Van Beeber Corporation's comparative balance sheet and income statement for last year appear below: The company declared and paid $49,000 in cash dividends during the year. It did not sell or retire any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by (used in) operating activities.On the statement of cash flows, the income tax expense adjusted to a cash basis would be:
A) $39,000
B) $69,000
C) $9,000
D) $25,000

Question

Van Beeber Corporation's comparative balance sheet and income statement for last year appear below:  The company declared and paid $49,000 in cash dividends during the year. It did not sell or retire any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by (used in) operating activities.On the statement of cash flows, the income tax expense adjusted to a cash basis would be:
A) $39,000 
B) $69,000 
C) $9,000 
D) $25,000

Quizplus · Accepted Answer

To adjust income tax expense to a cash basis, we need to identify the change in income taxes payable from the beginning to the end of the year. From the comparative balance sheet, we can see that income taxes payable increased from $10,000 to $19,000. Therefore, the cash basis income tax expense would be the increase in income taxes payable plus the income tax expense reported on the income statement ($19,000 - $10,000 + $9,000). This equals $9,000, so the correct answer is C.

Van Beeber Corporation's Comparative Balance Sheet and Income Statement for Last