The general fund has the following transactions for 2022: Issued $1,000,000 face value bonds with a coupon rate of 3%.Made a $100,000 principal payment on the bonds.Made a $25,000 interest payment on the bonds.Accrued interest due in 2023 on the bonds is $5,000. What is the effect of the above transactions on the general fund's fund balance in 2022?

Companies need to raise capital in order to run their business smoothly. There are many ways to raise fund, such as issuing share capital ,debt , borrowings etc. Thus the company gets enough capital to run the business.In case of bonds, the company is supposed to pay a fixed rate of interest in every year, which is an expense to the company.Accrued interest are the interest that has been incurred , but not paid. Thus accrued expense doesn’t affect the company’s cash inflow or out flow. In the given case, Interest of $5,000 will accrue in the year 2023.Thus it doesn’t affect the transactions of year 2022 .

Answered: What is the effect of the above…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The general fund has the following transactions for 2022:

Issued $1,000,000 face value bonds with a coupon rate of 3%.
Made a $100,000 principal payment on the bonds.
Made a $25,000 interest payment on the bonds.
Accrued interest due in 2023 on the bonds is $5,000.

What is the effect of the above transactions on the general fund's fund balance in 2022?

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