Effects of McDonald’s Current Liabilities on Its Statement of Cash Flows The following items are classifi ed as current liabilities on McDonald’s consolidated statements of fi nancial condition (or balance sheet) at December 31 (in millions):

December 31, 2008 2007 Current liabilities Notes payable — $1,126.6 Accounts payable $ 620.4 624.1 Other taxes 252.7 248.0 Accrued interest 173.8 148.4 Accrued payroll and other liabilities 1,459.2 1,486.9 Current maturities of long-term debt 31.8 864.5 Total current liabilities $ 2,537.9 $4,498.5 Required 1. McDonald’s 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 McDonald’s has the ability to pay these liabilities as they become due?

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