Assume tax is paid annually in a lump sum. The beginning balance in the current tax liability account is $52 000 and the ending balance is $73 000. There was no under or over provision of tax for the year. What is the amount of tax paid to be included in the statement of cash flows for the period?

Question

Quizplus · Accepted Answer

The tax paid can be calculated by adjusting the change in the current tax liability account with the tax expense for the period. Given there was no under or over provision, the tax paid equals the beginning balance of $52,000, as the increase in liability (from $52,000 to $73,000) represents the tax expense for the current period, not the amount paid.

Assume Tax Is Paid Annually in a Lump Sum