1. Which of the following statements is correct?

1. The Chicago Transit Authority needs an operating subsidy to sustain its operations because it is required by law to give free rides to certain classes of riders.
2. As we discussed in class, the disclosures on the statement of cash flows are more factual that the disclosures on the financial statements that result from using the accrual basis of accounting.
3. A and B.
4. Neither A nor B.