Prepayments for Julianna Company Decreased by $2,000 During Year 3

Multiple Choice

Prepayments for Julianna Company decreased by $2,000 during Year 3, the firm expensed less cash during Year 3 for new prepayments than it expensed prepayments of earlier years.Assume that all prepayments relate to selling and administrative activities.The journal entries that Julianna Corporation made in the accounting records during the year had the following combined effect: Selling and Administrative Expenses ..............35,500
Cash ........................................... 33,500
Prepayments ......................................2,000
To explain the change in the statement of cash flows T-account work sheet for Prepayments

A) add back $33,050 to net income.
B) add back $2,000 to net income.
C) subtract $2,000 from net income.
D) subtract $33,500 from net income.
E) subtract $2,000 from retained earnings.