The Following Selected Account Balances Appeared on the Financial Statements

question 83

Multiple Choice

The following selected account balances appeared on the financial statements of the Washington Company. Use these balances to answer the questions that follow.
$\begin{array}{lr}\text { Accounts receivable, Jan. } 1 & \$ 13,000 \\\text { Accounts receivable, Dec. } 31 & 9,000 \\\text { Accounts payable, Jan. 1 } & 4,000 \\\text { Accounts payable, Dec. } 31 & 7,000 \\\text { Inventory, Jan. 1 } & 10,000 \\\text { Inventory, Dec. } 31 & 15,000 \\\text { Sales } & 56,000 \\\text { Cost of goods sold } & 31,000\end{array}$ The Washington Company uses the direct method to calculate net cash flow from operating activities. Assume that all accounts payable are owed to merchandise suppliers.
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-Income tax expense was $175,000 for the year. Income tax payable was $30,000 and $40,000 at the beginning and end of the year, respectively. Cash payments for income tax reported on the statement of cash flows using the direct method is

• A) $175,000
• B) $165,000
• C) $205,000
• D) $215,000

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Definitions:

Current Cost Accounting

An accounting approach that records assets and liabilities at their current market value rather than their historical cost.

Realized Gains

Profits made from the sale of assets that exceed the purchase price, distinguishing from unrealized gains on assets still held.

LIFO Inventory

Last-In, First-Out, an inventory valuation method that assumes the last items added to inventory are the first sold, affecting the reported income and inventory value.

FIFO Inventory

FIFO Inventory, or First-In, First-Out, is an inventory valuation method where the goods first purchased or produced are the first to be sold.