Which 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) loss of a plant as a result of a flood
B) sale of long-term debt or capital stock
C) settlement of litigation in excess of the recorded liability
D) major purchase of a business that is expected to double the sales volume

Question

Quizplus · Accepted Answer

The settlement of litigation in excess of the recorded liability would require an adjustment to the financial statements before they could be issued. This is because it would result in a material increase in expenses, which would affect the income statement and possibly the balance sheet. The other options would not require adjustments to the financial statements before they could be issued as they would be reflected in the financial statements as of the balance sheet date.

Which of the Following Material Events Occurring Subsequent to the Balance