On the statement of cash flows, the income tax expense adjusted to a cash basis would be: Solution Cash Flow from Operating Ativities : Cash Receipts: Cash Payments : Cash Flow From Operating Activity : ( $13000) Working Notes : Cash Receipts From customers : Sales + Account receivable at the beginning - Account Receivable at the end : $700,000 + $36000 - $ 48000 = $688,000 Cash Payment for Purchases : Cost of Goods Sold + Increase ( or - Decrease ) in Inventory + Decrease (or - Increase ) in Accounts Payable : $ 3,60,000 +$56000 - $67000 + $53000 - $32000 = $3,70,000 Cash Payment For Operating Activities : Operating Expense + Increase ( or - Decrease ) in Prepaid Expense + Decrease (or - Increase ) in Accrured Liabilities. : $24000 - $16000 + $210000 + $270000 - $ 235000 + $80,000 - $ 60,000+ $ 49,000 = $ 3,22,000 Cash Interest : Interest Expense - Increase ( or + Decrease ) interest payable + Amortization of Bond Premium ( or - Discount ) Cash Payment For Income Taxes : Income Tax + Decrease ( or - Increase ) in Income Tax Payable : $ 39,000 - $61000 + $31000 = $9000 .