The comparative balance sheets for 2016 and 2015 are given below for Surmise Company. Net income for 2016 was $82 million.

SURMISE COMPANY

Comparative Balance Sheets

December 31, 2016 and 2015

($ in millions)

2016 2015

Assets

Cash $ 88 $ 37

Accounts receivable 90 108

Less: Allowance for uncollectible accounts (24) (3)

Prepaid expenses 18 17

Inventory 139 116

Long-term investment 141 100

Land 102 102

Buildings and equipment 400 275

Less: Accumulated depreciation (140) (110)

Patent 26 28

$ 840 $ 670

Liabilities

Accounts payable $ 24 $ 44

Accrued liabilities (2) 21

Notes payable 50 0

Lease liability 125 0

Bonds payable 66 136

Shareholders Equity

Common stock 70 50

Paid-in capitalexcess of par 263 205

Retained earnings 244 214

$ 840 $ 670

Required:

Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2016. 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. (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.)

rev: 05_13_2015_QC_CS-15794

ReferenceseBook & Resources

Financial StatementsLearning Objective: 21-04 Determine cash flows from operating activities by the indirect method.

Difficulty: 3 HardLearning Objective: 21-08 Prepare a statement of cash flows with the aid of a spreadsheet or T-accounts.

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