The comparative balance sheets for 2006 and 2005 are given below for Surmise Company. Net Income for 2006 was $50 million.
Surmise Company Comparative Balance Sheets Dec. 31, 2006 and 2005 ($ in millions)
------------------------2006---------------------2005--------
ASSETS:
Cash $45 $40
Accounts Receivable 92 96
Less: Allowance for Uncollectible accounts (12) (4)
Prepaid expense 8 5
Inventory 145 130
Long term Investment 80 40
Land 100 100
Buildings & Equipments 411 300
less: Accumulated Depreciation (142) (120)
Patent 16 17
Total $743 $604
LIABILITIES:
Accounts Payable $17 $32
Accrued Liabilities (2) 10
Notes payable 35 0
Lease Liability 111 0
Bonds Payable 65 125
SHAREHOLDER"S EQUITY:
Common Stock $60 $50
Paid in Capital - Excess of par 245 205
Retained Earnings 212 182
Total $743 $604
REQUIRED: Prepare the statement of cash flow of Surmise Company for the year ended December 31, 2006. 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.
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