A company purchases a new $10 million building,financed half with cash and half with a bank loan.How would this transaction affect the company's balance sheet?
A) Net plant and equipment rises $10 million;cash falls $10 million;bank debt rises $5 million.
B) Net plant and equipment rises $5 million;cash falls $10 million;bank debt rises $5 million.
C) Net plant and equipment rises $5 million;cash falls $5 million;bank debt rises $5 million.
D) Net plant and equipment rises $10 million;cash falls $5 million;bank debt rises $5 million.

Question

Quizplus · Accepted Answer

The company's net plant and equipment increases by the full value of the building ($10 million). Cash decreases by the amount paid in cash ($5 million), and bank debt increases by the amount of the loan ($5 million).

A Company Purchases a New $10 Million Building,financed Half with Cash