CPA Review Audit of Liabilities PROBLEM NO.1 PUKPOK, INC.

is a manufacturer and retailer of

household furniture. Your audit of the company’s financial statements for the year ended December 31,
2017; discloses the following debt obligations of the company at the end of its reporting period.
Pukpok’s financial statements are authorized for issuance on March 06, 2018.

1. A P200,000 short-term obligation due on March 01, 2018. Its maturity could be extended to March
01, 2020, provided Pukpok agrees to provide additional collateral. On February 12, 2018, an agreement
is reached to extend the loan’s maturity to March 01, 2020.

2. A short-term obligation of P4,200,000 in the form of notes payable due February 05,2018. The
company issued 80,000 ordinary shares for P40 per share on January 25, 2018. The proceeds from the
issuance, plus P1,000,000 cash, were used to fully settle the debt on February 05, 2018.

3. A long-term obligation of P1,500,000 due on December 01, 2027. On November 10, 2017, Pukpok
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 January 11, 2018.

4. 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 01, 2017, and the first maturity date is September 01, 2018.

5. A debt obligation of P600,000 maturing on December 31, 2020. The debt is callable on demand be the
lender at any time.

Requirements: 1. What amount of current liabilities should be reported on the December 31, 2017,
statement of financial position? a. P7,000,000b. P7,500,000 c. P6,400,000 d. P10,000,000