The comparative balance sheets for 2013 and 2012 are given below for Surmise Company. Net income for 2013 was $80 million.
SURMISE COMPANY
Comparative Balance Sheets
December 31, 2013 and 2012
($ in millions)
2013 2012
Assets
Cash $ 90 $ 45
Accounts receivable 89 106
Less: Allowance for uncollectible accounts (24) (4)
Prepaid expenses 19 16
Inventory 139 117
Long-term investment 134 95
Land 98 98
Buildings and equipment 392 270
Less: Accumulated depreciation (137) (108)
Patent 25 26
$ 825 $ 661
Liabilities
Accounts payable $ 23 $ 42
Accrued liabilities (4) 20
Notes payable 48 0
Lease liability 122 0
Bonds payable 64 132
Shareholders' Equity
Common stock 69 50
Paid-in capital-excess of par 261 205
Retained earnings 242 212
$ 825 $ 661
Required:
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.)
SURMISE COMPANY
Statement of Cash Flows
For year ended December 31, 2013
($ in millions)
Cash flows from operating activities:
Net income $________________________
Adjustments for noncash effects:
______________________ $_________________________
______________________ $_________________________
______________________ $_________________________
Changes in operating assets and liabilities
______________________ $________________________
______________________ $_________________________
______________________ $_________________________
______________________ $_________________________
______________________ $_________________________
Net cash flows from operating activities
Cash flows from investing activities:
______________________ $_________________________
Net cash flows from investing activities
Cash flows from financing activities:
______________________ $_________________________
______________________ $_________________________
______________________ $_________________________
______________________ $_________________________
Net cash flows from financing activities $____________________________________
Net Increase or Decrease $_____________________________________
Cash balance, January 1 $ ________________________________________
Cash balance, December 31 $ _________________________________________