The following events all occurred after the balance sheet date of 30 June 2012, but prior to the date of the audit report, 15 August 2012.Which one would NOT require an adjustment to the account balances as at 30 June 2012?
A) Uninsured inventory valued at $100 000 on 30 June 2012 was destroyed in a fire on 5 July 2012.
B) Investments recorded at cost ($100 000) were sold on 2 July 2012 for $60 000.
C) A contingent liability disclosed in the notes at an estimated amount of $100 000 was settled out of court on 15 July 2012 for $125 000.
D) A customer declared bankruptcy on 31 July 2012.

Question

Quizplus · Accepted Answer

Events that occur after the balance sheet date but before the audit report is issued are only required to be adjusted if they provide additional information about conditions that existed at the balance sheet date. The destruction of inventory in a fire after the balance sheet date does not reflect the conditions of the inventory at the balance sheet date and is considered a non-adjusting event.

The Following Events All Occurred After the Balance Sheet Date