Answer (D) is correct . Operating activities include all transactions and other events not classified as investing and financing activities. Operating activities include producing and delivering goods and providing services. Cash flows from such activities are usually included in the determination of net income. However, the purchase of land and a building in exchange for a long-term note is an investing activity. Because this transaction does not affect cash, it is reported in related disclosures of noncash investing and financing activities.
Answer (A) is incorrect because A decrease in inventory is an operating item.
Answer (B) is incorrect because Depreciation expense is an operating item.
Answer (C) is incorrect because A decrease in prepaid insurance is an operating item.
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