Bainbridge Company uses the direct method in determining net cash provided by operating activities. The income statement shows income tax expense $70,000. Income taxes payable were $25,000 at the beginning of the year and $18,000 at the end of the year. Cash payments for income taxes are
A) $63,000.
B) $70,000.
C) $77,000.
D) $88,000.

Question

Quizplus · Accepted Answer

The cash payments for income taxes can be calculated as follows:

Income taxes payable at the beginning of the year = $25,000 
Income tax expense = $70,000

Therefore, income taxes paid during the year = $70,000 - $25,000 = $45,000

Income taxes payable at the end of the year = $18,000

Cash payments for income taxes = income taxes paid during the year + income taxes payable at the end of the year 
= $45,000 + $18,000 = $63,000

Therefore, the correct answer is C) $77,000.

Bainbridge Company Uses the Direct Method in Determining Net Cash