Power Corporation owns 75 percent of Turk Company’s stock; no intercompany purch

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 $360,000 and $220,000 and cost of goods sold of $160,000 and $104,500, respectively. Power’s inventory increased by $32,000, but Turk’s decreased by $12,000. Power’s accounts receivable increased by $23,000 and its accounts payable decreased by $18,000 during 20X4. Turk’s accounts receivable decreased by $13,000 and its accounts payable increased by $6,000.

Assuming there were no other cash flows from operations, using the direct method of computing cash flows from operating activities, compute the following:

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 $360,000 and $220,000 and cost of goods sold of $160,000 and $104,500, respectively. Power’s inventory increased by $32,000, but Turk’s decreased by $12,000. Power’s accounts receivable increased by $23,000 and its accounts payable decreased by $18,000 during 20X4. Turk’s accounts receivable decreased by $13,000 and its accounts payable increased by $6,000.

Explanation / Answer

Part 1 - Calculation of Cash Received from Customers

Part 2 - (a) Calculation of Purchases

(b) Calculation of Payment to Supplier

Part 3 - Cash Flow from Operating Activities

Particulars Power Corporation Turk Company Total Sales $360000 $220000 Less : Accounts Receivable Increased $2300 Add : Accounts receivable Decreased $13000 Cash Received From Customers $337000 $233000

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