Reference no: EM132947300

Question - PK, INC. is a manufacturer and retailer of household furniture. Your audit of the company's financial statements for the year ended December 31, 2020, discloses the following debt obligations of the company at the end of its reporting period. PK's financial statements are authorized for issuance on March 31, 2021.

1. A P1,000,000 short-term obligation due on March 1, 2021. Its maturity could be extended to March 1, 2023, provided PK agrees to provide additional collateral. On February 12, 2021, an agreement is reached to extend the loan's maturity to March 1, 2023.

2. A short-term obligation of P1,350,000 in the form of notes payable due February 5, 2021. The company issued 7,500 ordinary shares for P120 per share on January 25, 2021. The proceeds from the issuance, plus P450,000 cash, were used to fully settle the debt on February 5, 2021.

3. A P1,500,000 note payable due July 31, 2021. PK intends to refinance the note by issuing long-term bonds. On January 10, 2021, the company prepaid P200,000 of the note because the company temporarily had excess cash. A P2,000,000 bond offering was completed in March 2021. The proceeds will be used to repay the note payable at maturity.

4. Deferred serial bonds, issued at face value of P5,000,000, and bearing interest at 12%. The bonds are payable in semiannual installment of P500,000 due April 1 and October 1 of each year. The last bond is to be paid on October 1, 2026. The interest is also paid semiannually.

5. A long-term obligation of P4,000,000. The loan is maturing over 8 years in the amount of P500,000 per year. The loan is dated September 1, 2020, and the first maturity date is September 1, 2021.

6. A debt obligation of P600,000 maturing on December 31, 2023. The debt is callable on demand by the lender at any time.

7. A P2,000,000,10% mortgage note issued October 1, 2019 with a term of 10 years. The terms of the note give the holder the right to demand immediate payment if the entity fails to make a monthly interest payment within 10 days of the date the payment is due. On December 31, 2020, PK is three months behind in making the required interest payment. An agreement was reached to provide a waiver of the breach on January 31, 2021.

8. Bank notes payable which include two separate notes payable to BK Bank:

a. A P3,000,000, 10% note issued March 1, 2019, payable on demand. Interest is payable every 6 months.

b. A one-year, P5,000,000, 11% note issued January 2, 2020. On December 31, 2020, PK negotiated a written agreement with BK Bank to replace the note with a 5- year, P5,000,000, 10% note to be issued January 2, 2021.

9. A P4,000,000, 10-year, 8% bonds issued at par on June 30, 2011. Interest is payable annually on June 30 and December 31.

Required -

1. What amount of current liabilities should be reported on the December 31, 2020, statement of financial position?

2. What amount of noncurrent liabilities should be reported on the December 31, 2020, statement of financial position?