Company Baldwin invested $37,940,000 in plant and
Company Baldwin invested $37,940,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $28,711,622 at 13.9% interest, and equity of $9,228,378. Depreciation is 15 years straight line. For this transaction alone which of the following statements are true?
On the Balance sheet, Plant & Equipment increased by $37,940,000.
Cash went down by $37,940,000 when the plant was purchased.
Cash was pulled from retained earnings to cover the $9,228,378 difference between the plant purchase and bond issue.
Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by $9,228,378, the difference between the investment $37,940,000 and the bond $28,711,622.
On the Balance sheet, Long Term Debt changed by $28,711,622.
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 $2,529,333.
Cash went up when the Bond was issued by $28,711,622.