On October 1, Year 1, Tankard Company borrowed $45,000 from the bank and issued a note for that amount. The note had a one-year term and an annual interest rate of 8%.

Required:

a) Compute the amount of interest expense that will be shown on the Year 1 income statement.

b) What is the total amount of cash that will be paid to the bank at the maturity of the note on October 1, Year 2?

c) Prepare the liabilities section of the balance sheet at December 31, Year 1.