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Reven Corporation prepares its statement of cash flows using the direct method.Last year, Reven reported Income Tax Expense of $25,000.At the beginning of last year, Reven had a $5,000 balance in the Income Taxes Payable account.At the end of last year, Reven had a $9,000 balance in the account.On its statement of cash flows for last year, what amount should Reven have shown for its Income Tax Expense adjusted to a cash basis (i.e., income taxes paid) ?
A) $29,000
B) $21,000
C) $25,000
D) $4,000
Income Taxes Payable
A current liability account found on the balance sheet that represents the amount of income taxes owed to governmental authorities but not yet paid.
Income Tax Expense
The cost of income taxes a company incurs, calculated based on the taxable income and tax rates applicable, reflecting the company's obligation to government revenue services.
Cash Basis
An accounting method where revenues are recognized when received and expenses when paid.
- Reposition reported income statement data to a cash basis for incorporation into the statement of cash flows.
- Examine the consequences of cash dividends, equipment trades, and income taxation on cash flow.
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Learning Objectives
- Reposition reported income statement data to a cash basis for incorporation into the statement of cash flows.
- Examine the consequences of cash dividends, equipment trades, and income taxation on cash flow.
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