If the indirect method is used, each of the following is a proper adjustment to net income to arrive at net cash flows from operating activities except
A) deducting a decrease in Prepaid Expenses.
B) adding an increase in Salaries Payable.
C) deducting an increase in Accounts Receivable.
D) adding a decrease in Inventory.

Question

Quizplus · Accepted Answer

A decrease in Prepaid Expenses should be added to net income, not deducted, when using the indirect method to calculate net cash flows from operating activities.

If the Indirect Method Is Used, Each of the Following