The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for
Question:
The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $84 million.
SURMISE COMPANY
Comparative Balance Sheets
December 31, 2018 and 2017
($ in millions)
2018 2017
Assets
Cash $31 $36
Accounts receivable 91 110
Less: Allowance for uncollectible accts (24) (2)
Prepaid expenses 20 18
Inventory 135 120
Long-term investment 92 50
Land 104 104
Buildings and equipment 418 280
Less: Accumulated depreciation (143) (112)
Patent 27 30
$751 $634
Liabilities
Accounts payable $21 $46
Accrued liabilities 1 22
Notes payable 52 0
Lease liability 128 0
Bonds payable 67 139
Shareholders' Equity
Common stock 71 50
Paid-in capitalexcess of par 265 205
Retained earnings 146 172
$751 $634
Required:
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2018. 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 $10 million are paid at January 1 of each year starting in 2018.) (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.)
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas