Company Baldwin invested $20,200,000 in plant and equipment last year. The plant

Question

Company Baldwin invested $20,200,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $15,739,873 at 12.3% interest, and equity of $4,460,127. Depreciation is 15 years straight line. For this transaction alone which of the following statements are true? Can pick multiple

Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings.

Cash went up when the Bond was issued by $15,739,873. On the Balance sheet, Long Term Debt changed by $15,739,873. Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $4,460,127, the difference between the investment $20,200,000 and the bond $15,739,873. Cash went down by $20,200,000 when the plant was purchased. Cash was pulled from retained earnings to cover the $4,460,127 difference between the plant purchase and bond issue. On the Balance sheet, Plant & Equipment increased by $20,200,000.

Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings.

Depreciation increased by $1,346,667.

Explanation / Answer

   
The following are true

1.
Cash went up when the Bond was issued by $15,739,873.
2.   On the Balance sheet, Long Term Debt changed by $15,739,873.
3.   Cash went down by $20,200,000 when the plant was purchased.
4.On the Balance sheet, Plant & Equipment increased by $20,200,000.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.