At year-end Annette Viau sent out accounts receivable confirmations. One of the major customers of her client confirmed that they would not be able to pay off the receivable. The
Client subsequently went bankrupt and an aggrieved shareholder of Annette's client sued her
Firm. What type of subsequent event was this?
A) Type 1
B) Type 2
C) Type 1 and 2
D) this was not a subsequent event

Question

Quizplus · Accepted Answer

This is a Type 1 subsequent event because it provides evidence of conditions that existed at the balance sheet date, specifically the customer's inability to pay off the receivable, which affects the valuation of the accounts receivable at year-end.

At Year-End Annette Viau Sent Out Accounts Receivable Confirmations