Disadvantages of direct method of reporting cash flows, Accounting Basics

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Disadvantages of direct method of reporting cash flows

Response to the following questions:

1. What is the principal disadvantage of the direct method of reporting cash flows from operating activities?

2. Fully depreciated equipment costing $55,000 was discarded. What was the effect of the transaction on cash flows if (a) $5,000 cash is received, (b) no cash is received?

3. In a recent annual report, PepsiCo, Inc., reported that during the year it issued stock of $438 million for acquisitions. How would this be reported on the statement of cash flows?

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Accounting Basics: Disadvantages of direct method of reporting cash flows

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