The comparative balance sheets for 2018 and 2017 are given b

The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $50 million SURMISE COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions) 2018 2017 Assets Cash Accounts receivable $36 $ 40 92 96 Less: Allowance for uncollectible accounts 12) (4) Prepaid expenses Inventory Long-term investment Land Buildings and equipment 145 130 40 100 100 20 300 142) 120 17 $743 $ 604 80 Less: Accumulated depreciation Patent 16 Liabilities Accounts payable Accrued liabilities Notes payable Lease liability Bonds payable Shareholders\' Equity Common stock Paid-in capital-excess of par Retained earnings $ 13 $ 32 10 35 65 125 60 50 245 205 212 182 $743 $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.)

Solution

Net income for 2018 $50 add/less change in working capital Decrease in cash ($4) Decrease in Accounts recievable $4 Increase in allowance for uncollectible accounts $8 increase in prepaid expenses ($3) increase in Inventory ($15) Decrease in Accounts payable ($19) Decrease in accrued liabilites ($8) Increase in Notes payable $35 Depreciation debited to p and l[142-120] $22 change in working capital $20 $20 net income from operation activities $70