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How should the net effect of these decreases

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Problem - Bauer Co. wants to convert its 2005 financial statements from the accrual basis of accounting to the cash basis. Both Prepaid Insurance and Wages Payable decreased between January 1, 2005, and December 31, 2005. Prepaid Insurance decreased by $7,000, and Wages Payable decreased by $6,000. To obtain 2005 cash basis net income, how should the net effect of these decreases be added to or deducted from accrual basis net income?

a. $13,000 deducted

b. $13,000 added

c. $1,000 deducted

d. $1,000 added

e. None of the above.

Reference no: EM132681538

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