Riley Company borrowed $18,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 6% annual interest rate. Riley earned cash revenue of $840 in Year 1 and $600 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:

Question

Quizplus · Accepted Answer

The total liabilities at the end of Year 1 include the principal amount of $18,000 plus the interest for 9 months (April 1 to December 31), which is $18,000 * 6% * 9/12 = $810, totaling $18,810. By the end of Year 2, the note and its interest would have been paid off, assuming no other transactions affecting liabilities, making the total liabilities $0.

Riley Company Borrowed $18,000 on April 1, Year 1 from the Titan