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Riley Company borrowed $36,000 on April 1, Year 1 from Titan Bank. The note issued by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenues of $1,700 during Year 1 and $1,400 during Year 2. Assume no other transactions.

-Based on this information alone,what are the amounts of total liabilities that would appear on Riley's December 31 balance sheets for Year 1 and Year 2,respectively?
A)$36,000 and $0
B)$37,890 and $0
C)$37,890 and $38,520
D)$1,890 and $630

Question

[The following information applies to the questions displayed below.]

Riley Company borrowed $36,000 on April 1, Year 1 from Titan Bank. The note issued by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenues of $1,700 during Year 1 and $1,400 during Year 2. Assume no other transactions.

-Based on this information alone,what are the amounts of total liabilities that would appear on Riley's December 31 balance sheets for Year 1 and Year 2,respectively?
A)$36,000 and $0
B)$37,890 and $0
C)$37,890 and $38,520
D)$1,890 and $630

Quizplus · Accepted Answer

End of Year 1:
Interest payable = $36,000 × 7% × (9 ÷ 12)= $1,890
Total liabilities = Note payable of $36,000 + Interest payable of $1,890 = $37,890
End of Year 2:
The note is repaid and the full amount of interest on the note was paid before the end of Year 2,so there are no remaining liabilities at that date.

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