Riley Company borrowed $32,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 8% annual interest rate. Riley earned cash revenue of $980 in Year 1 and $1,300 in Year 2. Assume no other transactions.

The amount of total liabilities that would appear on Riley's December 31 balance sheets for Year 1 and Year 2, respectively, would be:

Multiple Choice

a) $32,000 and $0.

b) $33,920 and $0.

c) $33,920 and $34,560.

d) $1,920 and $640.