At year-end Marissa Albion sent out accounts receivable confirmations. One of the major customers of her client confirmed that they would not be able to pay off the receivable. The client subsequently went bankrupt and an aggrieved shareholder of Marissa's client sued her firm. What type of subsequent event was this?
A) Type 1
B) Type 2
C) Type 1 and 2
D) this was not a subsequent event

Question

Quizplus · Accepted Answer

The confirmation of the customer's inability to pay off the receivable is a Type 1 subsequent event because it provides additional evidence about a condition that existed at the date of the financial statements.

At Year-End Marissa Albion Sent Out Accounts Receivable Confirmations