During the year, Income Tax Expense amounted to $12,500 and Income Taxes Payable increased by $1,500; therefore, the cash paid for income taxes was $11,000.

Question

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Income Tax Expense is an accrual-based expense, while Income Taxes Payable is a cash-based liability. The difference between the two represents the change in the company's income tax liability during the year. In this case, the increase in Income Taxes Payable indicates that the company's income tax liability increased by $1,500 during the year. Therefore, the cash paid for income taxes must have been $12,500 - $1,500 = $11,000.

During the Year, Income Tax Expense Amounted to $12,500 and Income