The comparative balance sheets for 2018 and 2017 are given below for Surmise Com
ID: 2539323 • Letter: T
Question
The comparative balance sheets for 2018 and 2017 are given below for Surmise Company Net income for 2018 was $66 miltion Comparative Balance Sheets Decenber 31, 2018 and 2817 (s in willions) Assets Cash Accounts receivable 5 45 49 82 92 (18) (S) Less: Allowance for uncollectible accounts Prepaid expenses Inventory Long-ters Investeent 13 135 120 92 60 84 84 Buildings and equipment Less: Accumulated depreciation 3448 (115) (94) 680 573 Liabilities Accounts payable Accrued liabilities Notes payable s11 27 ease liability Bonds payable Shareholders Equity Paid-in cagital -excess of par Retained earnings 62 5e S5 Required Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2018 cash flows from operating activities because you do not have sufficient information to use reasonable assumptions concerning the reasons for changes in some account balances. A helpful. (Hint. The right to use a building was acquired with a seven-year lease paid at January 1 of each year starting n 20 "Enter in to be deducted should be indicated with a minus sign Use the indirect method to present the direct method. You will need to make spreadsheet or T-account analysis will be ease payments of 58 million are your answers in millions G.e. 1o,0o0,000 should be entered os to), Amounts Arnual For year ended Decenber 31, 201B C Prey 12 of 12 E N pe hete 10Explanation / Answer
Answer:
Surmise Company
Statement of Cash Flows
For year ended December 31, 2018 ($ in millions)
Cash flows from operating activities:
Net income
$66
Adjustments for noncash effects:
Depreciation expense
21
Bad debt expense
13
Patent amortization expense
3
Changes in operating assets and liabilities:
Decrease in accounts receivable
10
Increase in inventory
-15
Decrease in accounts payable
-16
Increase in prepaid expenses
-4
Decrease in accrued liabilities
-11
1
Net cash flows from operating activities
$67
Cash flows from investing activities:
Purchase of long-term investment
-32
Net cash flows from investing activities
-32
Cash flows from financing activities:
Issuance of note payable
34
Retirement of bonds payable
-54
Sale of common stock
62
Annual Leae payment
-8
Payment of cash dividends
-73
Net cash flows from financing activities
-39
Net increase in cash
($4)
Cash balance, January 1
49
Cash balance, December 31
$45
Noncash investing and financing activities:
Acquired buildings by capital lease
$109
Working notes for the above answer is as under
Spreadsheet for the Statement of Cash Flows
Dec.31
Changes
Changes
Dec. 31
2018
Debits
Credits
2017
Balance Sheet
Assets:
Cash
45
16
4
49
Accounts receivable
82
5
10
92
Less: Allowance
-18
3
13
-5
Prepaid expenses
13
8
4
9
Inventory
135
6
15
120
Long-term investment
92
10
32
60
Land
84
84
Buildings and equip.
344
11
109
235
Less: Acc. depreciation
-115
2
21
-94
Patent
18
4
3
21
680
571
Liabilities:
Accounts payable
11
7
16
27
Accrued liabilities
2
9
11
13
Notes payable
34
12
34
0
Lease liability
101
X
11
101
0
Bonds payable
57
13
54
111
Shareholders' Equity:
Common stock
62
14
12
50
Paid-in capital-ex. of par
255
14
50
205
Retained earnings
158
15
73
1
66
165
680
571
Surmise Company
Statement of Cash Flows
For year ended December 31, 2018 ($ in millions)
Cash flows from operating activities:
Net income
$66
Adjustments for noncash effects:
Depreciation expense
21
Bad debt expense
13
Patent amortization expense
3
Changes in operating assets and liabilities:
Decrease in accounts receivable
10
Increase in inventory
-15
Decrease in accounts payable
-16
Increase in prepaid expenses
-4
Decrease in accrued liabilities
-11
1
Net cash flows from operating activities
$67
Cash flows from investing activities:
Purchase of long-term investment
-32
Net cash flows from investing activities
-32
Cash flows from financing activities:
Issuance of note payable
34
Retirement of bonds payable
-54
Sale of common stock
62
Annual Leae payment
-8
Payment of cash dividends
-73
Net cash flows from financing activities
-39
Net increase in cash
($4)
Cash balance, January 1
49
Cash balance, December 31
$45
Noncash investing and financing activities:
Acquired buildings by capital lease
$109