(Computation of Operating ActivitiesDirect Method) Presentedbelow are two independentsituations.Situation A:Chenowith Co. reports revenues of $200,000 and operating expensesof $110,000 in its first year of operations, 2010. Accountsreceivable and accounts payable at year-end were $71,000 and$39,000, respectively. Assume that the accounts payable related tooperating expenses. Ignore income taxes.Instructions: Using the direct method, compute net cash provided(used) by operating activities.Situation B:The income statement for Edgebrook Company shows cost of goods sold$310,000 and operating expenses (exclusive of depreciation)$230,000. The comparative balance sheet for the year shows thatinventory increased $21,000, prepaid expenses decreased $8,000,accounts payable (related to merchandise) decreased $17,000, andaccrued expenses payable increased $11,000.InstructionsCompute (a) cash payments to suppliers and (b) cash payments foroperating expenses.
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