Power Corporation owns 75 percent of Turk Company\'s stock; no intercompany purc

Question

Power Corporation owns 75 percent of Turk Company's stock; no intercompany purchases or sales were made in 20X4. For the year, Power and Turk reported sales of $400,000 and $230,000 and cost of goods sold of $150,000 and $109,250, respectively. Power's inventory increased by $25,000, but Turk's decreased by $14,000. Power's accounts receivable increased by $17,000 and its accounts payable decreased by $16,000 during 20X4. Turk's accounts receivable decreased by $9,000 and its accounts payable increased by S8,000. Required: Assuming there were no other cash flows from operations, using the direct method of computing cash flows from operating activities, compute the following: a. Cash received from customers b. Cash payments to suppliers c. Cash flows from operating activities

Explanation / Answer

Cash received from customer = (630000-17000+9000) = 622000

Cash paid to supplier = (150000+109250+25000-14000+16000-8000) = 278250

Cash flow from operating activity = (622000-278250) = 343750

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