2. 10.00 points The comparative balance sheets for 2016 and 2015 are given below

Question

2. 10.00 points The comparative balance sheets for 2016 and 2015 are given below for Surmise Company. Net income for 2016 was $54 million. SURMISE COMPANY Comparative Balance Sheets December 31, 2016 and 2015 (S in millions) 2016 2015 Assets Cash Accounts receivable s 171 s 135 76 8 Less: Allowance for uncollectible accounts Prepaid expenses Long-term investment Land Buildings and equipment 114 105 51 25 72 72 288 205 (97) (82) Patent 683 S 555 $ 9s 15 (3) 6 Accounts payable Accrued liabilities Notes payable Lease liability Bonds payable Shareholders' Equity Common stock Paid-in capital--excess of par Retained earnings 83 51 93 56 50 249 205 216 186 $683 $ 555 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 conceming he reasons for changes in some acoount balances. A spreadsheet or T-account analysis wl be helptul. (Enter answers in millions (Le, 10,000,000 should be entered as 10) Amounts to be deducted should indicated with a minus sign) Statement of Cash Flows For year ended December 31, 2016 Cash flows from operating activities: Net income Adjustments for noncash effects

Explanation / Answer

Cash flows from operating activities Net Income                     54.00 Adjustment to Non Cash Effect Depreciation expense (97-82)                     15.00 Bad Debt Expense (8-2)                      6.00 Patent Amortization expense (14-11)                      3.00 Changes in operating assets and liabilities Decrease in Accounts Receivable (80-76) 4 Increase in Inventory                    (9.00) Decrease in Accounts Payable                    (6.00) Increase in Prepaid Expenses                    (2.00) Decrease in Accurued Liabilities                    (9.00) Net cash from operating activities                     56.00 Cash flows from investing activities Purchaseof Long Term Investments -26 Net cash used in investing activities                   (26.00) Cash flows from financing activities Issuance Of Notes payable                     22.00 Retirement of Bonds payable                   (42.00) Sale of Common Stock (249+56-(50+205)) 50 Payments of dividend (186+54-216) -24 Net cash used in financing activities                      6.00 Net Increase in cash and cash equivalents                    36.00 Cash and cash equivalents at beginning of period                  135.00 Cash and cash equivalents at end of period                  171.00 Non cash investing and Financing Activities Acquired Building (288-205) 83

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