Question

Riley Company borrowed $36,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 7% annual interest rate. Riley earned cash revenue of $1,700 in Year 1 and $1,400 in Year 2. Assume no other transactions. The amount of total liabilities that would appear on Riley's December 31 balance sheets for Year 1 and Year 2, respectively, would be:_____.A) $36,000 and $0. B) $37,890 and $0. C) $37,890 and $38,520. D) $1,890 and $630.

Answer 1

Answer:

B) $37,890 and $0

Explanation:

Calculation to determine The amount of total liabilities that would appear on Riley's December 31 balance sheets for Year 1 and Year 2, respectively, would be

Total liabilities=$36,000+($36,000 * 7% * 9/12)

Total liabilities = $36,000+$1,890

Total liabilities = $37,890

Therefore The amount of total liabilities that would appear on Riley's December 31 balance sheets for Year 1 and Year 2, respectively, would be $37,890