Suppose Baldwin invested in plant and equipment last year. The plant investment was funded with bonds...
Suppose Baldwin invested in plant and equipment last year. The
plant investment was funded with bonds at a face value of
$8,000,000 at 12.5% interest and equity of $4,200,000. Depreciation
is 15 years straight line. For this transaction alone, which of the
following statements are true (select 3 answers)?
Cash went up when the bond was issued by $8,000,000.
Cash went down by the amount of the plant purchase.
On the Balance Sheet, Plant & Equipment increased by
$12,200,000.
Cash was pulled from Retained Earnings to cover the $4,200,000
difference between plant purchase and bond issue.
Since the new plant was funded with debt and equity, on the Balance
Sheet, Retained Earnings decreased by $4,200,000, the difference
between the investment and the bond issue.
On the Balance Sheet, Long Term Debt changed by $8,000,000.
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 $813,333.
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Suppose Baldwin invested in plant and equipment last year. The
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