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ABC Company uses the Direct method to prepare its statement of cash flows. Presented below...

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Accounting

ABC Company uses the Direct method to prepare its statement of cash flows. Presented below are selected items from its financial statements.

12/31/Yr 3 12/31/Yr 2
Accounts receivable $89,000 $56,000
Prepaid insurance $2,800 $4,600
Wages payable $9,500 $12,000
Interest payable $12,000 $8,900
Sales revenue $860,000
Cost of goods sold $495,000
Wages expense $110,000
Insurance expense $13,200
Interest expense $19,000

Which of the following would be shown in the Operating Activities section related to insurance?

$1,800 would be subtracted from net income
Cash paid for insurance of $15,000
Cash paid for insurance of $11,400
$1,800 would be added to net income

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