Madison Company issued an interest-bearing note payable with a face value of $24,000 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term. Based on this information alone, what is the amount of total liabilities appearing on Madison's balance sheet as of December 31, Year 1?

Question

Quizplus · Accepted Answer

The note payable has a face value of $24,000 and an interest rate of 8%, which means that Madison Company will owe $24,000 + ($24,000 x 8%) = $24,800 to Metropolitan Bank at the end of the one-year term. Therefore, the amount of total liabilities on Madison's balance sheet as of December 31, Year 1 would be $24,800.

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