Stonewall Company was organized on January 1, 2012. During the year ended December 31, 2012, the company provided the following data:

Analysis of selected accounts and transactions:

a. Issued 3,000 common shares for cash, at \(\$ 18\) per share.

b. Borrowed \(\$ 15,000\) on a one-year, 8 percent interest-bearing note; the note was dated June 1 , 2012.

c. Paid \(\$ 29,000\) to purchase machinery.

d. Purchased merchandise for resale at a cost of \(\$ 50,000\); paid \(\$ 40,000\) cash and the balance on account. The company uses a perpetual inventory system.

e. Exchanged plant machinery with a carrying amount of \(\$ 2,000\) for office machines with a market value of \(\$ 2,000\).

f. Declared a cash dividend of \(\$ 5,000\) on December 15,2012 , payable to shareholders on January \(15,2013\).
g. Because this is the first year of operations, all account balances are zero at the beginning of the year; therefore, the changes in the account balances are equal to the ending balances.
Required:
1. Prepare a statement of cash flows for the year ended December 31, 2012. Use the indirect method to report cash flows from operating activities.
2. Compute and explain the quality of earnings ratio and the capital acquisitions ratio.

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Income Statement Sales revenue Cost of sales Depreciation expense Other expenses Profit Statement of Financial Position Cash Trade receivables Merchandise inventory Machinery (ne:) Total assets Trade payables Accrued liabilities $ 80,000 (35,000) (4,000) (32,000) $9,000 $ 48,000 18,000 15,000 25,000 $106,000 $ 10,000 Dividends payable 21,000 2,000 Note payable, short term 15,000 Share capital 54,000 Retained earnings 4,000 Total liabilities and shareholders' equity $106,000