What
are the major types of subsequent events? Indicate how each of the following
subsequent events would be reported:
(a)
Collection of a note written off in a prior period
(b)
Issuance of a large preferred share offering
(c)
Acquisition of a company in a different industry
(d)
Destruction of a major plant in a flood
(e)
Death of the company's chief executive officer
(f)
Additional wage costs associated with the settlement of a four-week strike
(g)
Settlement of a federal income tax case at considerably more tax than was
anticipated at year end
(h)
Change in the product mix from consumer goods to industrial goods
“Subsequent events” are of two types:
(1) Those that provide additional evidence about conditions that existed
at the balance sheet date, affect the estimates used in preparing financial
statements, and therefore, result in needed adjustments.
(2) Those that provide evidence about conditions that did not exist at
the balance sheet date but arise subsequent to that date and do not require
adjustment of the financial statements but whose effects may be significant
enough to be disclosed with appropriate figures or estimates shown.
(a) Probably adjust the financial statements directly.
(b) Disclosure.
(c) Disclosure.
(d) Disclosure.
(e) Neither adjustment nor disclosure necessary.
(f) Neither adjustment nor disclosure necessary.
(g) Probably adjust the financial statements directly.
(h) Neither adjustment nor disclosure necessary.
