Payment of cash dividends? acquired building? The comparative balance sheets for
ID: 2535881 • Letter: P
Question
Payment of cash dividends?
acquired building?
The comparative balance sheets for 2018 and 2017 are given below for Surmise Company. Net income for 2018 was $90 million. SURMISE COMPANY Comparative Balance Sheets December 31, 2018 and 2017 (s in millions) Assets Cash Accounts receivable 2018 2017 $ 23 31 (29) (4) 95 Less: Allowance for uncollectible accounts Prepaid expenses Inventory Long-term investment Land Buildings and equipment 21 110 50 128 95 110 441 295 Less: Accumulated depreciation Patent (152) (118) $ 765 645 $ 24 52 30 Liabilities Accounts payable Accrued liabilities Notes payable Lease liability Bonds payable Shareholders' Equity Common stock Paid-in capital-excess of par Retained earnings 25 54 137 70 148 50 205 165 $ 765 645 271 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.) (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated with a minus sign.)Explanation / Answer
Solution:
Payment of cash dividend = $ 122 million
Retained Earnings Account
Particulars
Debit ($) in Million
Particulars
Credit ($)in Million
Dividend paid (Balancing Figure)
122
Beginning Balance
165
Ending Balance
133
Net Income
90
Total
255
Total
255
Solution:
Acquired building = $ 180 Million
Building and Equipment Account
Particulars
Debit ($) in Million
Particulars
Credit ($)in Million
Beginning Balance
295
Depreciation
34
Purchase ( Balancing Figure)
180
Ending Balance
441
Total
475
Total
475
Accumulated Depreciation Account
Particulars
Debit ($) in Million
Particulars
Credit ($)in Million
Beginning Balance
118
Ending Balance
152
Current Year Depreciation (Balancing Figure)
34
Total
152
Total
152
Particulars
Debit ($) in Million
Particulars
Credit ($)in Million
Dividend paid (Balancing Figure)
122
Beginning Balance
165
Ending Balance
133
Net Income
90
Total
255
Total
255
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