From Kaplan:
The $64 was not classified as a CFO. Correct me if I am wrong but my hunch is “Income tax $64” includes a non-cash recording. I then assume that if there was a hypothetical change in Taxes Payable, that would be classified as a CFO?
Hi Kaplan,
The tax expense can be classified into 2 components -
a. Component related to operations &
b. Component related to sale of Investment.
The tax expense cash flow related to operations is 130*40% which is 52 - this portion of tax expense can be directly traced to operations and hence it is a CFO.
Tax expense related to Gain on sale is 30*40% = 12. This portion of the tax expense can be directly attributed to the gain on sale, which is a investing activity and accordingly to be classified as CFI.