The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $58 million.

SURMISE COMPANY

Comparative Balance Sheets

December 31, 2018 and 2017

($ in millions)

2018 2017

Assets

Cash $ 90 $ 98

Accounts receivable 78 84

Less: Allowance for uncollectible accounts (15 ) (6 )

Prepaid expenses 10 5

Inventory 121 110

Long-term investment 63 35

Land 76 76

Buildings and equipment 311 215

Less: Accumulated depreciation (103 ) (86 )

Patent 13 15

$ 644 $ 546

Liabilities

Accounts payable $ 7 $ 19

Accrued liabilities 2 8

Notes payable 26 0

Lease liability 89 0

Bonds payable 53 99

Shareholders Equity

Common stock 58 50

Paid-in capitalexcess of par 247 205

Retained earnings 162 165

$ 644 $ 546

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 $7 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.)