Which one of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?
A) Sale of long- term debt or capital stock
B) Major purchase of a business that is expected to double the sales volume
C) Settlement of litigation in excess of the recorded liability
D) Loss of a plant as a result of a flood

Question

Quizplus · Accepted Answer

The settlement of litigation in excess of the recorded liability is a material event that occurred after the balance sheet date and would require an adjustment to the financial statements before they could be issued. This adjustment would involve recognizing an additional expense or liability related to the litigation settlement. Choices A, B, and D do not necessarily require adjustments to the financial statements as they do not relate to events occurring after the balance sheet date.

Which One of the Following Material Events Occurring Subsequent to the Balance