The comparative balance sheets for 2016 and 2015 are given below for Surmise Company. Net income for 2016 was $50 million.

Required:

Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2016. 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.

 

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SURMISE COMPANY Comparative Balance Sheets December 31, 2016 and 2015 ($ in millions) 2016 2015 Assets Cash $ 45 $ 40 Accounts receivable 92 96 Less: Allowance for uncollectible accounts (12) (4) Prepaid expenses Inventory Long-term investment Land 8 5 145 130 80 40 100 100 Buildings and equipment Less: Accumulated depreciation 411 300 (142) (120) Patent 16 17 $ 743 $ 604 Liabilities Accounts payable Accrued liabilities Notes payable Lease liability Bonds payable $ 17 $ 32 (2) 10 35 111 65 125 Shareholders' Equity Common stock 60 50 Paid-in capital-excess of par Retained earnings 245 205 212 182 $ 743 $ 604 SURMISE COMPANY Comparative Balance Sheets December 31, 2016 and 2015 ($ in millions) 2016 2015 Assets Cash $ 45 $ 40 Accounts receivable 92 96 Less: Allowance for uncollectible accounts (12) (4) Prepaid expenses Inventory Long-term investment Land 8 5 145 130 80 40 100 100 Buildings and equipment Less: Accumulated depreciation 411 300 (142) (120) Patent 16 17 $ 743 $ 604 Liabilities Accounts payable Accrued liabilities Notes payable Lease liability Bonds payable $ 17 $ 32 (2) 10 35 111 65 125 Shareholders' Equity Common stock 60 50 Paid-in capital-excess of par Retained earnings 245 205 212 182 $ 743 $ 604

Answer rating: 100% (QA)

Cash flows from operating activities indirect method Cash flows from operating activities These are ... View the full answer