Difference between the plant purchase and bond issue

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Reference no: EM131899657

Company Baldwin invested $51,960,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $33,975,374 at 13.6% interest, and equity of $17,984,626. 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 $33,975,374.

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

On the Balance sheet, Plant & Equipment increased by $51,960,000.

Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $17,984,626, the difference between the investment $51,960,000 and the bond $33,975,374.

Cash went down by $51,960,000 when the plant was purchased.

Depreciation increased by $3,464,000.

Cash was pulled from retained earnings to cover the $17,984,626 difference between the plant purchase and bond issue.

On the Balance sheet, Long Term Debt changed by $33,975,374.

Reference no: EM131899657

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