Effects of Burger King’s Current Liabilities on Its Statement of Cash Flows The following items are classifi ed 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 fl ows.

Prepare the Operating Activities section of the cash fl ow statement, which indicates how each item will be refl ected 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?

AppendixLO1