Please explain #74

d. 2 74. 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) subtract the $6,000 from the selling and administrative expenses reported on the income statement. B) add the $6,000 to the selling and administrative expenses reported on the income statement. C) subtract the $6,000 from the costof goods sold reported on the income statement. D) add the $6,000 to the cost of goods sold reported on the income statement. 75. Gregson Company had the following noncash current asset and current liabilities balances at the end of 2010 and 2011 2010 2011 $ 68,000 210,000 Accounts receivable Inventory Prepaid insurance Accounts payable S 60,000 230,000 15,000 20,000 13,000 30,000 Net income for 2011 was $750,000 and depreciation expense was $40,000. All sales and all purchases are on account. Gregson uses the indirect method for preparing the statement of cash flows. Net cash flows from operating activities for 2011 would be: a. $814,000 b. $774,000 c. $786,000 d. $766,000 046 12 0