Reference no: EM132933786

Included in PapaSakarinCorporation's liability account balances at December 31, 2016 were the following:

Note Payable, bank P2,800,000.00

Liability under capital lease 430,000.00

Deferred income taxes 360,000.00

Transactions during 2017 and other information relating to PapaSakarin's liabilities were as follows:

1. The principal amount of the notes payable is P2,800,000 and bears interest at 15%. The note is dated April 1, 2016 and is payable in four equal instalments of P700,000 beginning April 1, 2017. The first principal and interest payment was made on April 1, 2017.

2. The capitalized lease is for 10 year period beginning December 31, 2014. Equal payments of P100,000 are due on December of each year, and the 14% interest rate implicit in the lease is known by PapaSakarin. The present value at December 31, 2016, of the seven remaining lease payment (due December 31, 2017, through December 31, 2023) discounted at 14% was P430,000.

3. Deferred income taxes are provided in recognition of timing difference between financial statement and income tax reporting of depreciation. For the year ended December 31, 2017 depreciation per tax return exceeded book depreciation by P90,000. Papa Sakarin's effective income tax rate for 2017 was 40%

4. On July 1, 2016, Papa Sakarin 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, 2017 and mature on July 1, 2023. Interest is payable annually on July 1. PapaSakarin uses the interest method to amortize bond discount.

Problem a. Prepare the long-term liabilities section of Papa Saakrin balance sheet at December 31, 2017.

Problem b. Prepare the schedule showing the current portion of the long-term liabilities and accrued interest payable that would appear in Papa Sakarin balance sheet at December 31, 2017.

Problem c. Prepare the schedule showing interest expense from the long-term liabilities and deferred income tax expense that would appear in Papa Sakarin income statement for the year ended December 31, 2017.