Part B—Cash Flow
Explain the difference between the indirect and direct method of the statement of cash flows.
Describe whether all three sections of the cash flow statement are different when using either method.
Describe which method is preferred by the FASB.
Describe how are the following calculated when preparing the cash flow statement using the direct method:
Cash collected from customers,
Cash paid for merchandise,
Cash paid to employees and cash paid for other accrued expenses, and
Cash paid for other operating costs including insurance and other prepaid expenses.
Part C—Comprehensive Income
Read Statement of Financial Accounting Standards No.130 (Links to an external site.) paragraphs 8 through 9 and 58 through 67, and address the following:
Explain what comprehensive income is.
Identify the four possible reporting methods for comprehensive income (in theory).
Explain the pros and cons of each method.
Identify the method you think is the best.