Answer: Amortization of bond discount

**Explanation:** - **Option A (Gain on sale of assets):** Incorrect because a gain on the sale of assets is a non-operating item included in the net income calculation. Under the indirect method, such gains must be subtracted from net income to reconcile to operating cash flows. - **Option B (Amortization of bond discount):** Correct because amortization of a bond discount is a non-cash expense. Non-cash expenses are added back to net income in the operating activities section of the cash flow statement to adjust for items that do not affect cash flow. - **Option C (Decrease in deferred tax liability):** Incorrect because a decrease in deferred tax liability indicates that accounting tax expense is lower than cash taxes paid. This decrease must be subtracted from net income to reconcile to operating cash flows. **CFA Exam Relevance:** This question tests the candidate's understanding of adjustments required when converting net income to operating cash flows under the indirect method, a key concept in financial statement analysis.

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