Question

Stella Corp. has the following liabilities: $30,000 salaries payable, $70,000 accounts payable, $180,000 notes payable (to be made in 10 equal annual payments), and warranty payable $22,000 (all of Stella's products come with a 90-day manufacturer warranty). The total current liabilities is:

A. $122,000

B. $140,000

C. $100,000

D. $302,000

Answer 1

Stella Corp.'s total current liabilities amount to $140,000, which includes salaries payable, accounts payable, warranty payable, and one annual payment of the notes payable.

Step-by-step explanation:

To calculate Stella Corp.'s total current liabilities, we need to identify which liabilities are due within one year. The salaries payable ($30,000), accounts payable ($70,000), and the warranty payable ($22,000) are all considered current liabilities because they are due within a year. However, the notes payable ($180,000) are to be made in 10 equal annual payments, which means only one payment is due within the current year. To find the annual payment, we divide the total notes payable by 10, resulting in $18,000 per year as a current liability. Adding these together, we get $30,000 + $70,000 + $22,000 + $18,000 = $140,000 as the total current liabilities.