A company's Income Tax Payable account decreased from $14 million to $12 million during the year.If its income tax expense was $80 million,what would be shown as cash paid for income taxes under the direct method?

Question

Quizplus · Accepted Answer

The Income Tax Payable account decreased by $2 million ($14 million - $12 million). This means that the company paid $2 million of income tax during the year.

To find the cash paid for income taxes under the direct method, we need to adjust the income tax expense for changes in the Income Tax Payable account.

Cash paid for income taxes = Income tax expense - decrease in Income Tax Payable account
Cash paid for income taxes = $80 million - $2 million
Cash paid for income taxes = $78 million

Therefore, the correct answer is D, a cash outflow of $82 million.

A Company's Income Tax Payable Account Decreased from $14 Million