In calculating net cash provided by operating activities using the indirect method an increase in prepaid expenses during a period is
A) deducted from net income.
B) added to net income.
C) ignored because it does not affect income.
D) ignored because it does not affect expenses.

Question

Quizplus · Accepted Answer

An increase in prepaid expenses during a period means that cash was paid in advance for expenses that have not yet been incurred. This means that cash was used in the current period and therefore, should be deducted from net income when calculating net cash provided by operating activities using the indirect method.

In Calculating Net Cash Provided by Operating Activities Using the Indirect