Use Amazon.com, Inc.’s consolidated statement of cash flows along with the company’s other consolidated financial statements, all in Appendix A at the end of the book, to answer the following questions.

Requirements

1. By which method does Amazon.com, Inc., report cash flows from operating activities? How can you tell?

2. Suppose Amazon.com, Inc., reported net cash flows from operating activities by using the direct method. Compute these amounts for the year ended December 31, 2008 (ignore the statement of cash-flows, and use onlyAmazon.com, Inc.’s income statement and balance sheet).

a. Collections from vendors, customers, and others. Use the information in Note 1 Description of Business and Accounting Policies. Prepare a T-Account for Gross Accounts Receivable. Prepare another T-Account for Allowance for Doubtful Accounts. Calculate the beginning and ending gross amounts of gross accounts receivable by adding the beginning and ending balances of allowance for doubtful accounts ($81 and $64, respectively) to the net accounts receivable at both the beginning and end of the year. Assume that all sales are on account. Also assume that the company uses the percentage of net sales method for estimating doubtful accounts expense, and that the company estimates this amount at 0.5%.

b. Payments to suppliers. Amazon.com, Inc., calls its Cost of Goods Sold Cost of Sales. For this computation, use the format provided in Exhibit 12-15. Assume all inventory is purchased on account, and that all cash payments to suppliers are made from accounts payable.

3. Prepare a T-account for Net Fixed Assets (Fixed Assets minus Accumulated Depreciation). In this account, analyze all activity in the fixed assets and accumulated depreciation accounts for 2008. Use the information in Note 3 Fixed Assets to analyze this activity. Assume that Amazon.com, Inc., did not sell any fixed assets during the year. Compare your computation of fixed asset additions with the amount reflected in the investments section of the balance sheet. What is the difference? Where might that difference be reflected in Amazons Consolidated Statement of Cash Flows? (Challenge)

4. Evaluate 2008 for Amazon.com, Inc., in terms of net income, total assets, stockholders equity, cash flows from operating activities, and overall results. Be specific. (Challenge)