Which of the following situations does NOT illustrate a subsequent event that requires adjustment to the financial statement numbers?
A)A lawsuit against the auditee that had been ongoing for months is finally concluded: the amount awarded is substantially more than had been estimated.
B)The inventory that was on hand at the balance sheet was sold soon sold after the balance sheet date for a price below its carrying value.
C)A customer who had long been suspected of being in financial difficulty,declares bankruptcy.Based on the filing,amounts previously thought to be collectible will never be recovered.
D)A fire that occurred subsequent to the balance sheet date destroys a substantial amount of inventory that was on-hand at the year-end.

Question

Quizplus · Accepted Answer

Events that occur after the balance sheet date but before the financial statements are issued or available to be issued are classified into two types: those that provide additional evidence about conditions that existed at the balance sheet date (requiring adjustment) and those that are indicative of conditions that arose after the balance sheet date (not requiring adjustment). The fire destroying inventory after the balance sheet date (choice D) is an example of a non-adjusting event because it reflects a condition (loss of inventory) that did not exist at the balance sheet date.

Which of the Following Situations Does NOT Illustrate a Subsequent