For the current year, Northern Pacific Company reported income tax expense of $45,000. Income taxes payable at the end of the prior year were $20,000 and at the end of the current year were $27,000. The deferred tax liability classified as noncurrent that resulted from the use of MACRS for tax purposes and straight-line depreciation for financial reporting purposes increased from $18,000 at the beginning of the current year to $23,000 at the end of the current year. How much cash was paid for income taxes during the year?

Question

Quizplus · Accepted Answer

Income tax expense for the year = $45,000Increase in deferred tax liability = $23,000 - $18,000 = $5,000Increase in income taxes payable = $27,000 - $20,000 = $7,000Cash paid for income taxes = Income tax expense - Increase in deferred tax liability - Increase in income taxes payable= $45,000 - $5,000 - $7,000= $33,000

For the Current Year, Northern Pacific Company Reported Income Tax