The Prepaid Rent balance has decreased during the year. How would this affect the Statement of Cash Flows operations section under the indirect method?

Question

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The decrease in the Prepaid Rent balance signifies that cash was used to pay rent expenses in advance. Since prepaid rent is a non-cash expense, it is subtracted from net income when calculating cash flow from operations under the indirect method. Therefore, the decrease in Prepaid Rent balance needs to be added back to the net income to reflect the actual cash inflow from operations.

The Prepaid Rent Balance Has Decreased During the Year