The Rihanna Company owns 1,000 shares in Abhay Corp,a public company listed on the stock exchange.The share price was as follows:
- At date of purchase,July 2,2018 = $100/share
- At year end,June 30,2019 = $100/share
- At start of next fiscal year,July 1,2019 = $95/share
- At date financial statements authorized for issue,September 1,2019 = $90/share
Materiality for the Rihanna's financial statements is $500,000.What is the appropriate treatment of the subsequent event in the June 30,2019 financial statements?

Question

Quizplus · Accepted Answer

The subsequent decline in share price to $90/share is not considered material as it results in a decrease in value of only $10,000 (1000 shares x ($100 - $90)) which is below the materiality threshold of $500,000. Therefore, no adjustment or note disclosure is required in the financial statements for this subsequent event.

The Rihanna Company Owns 1,000 Shares in Abhay Corp,a Public