On January 1,Year 1,Eureka Company issued $100,000 of five-year,7% bonds at face value.The annual cash payment for interest is due on January 1 of each year beginning January 1,Year 2.Based on this information,what is the total amount of liabilities related to these bonds that will be reported on the balance sheet at December 31,Year 1? (Hint: Consider the interest that might be owed to bondholders at December 31,Year 1. )

Question

Quizplus · Accepted Answer

Accrued interest expense at December 31,Year 1 = Face value of $100,000 × 7% = $7,000
Total liabilities relating to bonds = Bonds payable of $100,000 + Interest payable of $7,000 = $107,000

On January 1,Year 1,Eureka Company Issued $100,000 of Five-Year,7% Bonds