During the year the balance in the Prepaid Expenses account increased by $6,000. In order to adjust the company's net income to a cash basis using the direct method on the statement of cash flows, it would be necessary to:

A. add the $6,000 to the selling and administrative expenses reported on the income statement.
B. subtract the $6,000 from the selling and administrative expenses reported on the income statement.
C. add the $6,000 to the cost of goods sold reported on the income statement.
D. subtract the $6,000 from the cost of goods sold reported on the income statement.


Answer: A

Business

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