Difference between plant purchase and bond issue

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Reference no: EM131912650

Company Baldwin invested $58,760,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $37,378,448 at 13.6% interest, and equity of $21,381,552. Depreciation is 15 years straight line. For this transaction alone which of the following statements are true?

Cash went up when the Bond was issued by $37,378,448.

Cash went down by $58,760,000 when the plant was purchased.

On the Balance sheet, Long Term Debt changed by $37,378,448.

Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $21,381,552, the difference between the investment $58,760,000 and the bond $37,378,448.

Cash was pulled from retained earnings to cover the $21,381,552 difference between the plant purchase and bond issue.

On the Balance sheet, Plant & Equipment increased by $58,760,000.

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 $3,917,333.

Reference no: EM131912650

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