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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. Issuance of a significant number of shares of common stock.

7. Loss of a significant customer.

8. Prolonged employee strike.

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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Solution Summary

The solution explains the accounting requirements for post balance sheet events

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The financial statements are adjusted if the event has taken place before the balance sheet date and the amount is known subsequent to the balance sheet date.

Disclosure is needed if the event takes place after the balance sheet date and is considered material enough to be disclosed
Any other ...

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