In its 2016 income statement,WME reported $58,000 for insurance expense.WME paid $72,000 in insurance premiums during 2016.In its reconciliation schedule,WME should:

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The question states that WME paid $72,000 in insurance premiums during 2016 and reported an insurance expense of $58,000. This suggests that WME pre-paid for insurance coverage. Therefore, the reconciliation schedule should include a negative adjustment to net income under the indirect method for the increase in prepaid insurance, which would be $14,000 ($72,000 premiums paid - $58,000 reported expense = $14,000 increase in prepaid insurance).

In Its 2016 Income Statement,WME Reported $58,000 for Insurance Expense