If the balance in prepaid expenses increased during the year, what action should be taken on the statement of cash flows when following the indirect method, (inci why ?

a. The change in the account balance should be subtracted from net income because the net increase in prepaid expenses did not impact net income but did reduce the cash balance.

b. The change in the account balance should be added to net income because the net increase in prepaid expenses did not impact net income but did increa.se the cash balance.

c. The net change in prepaid expenses should he suhliaeled Ironi net income to reverse the income statement eltect that had no impact on cash.

d. The net change in prepaid expenses should he added to net income to reverse the income statement effect that had no impact on cash.