Reference no: EM132956221

Question - In connection with your audit of BABEL Corporation's financial statements for the year 2005, you noted the following liability account balances as of December 31, 2004:

Note payable, bank P5,600,000

Deferred income taxes 700,000

Transactions during 2005 and other information relating to BABEL's liabilities were as follows:

a. The principal amount of the note payable is P5,600,000 and bears interest at 12%. The note is dated April 1, 2004 and is payable in four equal annual installments of P1,400,000 beginning April 1, 2005. The first principal and interest payment was made on April 1, 2005.

b. Deferred income taxes are provided in recognition of timing differences between financial and income tax reporting of depreciation. For the year ended December 31, 2005, depreciation per tax return exceeded book depreciation by P312,500. BABEL's effective income tax rate for 2004 was 32%.

c. On July 1, 2005, BABEL issued for P1,774,000, P2,000,000 face amount of its 10%, P1,000 bonds. The Bonds were issued to yield 12%. The bonds are dated July 1, 2004 and will mature on July 1, 2014. Interest is payable annually on July 1. BABEL uses the interest method to amortize bond discount.

Required - Based on the above and the result of your audit, determine the following:

1. Total noncurrent liabilities as of December 31, 2005.

2. Current portion of long-term liabilities as of December 31, 2005.

3. Accrued interest payable as of December 31, 2006.