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ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)

Calder Co's statement of financial position shows: income tax payable $30,000 (opening) and $36,000 (closing); deferred tax liability $20,000 (opening) and $26,000 (closing). The statement of profit or loss tax charge is $50,000, which includes the deferred tax movement. What is tax paid in the statement of cash flows?

Tax paid is $38,000. Combine current and deferred tax: opening balances of $50,000 plus the $50,000 charge, less closing balances of $62,000, leaves $38,000. The deferred tax increase is a non-cash element of the charge.

  1. A$38,000Correct
  2. B$44,000
  3. C$50,000
  4. D$32,000

Explanation

Total opening liabilities 50,000 + charge 50,000 - total closing liabilities 62,000 = $38,000. Deferred tax increase of 6,000 is a non-cash part of the charge. The $32,000 option ignores the deferred tax movement by treating only current tax: 30,000+50,000-36,000=44,000 is another error; 32,000 results from adding the deferred increase wrongly.

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