During 2016, $315 million of equipment was purchased to replace $180 million of

Question

   

During 2016, $315 million of equipment was purchased to replace $180 million of equipment (80% depreciated) sold at book value.

In order to maintain the usual policy of paying cash dividends of $32 million, it was necessary for Red to borrow $32 million from its bank.

Prepare the statement of cash flows of Red, Inc. using the indirect method to report operating activities

RED, INC.
Statement of Income
For Year Ended December 31, 2016 ($ in millions) Revenues   Sales revenue $ 2,200   Expenses   Cost of goods sold $ 1,500   Depreciation expense 23   Operating expenses 520 2,043   Net income $ 157

Explanation / Answer

Cashflow statement -operating activities Net income 157 ADD: depreciation 23 cashflow from operating activities 180

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