The balance sheet of Terrier Company at the end of 2009 is presented here, along with certain other information for 2010:
December 31, 2009
Cash ................ $ 140,000
Accounts receivable .......... 155,000
Total current assets ........... $ 295,000
Land ................. $ 300,000
Plant and equipment .......... 500,000
Accumulated depreciation ....... (150,000)
Investments .............. 100,000
Total long-term assets .......... $ 750,000
Total assets .............. $1,045,000
Current liabilities .......... $ 205,000
Bonds payable ........... $ 300,000
Common stock ........... $ 400,000
Retained earnings .......... 140,000
Total stockholders’ equity ........ $ 540,000
Total liabilities and
stockholders’ equity ..........$1,045,000
Other information is as follows:
a. Net income for 2010 was $70,000.
b. Included in operating expenses was $20,000 in depreciation.
c. Cash dividends of $25,000 were declared and paid.
d. An additional $150,000 of bonds was issued for cash.
e. Common stock of $50,000 was purchased for cash and retired.
f. Cash purchases of plant and equipment during the year were $200,000.
g. An additional $100,000 of bonds was issued in exchange for land.
h. During the year, sales exceeded cash collections on account by $10,000. All sales are on account.
i. The amount of current liabilities remained unchanged during the year.
Required
1. Prepare a statement of cash flows for 2010 using the indirect method in the Operating Activities section. Include a supplemental schedule for noncash activities.
2. Prepare a balance sheet at December 31, 2010.
3. Provide a possible explanation as to why Terrier decided to issue additional bonds for cash during 2010.