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Suppose Baldwin invested in plant and equipment last year. The plant investment was funded with bonds at a face value of $8,000,000 at 12.5% interest and equity of $4,200,000. Depreciation is 15 years straight line. For this transaction alone, which of the following statements are true (select 3 answers)

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anthougo

For Baldwin investing in plant and equipment last with bonds of $8 million at 12.5% and equity of $4.2 million, the true statements are:

  • 3. On the Balance Sheet, Plant & Equipment increased by $12,200,000.
  • 5. Depreciation increased by $813,333.
  • 7. On the Balance Sheet, Long Term Debt changed by $8,000,000.

What are the sources of cash for corporate investments?

Corporate investments require cash outlays.

The cash outlays may be sourced internally (through retained earnings and cash) or externally through the issuance of bonds and equity shares.

Thus, for Baldwin's investment, the true statements are Options 3, 5, and 7.

Learn more about sources of cash for investment at https://brainly.com/question/735261

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Question Completion with Answer Options:

1. Cash was pulled from Retained Earnings to cover the $4,200,000 difference between plant purchase and bond issue.

2. Cash went down by the amount of the plant purchase.

3. On the Balance Sheet, Plant & Equipment increased by $12,200,000.

4. Buying the plant had no net effect on the Cash account because the plant was paid for by the bond plus Retained Earnings.

5. Depreciation increased by $813,333.

6. Cash went up when the bond was issued by $8,000,000.

7. On the Balance Sheet, Long Term Debt changed by $8,000,000.

8. Since the new plant was funded with debt and equity, on the Balance Sheet, Retained Earnings decreased by $4,200,000, the difference between the investment and the bond issue.

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