Accrual versus cash basis of accounting PepsiCo, Inc. (PEP) is a food and...
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Accounting
Accrual versus cash basis of accounting
PepsiCo, Inc. PEP is a food and beverage company with a variety of brands, including FritoLay, Gatorade, PepsiCola, and Tropicana. On recent financial statements, Pepsi reported net income of $ million and $ million of depreciation expense. If Pepsi had used the cash basis of accounting, its net income would be approximately $ million. Why would Pepsi's net income be higher if it had used the cash basis?
Because depreciation expense a cash payment, it is
in arriving at Pepsi's estimated cashbasis net income of $ million. As a result, Pepsi's accrual net income of $ million is its estimated cashbasis net income of $ million. A majority of this difference of $ million depreciation expense of $ million.
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