Question

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	$	37			$	122
Accounts receivable		210				145
Prepaid insurance		11				9
Inventory		270				188
Buildings and equipment		426				363
Less: Accumulated depreciation		(132	)			(253	)
	$	822			$	574
Liabilities
Accounts payable	$	100			$	126
Accrued liabilities		10				16
Notes payable		63				0
Bonds payable		176				0
Shareholders’ Equity
Common stock		413				413
Retained earnings		60				19
	$	822			$	574

RED, INC. Statement of Income For Year Ended December 31, 2021
($ in millions)
Revenues
Sales revenue				$	2,210
Expenses
Cost of goods sold	$	1,515
Depreciation expense		41
Operating expenses		550			2,106
Net income				$	104

Additional information from the accounting records:

1. During 2021, $243 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value.
2. In order to maintain the usual policy of paying cash dividends of $63 million, it was necessary for Red to borrow $63 million from its bank.

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

Answer 1