qwerty8364
05.05.2020 •
Business
Long and Short, CPAs, were auditing Island Corporation for the year ended December 31, 2014. On January 11, 2015, a major customer of Island Corporation declared bankruptcy as the result of an uninsured loss due to a major fire in their warehouse on January 8, 2015. As a result, a material accounts receivable from the customer was determined to be uncollectible. Long and Short, CPAs, would expect the client to:.
A) treat the loss as a subsequent event and adjust the 2014 financial statements to record the loss on uncollectible accounts.
B) record the loss on uncollectible accounts as a routine transaction in the year 2015.
C) treat the loss as a subsequent event and provide a footnote about the loss in the 2014 financial statements.
D) file a lawsuit against the customer in hopes of collecting some of the money owed to the client.
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Ответ:
C) treat the loss as a subsequent event and provide a footnote about the loss in the 2014 financial statements.
Explanation:
The event happened in January 2015 which was after the books ended in December 2014. This makes it a subsequent event which is an event that occurs after the accounting period but before the Financial results are released.
The loss is therefore a subsequent event and must be treated by putting a footnote in the financial statement to reflect that the event happened after the accounting period.
Ответ: