Question

g An increase in the Prepaid Expenses account of $1,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as: A. a deduction of $1,000 under financing activities. B. a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities. C. an addition to net income of $1,000 in order to arrive at net cash provided by operating activities. D. an addition of $1,000 under financing activities.

Answer 1

Answer:

B. a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.

Explanation:

The adjustment made to the items of the change in the value of the working capital is come under the operating activities  

Since in the given situation, there is an increase in prepaid expenses and the prepaid expenses is a current assets. So the same is to be shown in the operating activities and deducted from the net income for $1,000. This can be done so that the net cash provided by operating activities could come