The following data are taken from the records of Saro Corporation and subsidiaries for Year 1:
| Net income Don't use plagiarized sources. Get Your Custom Essay on the following data are taken from the records of saro corporation and subsidiaries f 536434 For $10/Page 0nly | $10,000 |
| Depreciation, depletion, and amortization | 8,000 |
| Disposals of property, plant, and 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 banks | 400 |
Required:
a. Determine the amount of cash flows from operations for Year 1 (use the indirect format).
b. For the following items, explain their meaning and implications, if any, in adjusting net income to arrive at cash flows 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.
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