The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $70 million. SURMISE COMPANY Comparative Balance Sheets December 31, 2018 and 2017 ($ in millions) 2018 2017 Assets Cash $ 26 $ 32 Accounts receivable 84 96 Less: Allowance for uncollectible accounts (19 ) (4 ) Prepaid expenses 14 11 Inventory 132 115 Long-term investment 104 70 Land 88 88 Buildings and equipment 359 245 Less: Accumulated depreciation (122 ) (98 ) Patent 20 22 $ 686 $ 577 Liabilities Accounts payable $ 14 $ 32 Accrued liabilities 3 15 Notes payable 38 0 Lease liability 107 0 Bonds payable 59 117 Shareholders Equity Common stock 64 50 Paid-in capitalexcess of par 259 205 Retained earnings 142 158 $ 686 $ 577

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.)