The comparative balance sheets for 2013 and 2012 are given below for Surmise Com
ID: 2490421 • Letter: T
Question
The comparative balance sheets for 2013 and 2012 are given below for Surmise Company. Net income for 2013 was $52 million. SURMISE COMPANY Comparative Balance Sheets December 31, 2013 and 2012 ($ in millions)
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2013. 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.(Enter your answers in millions. Amounts to be deducted should be indicated with a minus sign.)
2013 2014 assets cash 184 148 accounts receivable 75 78 less: allowance for uncoll. accts. (8) (3) prepaid expenses 3 2 inventory 108 100 long-term investment 45 20 land 70 70 buildings&equipment 280 200 less: acc. depreciation (94) (80) patent 10 12 total 673 547 Liabilities acct.payable 8 13 accrued liabilities (1) 5 notes payable 20 0 lease liability 80 0 bonds payable 50 90 shareholder's equity common stock 55 50 paid-in capital -- ecess of par 247 205 retaianed earnings 214 184 total 673 547Explanation / Answer
Surmise Company Statement of Cash Flows For year ended December 31, 2013 ($ in millions) Cash flows from operating activities: Net income $52 Adjustments for noncash effects: Depreciation expense 14 Bad debt expense 5 Patent amortization expense 2 Decrease in accounts receivable 3 Increase in inventory -8 Decrease in accounts payable -5 Increase in prepaid expenses -1 Decrease in accrued liabilities -6 Net cash flows from operating activities $56 Cash flows from investing activities: Purchase of long-term investment -25 Net cash flows from investing activities -$25 Cash flows from financing activities: Issuance of note payable 20 Retirement of bonds payable -40 Sale of common stock 47 Payment of cash dividends -22 Net cash flows from financing activities $5 Net increase in cash $36 Cash balance, January 1 $148 Cash balance, December 31 $184