If the indirect method is used to prepare a statement of cash flows,which of the following would be added to net income to arrive at net cash flows from operating activities?
A) Decrease in accrued liabilities
B) Gain on sale of investments
C) Decrease in prepaid expenses
D) Increase in accounts receivable

Question

Quizplus · Accepted Answer

A decrease in prepaid expenses indicates that cash was not spent on these expenses during the period, which means more cash is available, so it is added back to net income in the indirect method.

If the Indirect Method Is Used to Prepare a Statement