Cling-on Ltd. sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. On July 1, 2018, Cling-on received a three-month $12,000 bank loan from City Credit Union due on September 30, 2018, and bearing interest at 3%. Interest is payable at maturity. Note that the company records adjusting entries annually at its year end, December 31.

During the next four months, Cling-on incurred the following:

Sept. 1 Purchased inventory on account for $15,000 from Black Diamond, terms n/30. The company uses a perpetual inventory system.

30 Repaid the $12,000 bank loan payable to City Credit Union (see opening balance), as well as any interest owed.

Oct. 1 Issued a six-month, 4%, $15,000 note payable to Black Diamond in exchange for the account payable (see September 1 transaction). Interest is payable on the first of each month.

2 Borrowed $25,000 from Montpelier Bank for 12 months at 3% to finance the building of a new climbing area for advanced climbers. (Use the asset account Buildings.) Interest is payable monthly on the first of each month.

Nov. 1 Paid interest on the Black Diamond note and Montpelier Bank loan.

Dec. 1 Paid interest on the Black Diamond note and Montpelier Bank loan.

Dec. 3 Purchased a vehicle for $28,000 from Auto Dealer Ltd. to transport clients to nearby climbing sites. Paid $8,000 as a down payment and borrowed the remainder from Atlantic Bank for 12 months at 3%. Interest is payable quarterly, at the end of each quarter.

31 Recorded accrued interest for the Black Diamond note and the Montpelier and Atlantic loans.

Instructions

(a) Record the above transactions.

(b) Open T accounts for the Interest Expense, Interest Payable, Bank Loans Payable, and Notes Payable accounts and enter any opening balances. Post the above entries.

(c) Assuming there is no other interest expense than that recorded in the transactions above, show the income statement presentation of interest expense for the year ended December 31.

(d) Show the current liability section of the statement of financial position as at December 31, listing balances of accounts affected by the above transactions.