Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Company Baldwin invested $21,700,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $16,333,655 at 12.2%

Company Baldwin invested $21,700,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $16,333,655 at 12.2% interest, and equity of $5,366,345. Depreciation is 15 years straight line. For this transaction alone which of the following statements are true?

Select : 5

Save Answer

On the Balance sheet, Plant & Equipment increased by $21,700,000.

On the Balance sheet, Long Term Debt changed by $16,333,655.

Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $5,366,345, the difference between the investment $21,700,000 and the bond $16,333,655.

select 5

Depreciation increased by $1,446,667.

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 $16,333,655.

Cash went down by $21,700,000 when the plant was purchased.

Cash was pulled from retained earnings to cover the $5,366,345 difference between the plant purchase and bond issue.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Theoretical Foundations For Quantitative Finance

Authors: Luca Spadafora, Gennady P Berman

1st Edition

9813202475, 978-9813202474

More Books

Students also viewed these Finance questions