Comparison of direct and indirect format of income statement.
Rowe Furniture: located in Elliston, Virginia, produces upholstered furniture. The company's 2004 statement of cash flows is presented below. Most companies use the indirect format for reporting cash flows; however, Rowe Furniture uses the direct format.
A. What are the similarities and differences in format of the two cash flow statements?
B. Note the reconciliation of net income to net cash provided by operating activities that appears at the bottom of the direct format statement. What information does it provide? Does this reconciliation look familiar?
C.Which statement format do you believe presents more understandable information?Why?