Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2021. Use the indirect method to present cash flows from operating activities because you do not have sufficient information to use the direct method. You will need to make reasonable assumptions concerning the reasons for changes in some account balances. A spreadsheet or T-account analysis will be helpful. (Hint: The right to use a building was acquired with a seven-year lease agreement. Annual lease payments of $8 million are paid at January 1 of each year starting in 2021.)

The comparative balance sheets for 2021 and 2020 are given below for Surmise Company. Net income for 2021 was $72 million. SURMISE COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) Assets Cash Accounts receivable Less: Allowance for uncollectible accounts Prepaid expenses Inventory Long-term investment Land Buildings and equipment Less: Accumulated depreciation Patent 2021 $ 25 85 (19) 13 118 119 2020 $ 32 98 (3) 12 100 75 99 250 368 (125) (199) $ 686 $ 578 $ 15 $ 34 49 110 Liabilities Accounts payable Accrued liabilities Notes payable Lease liability Bonds payable Shareholders' Equity Common stock Paid-in capital-excess of par Retained earnings 68 129 65 261 153 $578 SURMISE COMPANY Statement of Cash Flows For year ended December 31, 2021 ($ in millions) Cash flows from operating activities Net income Adjustments for noncash effects Depreciation expense Amortization expense 00 Changes in operating assets and liabilities: Decrease in accounts receivable Increase in inventory Increase in prepaid expenses o lolololololol (1) Decrease in accounts payable Decrease in accrued liabilities Net cash flows from operating activities Cash flows from investing activities: Purchase of long-term investment OOOOO OOO OOO (35) (35) Net cash flows from investing activities Cash flows from financing activities: Payment of dividends Sale of common stock Retirement of bonds payable Payment of lease liability Issuance of notes payable (94) 71 (60) ololololol Net cash flows from financing activities Net increase (decrease) in cash Cash balance, January 1 Cash balance, December 31 Noncash investing and financing activities: Acquired use of buildings by lease 32 25