Reporting Noncash Transactions on the Statement of Cash Flows; Interpreting the Effect on the Capital Acquisitions Ratio
An analysis of Courtney Corporation’s operational asset accounts provided the following information:
a .Acquircd 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 hook 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 capita l acquisitions ratio? How might these transactions distort ones interpretation of the ratio?
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