Question
Power Corporation owns 75 percent of Surge Companys stock; no intercompany purchases or sales were made in 20X4. For the year, Power and Surge reported
Power Corporation owns 75 percent of Surge Companys stock; no intercompany purchases or sales were made in 20X4. For the year, Power and Surge reported sales of $340,000 and $230,000 and cost of goods sold of $150,000 and $109,250, respectively. Powers inventory increased by $29,000, but Surges decreased by $12,000. Powers accounts receivable increased by $21,000 and its accounts payable decreased by $18,000 during 20X4. Surges accounts receivable decreased by $13,000 and its accounts payable increased by $4,000. Required: Assuming there were no other cash flows from operations, using the direct method of computing cash flows from operating activities, compute the following:
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