Prior to the Finalisation of the Financial Statements for the Year

question 3

Multiple Choice

Prior to the finalisation of the financial statements for the year ended 30 June 2021, a company experienced a number of material events, including: I. on 15 July 2021 the directors decided to close a division of the company at an estimated cost of $\$ 920,000$ .
II. on 18 August 2021 a court decision found the company liable to pay damages of $\$ 350,000$ to a major customer who had commenced legal action in April 2020.
III. an independent valuation of property conducted on 29 July 2021 revealed that the directors' valuation included in the 30 June 2021 financial statements was overstated by $\$ 400,000$ . General journal entries to adjust the financial statements will be required for which of the above events?

• A) I, II and III.
• B) II only, and make a note disclosure for I and III.
• C) III only, and make a note disclosure for I and II.
• D) II and III only, and make a note disclosure for I.

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Definitions:

Par Common Stock

Par Common Stock refers to the nominal or face value assigned to common stock shares by the issuing company.

Noncumulative Preferred Stock

A type of preferred stock where dividends not paid in one period do not accumulate or have to be paid in future periods.

Noncumulative Preferred Stock

A type of preferred stock where missed dividend payments are not required to be paid to the shareholders in the future.

Par Value

The face value of a bond or the stock value stated in the corporate charter, which is the minimum legal capital per share.