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Madison Company issued an interest-bearing note payable with a face amount of $13,200 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:

Respuesta :

Answer:

$13,640

Explanation:

The computation of the total liabilities for the balance sheet is shown below:

Total liabilities    

Note payable outstanding $13,200

Add: interest payable  $440

Total liabilities outstanding $13,640

The interest is computed below:

= $13,200 Ă— 5% Ă— 5 months Ă· 12 months

= $440

The 5 months are calculated from August 1 to December 31 and the same is considered

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