A client has a calendar year-end.Listed below are four events that occurred after December 31.Which one of these subsequent events might result in adjustment of the December 31 financial statements?
A)Sale of a major subsidiary
B)Adoption of accelerated depreciation methods
C)Write-off of a substantial portion of inventory as obsolete
D)Collection of 90% of the accounts receivable existing at December 31

Question

Quizplus · Accepted Answer

The write-off of a substantial portion of inventory as obsolete is a subsequent event that might result in an adjustment of the December 31 financial statements. This event would result in a decrease in the value of inventory and a corresponding decrease in the net income and total assets recorded on the December 31 financial statements. The other events listed (sale of a major subsidiary, adoption of accelerated depreciation methods, and collection of 90% of accounts receivable) would not require adjustment of the December 31 financial statements.

A Client Has a Calendar Year-End