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Suppose Baldwin invested in plant and equipment last year. The plant investment was funded with...

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Accounting

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)?

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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