Madison Company issued an interest-bearing note payable with a face amount of $11,400 and a stated interest rate of 8% to the Metropolitan Bank on August 1, Year 1. The note carried a one-year term.Based on this information alone, the amount of total liabilities appearing on Madison's Year 1 balance sheet would be:

Question

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The face amount of the note payable is $11,400, which represents a current liability for Madison. The interest on the note payable for the year would be $912 ($11,400 x 8%). Therefore, the total liabilities for Madison would be $11,400 (face amount of note payable) + $912 (interest on the note payable) = $11,780.

Madison Company Issued an Interest-Bearing Note Payable with a Face