Which of the following subsequent events (post-balance-sheet events) would require adjustment of the accounts before issuance of the financial statements?
A) Loss of plant as a result of fire
B) Changes in the quoted market prices of securities held as an investment
C) Loss on an uncollectible account receivable resulting from a customer's major flood loss
D) Loss on a lawsuit, the outcome of which was deemed uncertain at year end.

Question

Quizplus · Accepted Answer

Adjustments to the financial statements are required for events that provide additional information about conditions that existed at the balance sheet date. The loss on a lawsuit, where the outcome was uncertain at year-end but subsequently resolved, falls into this category as it clarifies the company's position at the balance sheet date.

Which of the Following Subsequent Events (Post-Balance-Sheet Events) Would Require