Assuming the indirect method for preparing the statement of cash flows is used, indicate whether these items should be added to net income (A), deducted from net income (D), or not be reported in the operating section of the statement under the indirect method (NR).
-Decrease in prepaid insurance
A)Added (A)
B)Deducted (D)
C)Not reported (NR)

Question

Quizplus · Accepted Answer

A decrease in prepaid insurance means that insurance expenses have been prepaid, decreasing the company's cash balance. Therefore, this should be added back to net income in the operating section of the statement.

Assuming the Indirect Method for Preparing the Statement of Cash