Directions: Identify which of the following liability accounts are usually classified as either current

liabilities (CL) or non-current liabilities (NCL).

1. Accounts Payable -CL

2. Trade Notes Payable due within 1 year - CL
3. Trade Note Payable due within 2 years - CL
4. Non- Trade Note Payable due within 2 years - NCL
5. Dividend Payable - CL
6. Bonds Payable - NCL
7. Accrued interest on Bonds Payable - CL
8. Unearned Rent Income - CL
9. Mortgage payable - NCL
10. Estimated Warranty Liability - CL
11. Bank Overdraft - CL
12. Deferred-tax liability - NCL
13. Income Tax payable - CL
14. Lease Liability - NCL
15. Credit balance in Accounts Receivable - CL

Notes:

a. Trade accounts are considered current regardless of maturity date.

b. Dividend payable is dividend declared but not yet paid, and usually paid within 12 months from
declaration.
c. Bonds payable is normally presented as noncurrent liability. However, when the bond has
separate maturity dates (serial bonds), it may be separated between current and non-current
portions.
d. Interest payable is current because it is usually payable every year.
e. Mortgage payable is usually noncurrent because its security depends on a long-term asset.
f. Bank overdraft is usually classified as a liability (current liability). Bank overdrafts are only
netted against cash account only if the bank overdraft arise one account and the entity has another
account of the same bank. (BPI account 1 – 120M; BPI account 2 – (20M); BDO account 1 ;
(40M) – Only BPI account 1 and 2 can be netted against each other. Therefore the bank overdraft
presented as current liability is only the BDO account (40M)).
g. Deferred tax assets and liabilities are always noncurrent.
h. Lease liability is usually considered noncurrent. However current portion of the lease liability
(due within 12 months after the reporting period) should be classified as current liability.
i. Credit balances in AR is an excess payment of a customer. Therefore the entity owes the
customer for the excess, such credit balance in AR is considered as a liability (current).
M Company provided the following information on December 31, 2020:

Accounts payable after deducting debit balances in suppliers accounts of P100,000 P 600,000
Accrued liabilities 50,000
Note payable- due March 31, 2021 1,000,000
Note payable- due May 1, 2021 800,000
Bonds payable- due December 31, 2021 2,000,000

On March 1, 2021 before the 2020 financial statements were issued, the note payable of P1,000,000 was
replaced by an 18-month note for the same amount. The entity is considering similar action on the
P800,000 note due May 1, 2021. The financial statements were issued on March 31, 2021.

Required:

1. Compute total current liabilities

2. Compute total noncurrent liabilities

Current liabilities:
Accounts payable P 700,000
Accrued liabilities 50,000
Note payable- due March 31, 2021 1,000,000
Note payable- due May 1, 2021 800,000
Bonds payable- due December 31, 2021 2,000,000
Current liabilities: 4,550,000

Noncurrent liabilities 0

Long-term debit falling due within one year

A liability which is due to be settled within 12 months after the reporting period is classified as current,
even if:

a. The original term was for a period longer than twelve months.
b. An agreement to refinance or to reschedule payment on a long-term basis is completed after
the reporting period and before the financial statements are authorized for issue.

However, if the refinancing on a long-term basis is completed on or before the reporting period, the
refinancing is an adjusting event and therefore the obligation is classified as noncurrent.
A Company is planning to refinance certain short-term obligations on a long term basis. The 2020
financial statements will be published on March 15, 2021. On December 31, 2020, before reclassification
of short-term debt, the liabilities are:

Accounts payable 7,000,000

Note payable – bank 12,000,000
Accrued expenses 4,000,000
Mortgage payable 4,000,000
Note payable – due in 2022 3,000,000

The entity intends to refinance 9,000,000 of the 12,000,000 bank note payable on a long term basis.
Although the entire 12,000,000 is due on June 30, 2021, the bank has informally agreed to extend the
maturity date for 6,000,000 to June 30, 2022, if necessary.

On January 31, 2021, the entity issued share capital for 4,000,000, net of issue costs and underwriting
fees of 500,000.

On February 15, 2021, the entity entered into a financing agreement with a financially capable
commercial bank, permitting the entity to borrow up to 3,000,000. Borrowings available at the entity’s
option on April 1, 2021 will mature five years after the loan date.

The entity used the entire proceeds of the issue of share capital to retire part of the current note payable
and now intends to draw down the entire available commitment of the five year debt on April 1, 2021.

Required:

1. Compute total current liabilities

2. Compute total noncurrent liabilities

Current Liabilities
Accounts payable 7,000,000
Note payable – bank 12,000,000
Accrued expenses 4,000,000
Current Liabilities 23,000,000
Noncurrent Liabilities
Mortgage payable 4,000,000
Note payable – due in 2022 3,000,000
Noncurrent Liabilities 7,000,000
G Company disclosed the following liability account balances on December 31, 2020:

Accounts Payable 1,900,000

Bonds Payable 3,400,000
Premium on bonds payable 200,000
Deferred tax liability 400,000
Dividends payable 500,000
Income tax payable 900,000
Note payable, due January 31, 2021 600,000

The deferred tax liability is based on temporary differences that will reverse in 2021. In the December 31,
2020 Statement of financial position, what amount should be reported as:

1. Current Liabilities
2. Non-Current Liabilities

Current Liabilities
Accounts Payable 1,900,000
Dividends payable 500,000
Income tax payable 900,000
Note payable, due January 31, 2021 600,000
Current Liabilities 3,900,000
Noncurrent Liabilities
Bonds Payable 3,400,000
Premium on bonds payable 200,000
Deferred tax liability 400,000
Noncurrent Liabilities 4,000,000