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 net income.
D)ignored because it does not affect expenses.

Question

Quizplus · Accepted Answer

An increase in prepaid expenses represents a cash outflow that does not affect net income immediately. Therefore, it is deducted from net income in the indirect method to calculate net cash provided by operating activities.

In Calculating Net Cash Provided by Operating Activities Using the Indirect