P 21-14 Statement of cash flows; indirect method; limited information
The comparative balance sheets for 2011 and 2010 are given below for Surmise Company. Net income for 2011 was $50 million.
Surmise Company
Comparative Balance sheets
December 31, 2011 and 2010
($In millions)
2011 2010
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 and equipment 411 300
Less: Accumulated depreciation (142) (120)
Patent 16 17
$743 $604
Liabilities
Account 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
$743 $604
Required:
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2011. 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 change in some account balances. A spreadsheet or T-account analysis will be helpful.
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