Walk me through the three financial statements when debt increases by $200 and you buy a factory. Depreciation is 10%, annual debt repayment is 20%, and interest is 5%.

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IBPrep · Accepted Answer

At the time of purchase:

Income Statement: No immediate change.
Cash Flow Statement: No change to CFO; CFF is up $200 from the new debt; CFI shows the $200 outflow for the factory, so net change in cash is $0 (the $200 raised is spent on the asset).

Walk me through the three financial statements when debt increases by $200 and you buy a factory. Depreciation is 10%, annual debt repayment is 20%, and interest is 5%.

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