This is the indirect method for statement of cash flows. I am confused because for "decrease in prepaid insurance" don't I have to subtract the $1,550 from net income? Do I add the $1550 back to net income because technically if there is a decrease in prepaid insurance, then that means prepaid expense increased so is that the reason I have to add it back to net income since no cash was involved? I thought there was cash involved considering it is prepaid insurance and that means a company paid cash in advance so I don't understand why we have to add it back to net income. Because on question 11 it says "increase in prepaid expense" so isn't that the same thing as "decrease in prepaid insurance"?

RetL 10 Net income Depreciation expense Increase in accounts receivable Decrease in inventory Decrease in prepaid insurance Decrease in salaries payable Increase in interest payable $24,300 8,500 4,700 6,200 1,550 3,400 950 20 points Required: Prepare a reconciliation of net income to net cash flows from operating activities. (Amounts to be deducted should be in minus sign. Enter your answers in thousands.) Answer is complete and correct. >$ 24,300 8,500 Cash flows from operating activities: Net income Adjustments for noncash effects: Depreciation expense Changes in operating assets and liabilities: Increase in accounts receivable Decrease in inventory Decrease in prepaid insurance Decrease in salaries payable Increase in interest payable (4,700) 6,200 1,550 (3,400) 950 11 Lemplex Corporation prepares ILS SLALEMENLUI CASITIOS using live IulieCLIELIVU liepunt opei diny a 2021 fiscal year was $684,000. Depreciation and amortization expense of $99,000 was included with oper statement. The following information describes the changes in current assets and liabilities other than cash: 20 points Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $34,000 10,400 9,700 11, 200 10,000 Required: Prepare the operating activities section of the 2021 statement of cash flows. (Amounts to be deducted sho minus sign.) Answer is complete and correct. >$ 684,000 99,000 Ca from operating activities: Net income Adjustments for noncash effects: Depreciation and amortization expense Changes in operating assets and liabilities: Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable 34,000 (10,400) (9,700) 11,200 (10,000)