Question - The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $64 million.
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SURMISE COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions)
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2018
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2017
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Assets
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Cash
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$38
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$41
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Accounts receivable
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81
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90
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Less: Allowances for uncollectible accounts
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(14)
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(2)
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Prepaid expenses
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10
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8
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Inventory
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149
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135
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Long-term investment
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86
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55
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Land
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82
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82
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Building and equipment
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338
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230
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Less: Accumulated depreciation
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(112)
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(92)
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Patent
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17
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19
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$675
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$566
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Liabilities
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Accounts payable
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$10
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$25
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Accrued liabilities
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4
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12
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Notes payable
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32
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0
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Lease liabilities
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98
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0
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Bonds payable
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56
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108
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Shareholders' Equity
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Common stock
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61
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50
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Paid in capital excess of par
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253
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205
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Retained earnings
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161
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166
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$675
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$566
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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.)