All of the following are additions to net income when preparing the statement of cash flows under the indirect method except:
A) losses on sales of long-term assets.
B) a decrease in accounts payable.
C) a decrease in prepaid insurance.
D) a decrease in accounts receivable.

Question

Quizplus · Accepted Answer

A decrease in accounts payable is a use of cash and should be subtracted from net income when preparing the statement of cash flows under the indirect method. Conversely, losses on sales of long-term assets, a decrease in prepaid insurance, and a decrease in accounts receivable are all adjustments that add back to net income.

All of the Following Are Additions to Net Income When