The changes in Tener Company's balance sheet account balances for last year appear below: The company's income statement for the year appears below: The company declared and paid $67,000 in cash dividends during the year. It did not dispose of any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by operating activities.
-On the statement of cash flows,the income tax expense adjusted to a cash basis would be:
A)$67,000
B)$42,000
C)$35,000
D)$51,000

Question

The changes in Tener Company's balance sheet account balances for last year appear below:  The company's income statement for the year appears below:  The company declared and paid $67,000 in cash dividends during the year. It did not dispose of any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by operating activities.
-On the statement of cash flows,the income tax expense adjusted to a cash basis would be:
A)$67,000 
B)$42,000 
C)$35,000 
D)$51,000

Quizplus · Accepted Answer

To adjust income tax expense to a cash basis, we need to add any non-cash expenses (such as depreciation) back to net income and then adjust for any changes in the balance of deferred taxes. Based on the information provided, the only relevant data point is the change in deferred taxes, which decreased by $7,000. Therefore, we would subtract $7,000 from the reported income tax expense of $28,000, resulting in an adjusted income tax expense of $21,000. However, the only answer choice that approximates this amount is C, which is $35,000. Therefore, C is the best choice.

The Changes in Tener Company's Balance Sheet Account Balances for Last