Effects of Burger King's Current Liabilities on Its Statement of Cash Flows
The following items are classified as current liabilities on Burger King Holdings, Inc.'s balance sheets as of June 30, 2008, and June 30, 2007:
As of June 30,
2008 2007
(In millions)
Current Liabilities:
Accounts and drafts payable $130 $106
Accrued advertising 77 64
Other accrued liabilities 242 259
Current portion of long-term debt and capital leases 7 5
Total current liabilities $456 $434
Required
1. Burger King uses the indirect method to prepare its statement of cash flows. Prepare the Operating Activities section of the cash flow statement, which indicates how each item will be reflected as an adjustment to net income. If you did not include any of the preceding items, explain why.
2. How would you decide if Burger King has the ability to pay these liabilities as they become due?