Assume tax is paid annually in a lump sum. The beginning balance in the current tax liability account is $70 000 and the ending balance is $79 000. 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 beginning balance of the current tax liability for the tax expense of the year and comparing it to the ending balance. Since there was no under or over provision, the increase in the tax liability account from $70,000 to $79,000 ($9,000) represents the tax expense for the year. To find the tax paid, we add this increase to the beginning balance and then subtract the ending balance: $70,000 + $9,000 - $79,000 = $70,000. This means $70,000 was paid in taxes during the year.

Assume Tax Is Paid Annually in a Lump Sum