Skip to content

CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I

Under IFRS, a company reports profit before tax of 500,000, interest expense of 40,000, and income tax expense of 150,000. Income taxes payable fell by 10,000, and the deferred tax liability rose by 20,000. Interest paid equals interest expense. The company classifies interest paid as financing and taxes as operating. Cash paid for income taxes is closest to:

Cash taxes paid is about 140,000. Total tax expense of 150,000 includes 20,000 of deferred tax that required no cash, leaving 130,000 current tax. Taxes payable declined by 10,000, so the company paid that extra amount, giving 140,000.

  1. A120,000
  2. B140,000Correct
  3. C180,000

Explanation

Current tax expense = 150,000 - 20,000 deferred = 130,000. A decrease in taxes payable means extra cash paid: 130,000 + 10,000 = 140,000. Using 120,000 subtracts the payable change; 180,000 adds the deferred tax and the payable change.

Did you get it right without looking?

One question tells you little. A timed set on Analyzing Statements of Cash Flows I shows your real accuracy, how long you take and where you lose marks.

Practise Analyzing Statements of Cash Flows IFree diagnostic mock

More Analyzing Statements of Cash Flows I questions