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Post-Balance-Sheet Events

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(Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.
______ 2. Introduction of a new product line.
______ 3. Loss of assembly plant due to fire.
______ 4. Sale of a significant portion of the company's assets.
______ 5. Retirement of the company president.
______ 6. Prolonged employee strike.
______ 7. Loss of a significant customer.
______ 8. Issuance of a significant number of shares of common stock.
______ 9. Material loss on a year-end receivable because of a customer's bankruptcy.
______ 10. Hiring of a new president.
______ 11. Settlement of prior year's litigation against the company.
______ 12. Merger with another company of comparable size.

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(Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

___A___ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.

I think this should be a reason to adjust the statement since it in excess of what was expected, thus will change the numbers.

_____C_ 2. Introduction of a new product ...

Solution Summary

This posting looks at a series of hypothetical situations and asks if a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

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See Also This Related BrainMass Solution

Keystone Corp: Discuss post balance sheet events effects on financial statements

Post-Balance-Sheet Events

Keystone Corporation issued its financial statements for the year ended December 31, 2010, on March 10, 2011. The following events took place early in 2011.

(a) On January 10, 10,000 shares of $5 par value common stock were issued at $66 per share.

(b) On March 1, Keystone determined after negotiations with the Internal Revenue Service that income taxes payable for 2010 should be $1,320,000. At December 31, 2010, income taxes payable were recorded at $1,100,000.

Instructions

Discuss how the preceding post-balance sheet events should be reflected in the 2010 financial statements.

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