Problem 1-5 Problem 1-6

Accounts payable 1,000,000 Note payable – trade 3,000,000

Deposits and advances Note payable – bank 2,000,000
from customers 250,000 Note payable – officers 500,000
Notes payable 1,000,000 Accounts payable – trade 4,000,000
Credit balances in Bank overdraft 300,000
customers’ accounts 200,000 Dividends payable 1,000,000
Serial bonds payable 1,000,000 Withholding tax payable 100,000
Accrued interest on Income tax payable 800,000
bonds payable 150,000 Estimated warranty liability 600,000
Unearned rent income 100,000 Estimated damages payable 700,000
Total current liabilities 3,700,000 Accrued liabilities 900,000
Estimated premium liability 200,000
Total current liabilities 14,100,000

Problem 1-8

Accounts payable (500,000 + 100,000) 600,000

Accrued liabilities 50,000
Note payable - refinanced 1,000,000
Note payable – due May 1, 2012 800,000
Total current liabilities 2,450,000

Noncurrent liabilitiy:
Bonds payable, due December 31, 2011 2,000,000

Problem 1-9

a. Current liabilities:
Note payable – bank 700,000
Note payable – shareholder 2,000,000
Less: Discount on note payable 113,000 1,887,000
Accrued interest payable 189,000
Total current liabilities 2,776,000

b. Note payable – bank:

January 1 – April 1, 2011 (2,800,000 x 12% x 3/12) 84,000
April 1 – December 31, 2011 (2,100,000 x 12% x 9/12) 189,000 273,000
Note payable – shareholder:
Amortization of discount from July 1 – December 31, 2011
(226,000 x 6/12) 113,000
Total interest expense 386,000

Problem 1-10

1. Current liabilities:
 Accounts payable 7,000,000
Note payable – bank 12,000,000
Accrued expenses 4,000,000 23,000,000

Noncurrent liabilities:
Mortgage payable 4,000,000
Note payable due 2013 3,000,000 7,000,000
Total liabilities 30,000,000

2. The note payable to bank is paid from the proceeds of the issuance of share capital of P4,000,000 on
January 31, 2012 and the availment of a financing agreement on February 15, 2012 with a financially
capable commercial bank on April 1, 2012 in the amount of P3,000,000. Nevertheless, the note
payable should continue to be classified as current.

Problem 1-11

Accounts payable 6,500,000

Note payable – bank 3,000,000
Interest payable 150,000
Mortgage note payable 2,000,000
Bonds payable 4,000,000
Total Current Liabilities 15,650,000

Problem 1-12 Answer B

Note payable, September 1, 2010 1,800,000

Less: Payment on September 1, 2011 600,000
Balance, September 1, 2011 1,200,000

Accrued interest payable from September 1 to December 31, 2011

(1,200,000 x 12% x 4/12) 48,000

Problem 1-14 Answer A

Note payable, October 1, 2010 1,200,000

Less: Payment on October 1, 2011 400,000
Balance, October 1, 2011 800,000

Interest paid from January 1 to September 30, 2011

(1,200,000 x 15% x 9/12) 135,000
Interest accrued from October 1 to December 31, 2011
(800,000 x 15% x 3/12) 30,000
Interest expense for 2011 165,000

Problem 1-15 Answer A

January 1 – October 31, 2011 (500,000x 12% x 10/12) 50,000

February 1 – July 31, 2011 (1,500,000 x 12% x 6/12) 90,000
May 1 – December 31, 2011 (800,000 x 12% x 8/12) 64,000
Total interest expense of 2011 204,000
Less: Recorded interest expense 150,000
Understatement of interest expense 54,000

Problem 1-16 Answer C

Accrued interest from March 1, 2010 to February 28, 2011

(1,000,000 x 12%) 120,000
Accrued interest from March 1 to December 31, 2011
(1,000,000 + 120,000 x 12% x 10/12) 112,000
Total accrued interest payable, December 31, 2011 232,000

If the interest is compounded annually, it means that the accrued interest for one year will also earn
interest.

Problem 1-21 Answer B

12% note payable – refinanced 5,000,000

Problem 1-22 Answer A

6% Note payable 500,000

8% Note payable 800,000
Total current liabilities 1,300,000

PAS 1, paragraph 63, provides that an entity shall classify its financial liabilities as current when they are
due to be settled within twelve months after balance sheet date even if an agreement to refinance or
reschedule payment on a long-term basis is completed after balance sheet date and before the financial
statements are authorized for issue.