Question
Company Baldwin invested $27,800,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $18,563,719 at 12.2%
Company Baldwin invested $27,800,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $18,563,719 at 12.2% interest, and equity of $9,236,281. Depreciation is 15 years straight line. For this transaction alone which of the following statements are true?
Select : 5
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On the Balance sheet, Plant & Equipment increased by $27,800,000.
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On the Balance sheet, Long Term Debt changed by $18,563,719.
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Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $9,236,281, the difference between the investment $27,800,000 and the bond $18,563,719.
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Depreciation increased by $1,853,333.
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Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings.
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Cash went up when the Bond was issued by $18,563,719.
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Cash went down by $27,800,000 when the plant was purchased.
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Cash was pulled from retained earnings to cover the $9,236,281 difference between the plant purchase and bond issue.
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