The comparative balance sheets for 2024 and 2023 are given below for Surmise Company. Net income for 2024 was $50 million.
SURMISE COMPANY
Comparative Balance Sheets
December 31, 2024 and 2023
($ in millions)
	2024	2023
Assets
Cash	$36	$40
Accounts receivable	92	96
Less: Allowance for uncollectible accounts	-12	-4
Prepaid expenses	8	5
Inventory	145	130
Long-term investment	80	40
Land	100	100
Buildings and equipment	420	300
Less: Accumulated depreciation	-142	-120
Patent	16	17
	$743	$604
Liabilities
Accounts payable	$13	$32
Accrued liabilities	2	10
Notes payable	35	0
Lease liability	111	0
Bonds payable	65	125
Shareholders Equity
Common stock	60	50
Paid-in capitalexcess of par	245	205
Retained earnings	212	182
	$743	$604
Required:
1. Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2024. 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 $9 million are paid at January 1 of each year starting in 2024.)
Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.
SURMISE COMPANY
Statement of Cash Flows
For year ended December 31, 2024
($ in millions)
Cash flows from operating activities:
Net income
Adjustment for non cash effects
Depreciation expense
Bad debts expense
Amortization expense
Changes in operating assets and liabilities:
Decrease in account receivable
Increase in inventory
Decrease in account payable
Increase in prepaid expense
Decrease in accrued liabilities
Net cash flows from operating activities
Purchase of long term investments
Payment of lease liability
Net cash flows from investing activities
Cash flow from financing activities
Issuance of notes payable
Retirement of bond payable
Sale of common stock
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 building by lease
2. Complete the Worksheet:
SURMISE COMPANY
Spreadsheet for the Statement of Cash Flows
($ in millions)
	31-Dec-23	Changes	31-Dec-24
Debits	Credits
Balance Sheet
Assets:
Liabilities:
Statement of Cash Flows
Operating activities:
Net income		50
Adjustments for noncash effects:
Net cash flows
Investing activities:
Net cash flows
Financing activities:
Net cash flows
Net decrease in cash
Totals