In its 2013 income statement, WME reported $58,000 for insurance expense. WME paid $72,000 in insurance premiums during 2013. In its reconciliation schedule, WME should:

Question

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The $14,000 difference between the insurance paid ($72,000) and the insurance expense reported ($58,000) represents an increase in prepaid insurance, which is a current asset. Under the indirect method, an increase in current assets is a negative adjustment to net income.

In Its 2013 Income Statement, WME Reported $58,000 for Insurance