Reading PepsiCo’s Statement of Cash Flows A portion of the Financing Activities section of PepsiCo’s statement of cash flows for the year ended December 31, 2006, follows (in millions):

Required 1. Explain why proceeds from debt is shown as a positive amount and payment of debt is shown as a negative amount.
2. During 2006, interest rates remained at low levels. Explain why the company might have paid off debt during such conditions.
3. PepsiCo has a Deferred Income Tax account listed in the asset category of its balance sheet.
Would an increase in that account result in an addition or a subtraction on the statement of cash flows? in which category?

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Financing Activities: Proceeds from the issuance of long-term debt Payment of long-term debt Short-term borrowings by original maturity: More than three months-proceeds More than three months-payments Three months or less, net $ 51 (157) 185 (358) (2,168)