Question

On January 1, Year 1, Eureka Company issued $290,000 of 4-year, 5% 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

Answer 1

The total amount of liabilities related to the bonds that will be reported on the balance sheet at December 31, Year 1 is $1,160,000.

Step-by-step explanation:

The total amount of liabilities related to the bonds that will be reported on the balance sheet at December 31, Year 1 can be calculated by multiplying the face value of the bonds with the remaining term. In this case, the face value is $290,000 and the remaining term is 4 years. So, the total liabilities related to these bonds will be $290,000 x 4 = $1,160,000.

Answer 2

$304,500

Step-by-step explanation:

Interest payable on December 31, year 1 = $290,000 * 5%

Interest payable on December 31, year 1 = $14,500

Total amount of liabilities to be reported on the Balance Sheet, year 1:

= $290,000 + $14,500

= $304,500

So, the total amount of liabilities related to these bonds that will be reported on the balance sheet at December 31, Year 1 is $304,500.