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)Sale of long-term debt or capital stock.
B)Loss of a plant as a result of a flood.
C)Major purchase of a business that is expected to double sales volume.
D)Settlement of litigation, in excess of the previously recorded liability.

Question

Quizplus · Accepted Answer

Settlement of litigation in excess of the previously recorded liability would require an adjustment to the financial statements before they could be issued. This is because the financial statements have already recognized the liability for the litigation, and settlement in excess of that amount would change the liability amount, impacting the financial statements. The other options do not necessarily require adjustments to be made to the financial statements as they do not affect the balances recorded in the financial statements.

Which of the Following Material Events Occurring Subsequent to the Balance