An analysis of Courtney Corporation’s operational asset accounts provided the following information:

a. Acquired a large machine that cost $36,000, paying for it by giving a $15,000, 12 percent interest bearing note due at the end of two years and 500 shares of its common stock, with a par value of $10 per share and a market value of $42 per share.

b. Acquired a small machine that cost $12,700. Full payment was made by transferring a tract of land that had a book value of $12,700.

Required:

1. Show how this information should be reported on the statement of cash flows.

2. What would be the effect of these transactions on the capital acquisitions ratio? How might these transactions distort one’s interpretation of the ratio?