Reven Corporation prepares its statement of cash flows using the direct method. Last year, Reven reported Income Tax Expense of $25,000. At the beginning of last year, Reven had a $5,000 balance in the Income Taxes Payable account. At the end of last year, Reven had a $9,000 balance in the account. On its statement of cash flows for last year, what amount should Reven have shown for its Income Tax Expense adjusted to a cash basis (i.e., income taxes paid)?
A) $29,000
B) $21,000
C) $25,000
D) $4,000

Question

Quizplus · Accepted Answer

The cash paid for income taxes can be calculated by adjusting the income tax expense for changes in the income taxes payable account. The formula is: Income Tax Expense + Beginning Balance of Income Taxes Payable - Ending Balance of Income Taxes Payable = Cash Paid for Income Taxes. Thus, $25,000 + $5,000 - $9,000 = $21,000.

Reven Corporation Prepares Its Statement of Cash Flows Using the Direct