When the Direct Method Is Used to Determine the Cash

question 215

Multiple Choice

When the direct method is used to determine the cash flows from operating activities,which of the following adjustments must be made to income tax expense to determine total income tax payments?

• A)Add all changes in income taxes and income taxes payable.
• B)Add decreases in income taxes payable and subtract increases in income taxes payable.
• C)Add increases in income taxes payable and subtract decreases in income taxes payable.
• D)Subtract all changes in income taxes payable.

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Definitions:

Resale Price Maintenance

A practice where a manufacturer or wholesaler controls the retail price at which products are sold by retailers, often to maintain brand image or prevent price wars.

Anticompetitive Effects

Refer to actions or outcomes that reduce competition in a market, leading to less consumer choice and possibly higher prices.

Lawful

Conforming to, permitted by, or recognized by law and regulations.

Sherman Act

A landmark federal statute in the United States antitrust law passed by Congress in 1890 that prohibits monopolistic practices and promotes competition.