When using the indirect method to determine cash flows from operating activities, an increase in prepaid expenses should be reported as:
A) An addition to net income in determining cash flows from operating activities.
B) A deduction from net income in determining cash flows from operating activities.
C) An investing activity.
D) Not reported.

Question

Quizplus · Accepted Answer

Increases in current operating assets are considered cash inflows and deducted from net income under the indirect method.

When Using the Indirect Method to Determine Cash Flows from Operating