Exercise 21-31 (Static) Statement of cash flows; indirect method [LO21-4, 21-5, 21-6, 21-8] Appendix 21A

Comparative balance sheets for 2021 and 2020, a statement of income for 2021, and additional information from the accounting records of Red, Inc., are provided below.

RED, INC. Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions)
	2021				2020
Assets
Cash	$	24			$	110
Accounts receivable		178				132
Prepaid insurance		7				3
Inventory		285				175
Buildings and equipment		400				350
Less: Accumulated depreciation		(119	)			(240	)
	$	775			$	530
Liabilities
Accounts payable	$	87			$	100
Accrued liabilities		6				11
Notes payable		50				0
Bonds payable		160				0
Shareholders Equity
Common stock		400				400
Retained earnings		72				19
	$	775			$	530

RED, INC. Statement of Income For Year Ended December 31, 2021
($ in millions)
Revenues
Sales revenue				$	2,000
Expenses
Cost of goods sold	$	1,400
Depreciation expense		50
Operating expenses		447			1,897
Net income				$	103

Additional information from the accounting records:

1. During 2021, $230 million of equipment was purchased to replace $180 million of equipment (95% depreciated) sold at book value.
2. In order to maintain the usual policy of paying cash dividends of $50 million, it was necessary for Red to borrow $50 million from its bank.

Required: Prepare the statement of cash flows for Red, Inc., using the indirect method to report operating activities. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).

Answer is not complete.

RED, INC.
Statement of Cash Flows
For year ended December 31, 2021 ($ in millions)
Cash flows from operating activities:
Net incomeselected answer correct	not attempted
Adjustments for noncash effects:
Depreciation expenseselected answer correct	not attempted
Changes in operating assets and liabilities:
Increase in accounts receivableselected answer correct	not attempted
Increase in prepaid insuranceselected answer correct	(4)selected answer correct
Increase in inventoryselected answer correct	not attempted
Decrease in accounts payableselected answer correct	not attempted
Decrease in accrued liabilitiesselected answer correct	not attempted
not attempted	not attempted
Net cash flows from operating activities		$(4)
Cash flows from investing activities:
Sale of equipmentselected answer correct	not attempted
Purchase of equipmentselected answer correct	not attempted
not attempted	not attempted
Net cash flows from investing activities		0
Cash flows from financing activities:
Issuance of note payableselected answer correct	not attempted
Issuance of bonds payableselected answer correct	not attempted
Payment of dividendsselected answer correct	not attempted
not attempted	not attempted
Net cash flows from financing activities		0
Net increase (decrease) in cash		(4)
Cash balance, January 1		not attempted
Cash balance, December 31		$(4)