Question
The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $74 million. SURMISE COMPANY Comparative Balance
The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $74 million.
SURMISE COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions) 2018 2017 Assets Cash $ 27 $ 35 Accounts receivable 86 100 Less: Allowance for uncollectible accounts (19 ) (2 ) Prepaid expenses 15 13 Inventory 129 110 Long-term investment 116 80 Land 92 92 Buildings and equipment 377 255 Less: Accumulated depreciation (128 ) (102 ) Patent 22 23 $ 717 $ 604 Liabilities Accounts payable $ 16 $ 36 Accrued liabilities 2 17 Notes payable 42 0 Lease liability 113 0 Bonds payable 61 123 Shareholders Equity Common stock 66 50 Paid-in capitalexcess of par 255 205 Retained earnings 162 173 $ 717 $ 604
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 $9 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.)
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