Krech Corporation's Comparative Balance Sheet Appears Below

Krech Corporation's comparative balance sheet appears below:
The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It did not sell or retire any property, plant, and equipment during the year. The company uses the indirect method to determine the net cash provided by operating activities.
-Which of the following is correct regarding the operating activities section of the statement of cash flows?

A) The change in Prepaid Expenses will be added to net income; The change in Income Taxes Payable will be subtracted from net income
B) The change in Prepaid Expenses will be subtracted from net income; The change in Income Taxes Payable will be subtracted from net income
C) The change in Prepaid Expenses will be subtracted from net income; The change in Income Taxes Payable will be added to net income
D) The change in Prepaid Expenses will be added to net income; The change in Income Taxes Payable will be added to net income

Correct Answer:

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