Question

When using the indirect method to determine cash flows from operating activities, an increase in prepaid expenses should be reported as: not reported

Answer 1

Answer:

it is an adjustment to net income.

Since the prepaid expenses increased during the year, the amount by which it increased should be deducted from operating cash flows

Explanation:

other adjustments to net income:

depreciation expense

changes in accounts receivable

changes in inventory level

changes in accounts payable

changes in other current liabilities, e.g. taxes payable