You buy $100 of PP&E using debt, walk me through the three statements. Then assume 10% interest, $50 of D&A, and a $50 debt paydown, and walk through the three statements again.

Question

IBPrep · Accepted Answer

At T0:

I/S: No change.

CFS:
CFO: no change
CFF: +$100 inflow from the debt
CFI: ($100) outflow from the PP&E purchase
Net change in cash: $0

BS:
PP&E up $100, Assets up $100
Debt up $100, L&E up $100
Both sides balance.

You buy $100 of PP&E using debt, walk me through the three statements. Then assume 10% interest, $50 of D&A, and a $50 debt paydown, and walk through the three statements again.

Answer

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You buy $100 of PP&E