Using the indirect method, which of the following would not be an adjustment to net income?
A)depreciation expense
B)an increase in prepaid insurance
C)an increase in inventories
D)an increase in Land

Question

Quizplus · Accepted Answer

Depreciation expense, increases in prepaid insurance, and increases in inventories are all adjustments to net income in the indirect method of preparing the cash flow statement because they are non-cash transactions or changes in working capital. However, an increase in land is an investing activity, not an adjustment to net income in the operating section of the cash flow statement.

Using the Indirect Method, Which of the Following Would Not