Income tax was $175,000 for the year. Income tax payable was $30,000 and $40,000 at the beginning and end of the year, respectively. Cash payments for income tax reported on the statement of cash flows using the direct method is

Question

Quizplus · Accepted Answer

The cash payments for income tax reported on the statement of cash flows using the direct method is calculated by adding the increase in income tax payable to the income tax expense and deducting the decrease in income tax payable.

Cash payments for income tax = Income tax expense + increase in income tax payable – decrease in income tax payable
 
= $175,000 + ($40,000 – $30,000)
 
= $165,000

Therefore, the answer is B.

Income Tax Was $175,000 for the Year