Chapter 21, Problem 21.14P

Statement of cash flows; indirect method; limited information

• LO21–4, LO21–8

The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $50 million.

Required:

Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2018. 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. (Hint: The right to use a building was acquired with a seven-year lease agreement. Annual lease payments of $9 million are paid at January 1 of each year starting in 2018.)