90.2K

Verified Solution

Link Copied!

1) Prepare the T-account for Red, Inc.

2) Prepare the Statement of Cash flows (direct method) for Red, Inc. Use the T-account method to assist in your analysis. (amounts to be deducted should be indicated with a minus sign. Answers in million to 1 decimal place (i.e. 5,500,000 should be entered as 5.5))

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 $ 54.0 $ 123.0 Accounts receivable 166.0 130.0 Prepaid insurance 5.0 2.0 Inventory 260.0 160.0 Buildings and equipment 370.0 330.0 Less: Accumulated depreciation (109.0) (231.0) $ 746.0 $ 514.0 Liabilities Accounts payable $ 86.0 95.0 Accrued liabilities 5.0 9.9 Notes payable 30.0 0.0 Bonds payable 200.0 0.0 Shareholders' Equity Common stock 400.0 400.0 Retained earnings 25.0 10.0 $ 746.0 $ 514.0 RED, INC. Statement of Income For Year Ended December 31, 2021 ($ in millions) Revenues Sales revenue $1,650.0 Expenses Cost of goods sold $1,155.0 Depreciation expense 30.0 Operating expenses 420.0 1,605.0 Net income $ 45.0 Additional information from the accounting records: a. During 2021, $200.0 million of equipment was purchased to replace $160.0 million of equipment (95.0% depreciated) sold at book value. b. In order to maintain the usual policy of paying cash dividends of $30.0 million, it was necessary for Red to borrow $30.0 million from its bank

Answer & Explanation Solved by verified expert

See Answer