In Its First Year of Operations, Badonna Corp

question 25

Multiple Choice

In its first year of operations, Badonna Corp. reported Income Tax Expense of $52,000 and Income Tax Payable of $10,000. At the end of the year, Badonna reported a noncurrent Deferred Tax Liability of $5,000. What is the amount of cash paid for income taxes during the year?

• A) $37,000
• B) $47,000
• C) $17,000
• D) $7,000

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Definitions:

Uncollectible

Refers to accounts receivable that a business deems unlikely to be collected and writes off as a loss.

Direct Write-off

A method for accounting for bad debts whereby debts deemed uncollectable are written off directly against income at the time they are determined to be uncollectable.

Allowance Method

An accounting technique used to estimate and account for doubtful accounts, reducing accounts receivable to their net realizable value.

Direct Write-off Method

A method used in accounting to write off bad debt expenses when a company decides an account is uncollectible, directly affecting the income statement.