Events that occur after the December 31, 2015 balance sheet date (but before the balance sheet is issued) and provide additional evidence about conditions that existed at the balance sheet date and affect the realizability of accounts receivable should be
A) discussed only in the MD&A (Management's Discussion and Analysis) section of the annual report.
B) disclosed only in the Notes to the Financial Statements.
C) used to record an adjustment to Bad Debt Expense for the year ending December 31, 2015
D) used to record an adjustment directly to the Retained Earnings account

Question

Quizplus · Accepted Answer

Events that occur after the balance sheet date but before the balance sheet is issued, which provide additional evidence about conditions that existed at the balance sheet date (such as the realizability of accounts receivable), should be used to adjust the financial statements. This includes recording an adjustment to Bad Debt Expense for the year in question to reflect the new information.

Events That Occur After the December 31, 2015 Balance Sheet