Adjustments to Net Income with the Indirect Method Assume that a company uses the indirect method to prepare the Operating Activities section of the statement of cash flows. For each of the following items, indicate whether it would be added to net income (A), be deducted from net income (D), or not be reported in this section of the statement under the indirect method (NR).

1. Decrease in accounts payable 2. Increase in accounts receivable 3. Decrease in prepaid insurance 4. Purchase of new factory equipment 5. Depreciation expense 6. Gain on retirement of bonds