Company Baldwin invested $51,960,000 in plant and equipment last year. The plant

Question

Company Baldwin invested $51,960,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $33,975,374 at 13.6% interest, and equity of $17,984,626. Depreciation is 15 years straight line. For this transaction alone which of the following statements are true? Select: 5 Cash went up when the Bond was issued by $33,975,374. Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings. On the Balance sheet, Plant & Equipment increased by $51,960,000. Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $17,984,626, the difference between the investment $51,960,000 and the bond $33,975,374. Cash went down by $51,960,000 when the plant was purchased. Depreciation increased by $3,464,000. Cash was pulled from retained earnings to cover the $17,984,626 difference between the plant purchase and bond issue. On the Balance sheet, Long Term Debt changed by $33,975,374. Company Baldwin invested $51,960,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $33,975,374 at 13.6% interest, and equity of $17,984,626. Depreciation is 15 years straight line. For this transaction alone which of the following statements are true? Select: 5 Cash went up when the Bond was issued by $33,975,374. Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings. On the Balance sheet, Plant & Equipment increased by $51,960,000. Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $17,984,626, the difference between the investment $51,960,000 and the bond $33,975,374. Cash went down by $51,960,000 when the plant was purchased. Depreciation increased by $3,464,000. Cash was pulled from retained earnings to cover the $17,984,626 difference between the plant purchase and bond issue. On the Balance sheet, Long Term Debt changed by $33,975,374.

Explanation / Answer

Correct statements are:

Cash went up when the Bond was issued by $33,975,374. - When bonds issued both cash and liabilities will increase.

On the Balance sheet, Plant & Equipment increased by $51,960,000. - Plant assets increase with amount of assets purchased.

Cash went down by $51,960,000 when the plant was purchased. - Asset will come into organisationa and cash will flow out of organisation.

On the Balance sheet, Long Term Debt changed by $33,975,374. - Since, new debt issued, Long-term debt will increase by #33,975,374.

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