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Classify each of the liability whether current or noncurrent

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Reference no: EM132929457

AUDITING

  • CPALE INC. is a manufacturer and retailer of household furniture. Your audit of the company's financial statements for the year ended December 31, 2021, discloses the following debt obligations of the company at the end of its reporting period. CPALE's financial statements are authorized for issuance on March 6, 2022.
  • On January 1, 2018, CPALE acquired a building from OIL Co. In lieu of cash payment, CPALE gave OIL a 6-year, P36,000,000 non-interest bearing note payable. Principal is due in equal payments every December 31 beginning on December 31, 2018. The prevailing rate of interest for this type of note is 12.5%.
  • A long-term obligation of P3,600,000 on December 1,2021 . On December 20, 2021 CPALE breaches a covenant on its debt obligation and the loan becomes payable on demand. An agreement is reached to provide a waiver of the breach on December 31, 2021.
  • It has a debt obligation of P4,000,000 maturing on December 31, 2025. The debt is callable on demand by the lender at any time after January 1, 2022.
  • A P511,000 short-term obligation due on March 1, 2022. Its maturity could be extended to March 1, 2025, because CPALE has an unconditional right to defer the payment of this obligation until March 1,2025. On February 12, 2022 an agreement was reached to extend the loan's maturity to March 1, 2024.
  • A long-term obligation of P10,000,000. The loan is payable in the amount of P2,000,000 per year. The loan is dated January 1, 2021 and the first payment was also made on such date.
  • A long-term obligation of P6,900,000 in the form of notes payable due February 5, 2030. The company issued 75,000 ordinary shares for P63 per share on December 31, 2021. The proceeds from the issuance were used to fully settle the debt on February 5, 2022.

REQUIREMENTS:

Problem 1. Classify each of the liability whether current or noncurrent. JUSTIFY YOUR ANSWER by CITING the specific provision in the standard supporting your it.

Problem 2. Show the computation of the total current and noncurrent liability.

Reference no: EM132929457

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