Shady Lane's income tax payable account decreased from $14 million to $12 million during 2009. If its income tax expense was $80 million, what would be shown as an operating cash flow under the direct method?

Question

Quizplus · Accepted Answer

The decrease in income tax payable of $2 million ($14 million - $12 million) indicates a cash outflow of $2 million. However, since the income tax expense was $80 million, the operating cash flow under the direct method would be calculated as $80 million (income tax expense) + $2 million (decrease in income tax payable) = $82 million cash outflow. Therefore, option D is the correct answer.

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