T Chapter $7$

Exercise $7-35$

Page $438$

The following data are taken from the records of Saro Corporation and subsidiaries for Year $1$:

Required:

a$.$ Determine the amount of cash flows from operations for Year $1($use the indirect format$).$

Check $-$ CFO is $$19,340$

b$.$ For the following items, explain their meaning and implications, if any, in adjusting net income

to arrive at cash flow from operations.

$(1)$ Issuance of treasury stock as employee compensation.

$(2)$ Capitalization of interest incurred.

$(3)$ Amount charged to pension expense differing from the amount funded.he following data are taken from the records of Saro Corporation and subsidiaries for Year $1$:

Net income $ $10,000$

Depreciation, depletion, and amortization $8,000$

Disposals of property, plant, & equipment $($book value$)$ for cash $1,000$

Deferred income taxes for Year $1($noncurrent$)400$

Undistributed earnings of unconsolidated affiliates $200$

Amortization of discount on bonds payable $50$

Amortization of premium on bonds payable $60$

Decrease in noncurrent assets $1,500$

Cash proceeds from exercise of stock options $300$

Increase in accounts receivable $900$

Increase in accounts payable $1,200$

Decrease in inventories $850$

Increase in dividends payable $300$

Decrease in notes payable to bank $400$

Required:

a$.$ Determine the amount of cash flows from operations for Year $1($use the indirect format$).$

Check $-$ CFO is $$19,340$

b$.$ For the following items, explain their meaning and implications, if any, in adjusting net income

to arrive at cash flow from operations.

$(1)$ Issuance of treasury stock as employee compensation.

$(2)$ Capitalization of interest incurred.

$(3)$ Amount charged to pension expense differing from the amount funded.