Bothell Inc. prepares its statement of cash flows on the indirect method bases. In its 2019 income statement, Bothell recorded $60,000 for insurance expense. Bothell made a total payment of $80,000 in insurance premiums (prepaid) during 2019. In its statement of cash flows, Bothell should:

Multiple Choice

• Show a $20,000 positive adjustment to net income under the indirect method for the decrease in prepaid insurance.
• Show a $20,000 negative adjustment to net income under the indirect method for the increase in prepaid insurance.
• Show a $20,000 positive adjustment to net income under the indirect method for the increase in prepaid insurance.
• Show a $20,000 negative adjustment to net income under the indirect method for the decrease in prepaid insurance.