Adjustment for Prepaid Rent Jarem Company showed $12,000 in prepaid rent on December 31, 20X1. On December 31, 20X2, the balance in the prepaid rent account was $13,600. Rent expense for 20X2 was $40,000. Required: 1. What amount of cash was paid for rent in 20X2? 2. CONCEPTUAL CONNECTION What adjustment in prepaid expenses is needed if the indirect method is used to prepare Jarem's statement of cash flows? In determining operating cash flow under the indirect method, any increase in a noncash current asset is net income. Thus, since prepaid rent increased by $1,600, this would be net income. The increase in prepaid rent represents in operating cash outflows.