Comparative balance sheets for 2016 and 2015, a statement of income for 2016, an
ID: 2463165 • Letter: C
Question
Comparative balance sheets for 2016 and 2015, a statement of income for 2016, and additional information from the accounting records of Red, Inc., are provided below.
During 2016, $248 million of equipment was purchased to replace $180 million of equipment (90% depreciated) sold at book value.
In order to maintain the usual policy of paying cash dividends of $68 million, it was necessary for Red to borrow $68 million from its bank.
Prepare the statement of cash flows of Red, Inc. using the direct method to report operating activities.
Comparative balance sheets for 2016 and 2015, a statement of income for 2016, and additional information from the accounting records of Red, Inc., are provided below.
Explanation / Answer
Red Inc Cash flow Statement for the period ending Dec 31.2016 Indirect Method Details Amt $ million Cash Flow From Operating Activities Net Income 145 Add Depreciation 41 Increased Accounts Receivable (44) Increased Inventory (107) Increased Prepaid Insurance (6) Decreased Accounts Payable (31) Decreased Accrued Expenses (8) Increased Note Payable 68 Total Cash Flow From Operating Activities 58 Cash Flow From Investing Activities Cash Inflow from sales of assets 18 Cash outflow from purchase of assets (248) Total Cash Flow From Investing Activities (230) Cash Flow From Financing Activities Cash Paid for Dividend Payment (68) Cash Received from Bond Issue 144 TotalCash Flow From Financing Activities 76 Total Cash Flow from Operating. Investing and Financing Activities (96) Intial Cash Balance 138 Net Effect of Cash Flow during the period (96) Closing Cash Balance 42
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.