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Current Liability Calculation Example

Mark Company purchased machinery for P2.5 million, with a down payment of P500,000, leaving a balance of P2 million at 10% interest. The document calculates that the quarterly interest is P50,000, and since the grace period is only for 2 quarters, the total current liability to report is P100,000.

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Elaine Joyce Garcia
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41 views1 page

Current Liability Calculation Example

Mark Company purchased machinery for P2.5 million, with a down payment of P500,000, leaving a balance of P2 million at 10% interest. The document calculates that the quarterly interest is P50,000, and since the grace period is only for 2 quarters, the total current liability to report is P100,000.

Uploaded by

Elaine Joyce Garcia
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

What total amount of current liability should Mark Company report in its

December 31, 2021 statement of financial position assuming Julian Company


agreed to provide a grace period ending at least twelve months to rectify the
breach?

ANSWER:
Cost of machinery P 2,500,000
Down payment (500,000)
Balance Due 2,000,000
Interest rate 10%
Total 200,000
Divide: Quarterly interest 4
Total 50,000
x Number of term 2
Liability P 100,000

Common questions

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Mark Company should report a total amount of current liability related to the machinery purchase from Julian Company as P 100,000 on its December 31, 2021 statement of financial position. This is calculated based on a quarterly interest payment of P 50,000 for two terms, which relates to the unpaid balance on the machinery cost of P 2,000,000 after a down payment of P 500,000. Julian Company has agreed to provide a grace period of at least twelve months to rectify any breach, thus impacting how current liabilities are determined .

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