Shady Lane's income tax payable account decreased from $14 million to $12 million during 2013. If its income tax expense was $80 million, what was shown as an operating cash flow under the direct method?

Question

Quizplus · Accepted Answer

The decrease in income tax payable account implies that the company paid taxes during the year. Therefore, the operating cash flow would be income tax expense ($80 million) plus the decrease in income tax payable ($12 million), which equals $92 million. However, since the question asks for cash outflow, the answer would be $82 million (subtracting $10 million from $92 million). Therefore, the correct choice is D.

Shady Lane's Income Tax Payable Account Decreased from $14 Million