Admiral Industries commenced operations in 20Y1 and prepaid two expenses in 20Y1. On April 1, Admiral paid $90,000 for an insurance policy that covers the 12-month period ending March 31, 2012. On November 1, Admiral paid $75,000 for an advertising campaign that covers the 6-month period ending April 30, 20Y2. Admiral's accountant correctly accounts for the prepaid expenses when preparing the income statement and balance sheet for 20Y1. However, when using the indirect method to prepare the operating activities section of the statement of cash flows for 20Y1, the accountant forgets to make adjustments for the effects of the two prepaid expenses. Unless these errors are corrected, the net cash provided by operating activities for 20Y1 will be:

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Admiral Industries commenced operations in 20Y1 and prepaid two expenses in 20Y1. On April 1,
Admiral paid $90,000 for an insurance policy that covers the 12-month period ending March 31,
20Y2. On November 1, Admiral paid $75,000 for an advertising campaign that covers the 6-month
period ending April 30, 20Y2. Admiral's accountant correctly accounts for the prepaid expenses
when preparing the income statement and balance sheet for 20Y1. However, when using the
indirect method to prepare the operating activities section of the statement of cash flows for 20Y1,
the accountant forgets to make adjustments for the effects of the two prepaid expenses. Unless
these errors are corrected, the net cash provided by operating activities for 20Y1 will be:
$92,500 too low.
O $72,500 too low.
O $72,500 too high.
O $92,500 too high.
O None of the above
Transcribed Image Text:Admiral Industries commenced operations in 20Y1 and prepaid two expenses in 20Y1. On April 1, Admiral paid $90,000 for an insurance policy that covers the 12-month period ending March 31, 20Y2. On November 1, Admiral paid $75,000 for an advertising campaign that covers the 6-month period ending April 30, 20Y2. Admiral's accountant correctly accounts for the prepaid expenses when preparing the income statement and balance sheet for 20Y1. However, when using the indirect method to prepare the operating activities section of the statement of cash flows for 20Y1, the accountant forgets to make adjustments for the effects of the two prepaid expenses. Unless these errors are corrected, the net cash provided by operating activities for 20Y1 will be: $92,500 too low. O $72,500 too low. O $72,500 too high. O $92,500 too high. O None of the above
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