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.
Discuss how the preceding post-balance sheet events should be reflected in the 2010 financial statements.
A subsequent event is one which occurs after the balance sheet date but before issuance of the financial statements. See Note 1 below. The event should be a material item that requires disclosure and possibly adjustment to the financial statements for the prior year.
"Material happening occurring after the date of the financial statements but before the audit report is issued. Footnote disclosure is required so that financial statement users are properly informed. The subsequent event typically has a significant impact on financial position or earning ...
The 314 word. cited solution carefully explains the subsequent event issues in the problems including a recent SEC change in disclosure.