When the Direct Method Is Used to Determine the Net

question 6

Multiple Choice

When the direct method is used to determine the net 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:

Horizontal Expansion

A business growth strategy involving the increase of production or the expansion of product lines within the same level of the supply chain.

Vertical Expansion

The growth of a company by acquiring or establishing operations within the same industry but at different stages of the production process.

Skill Variety

Describes the degree to which a job requires a variety of different activities in carrying out the work, involving the use of different skills and talents.

Physical Strength

The measure of an individual's exertion capacity in terms of muscle performance and endurance.