The Following Events All Occurred After the Balance Sheet Date

question 100

Multiple Choice

The following events all occurred after the balance sheet date of 30 June 2012, but prior to the date of the audit report, 15 August 2012. Which one would NOT require an adjustment to the account balances as at 30 June 2012?

• A) Investments recorded at cost ($100 000) were sold on 2 July 2012 for $60 000.
• B) A customer declared bankruptcy on 31 July 2012.
• C) A contingent liability disclosed in the notes at an estimated amount of $100 000 was settled out of court on 15 July 2012 for $125 000.
• D) Uninsured inventory valued at $100 000 on 30 June 2012 was destroyed in a fire on 5 July 2012.

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Definitions:

Commercial Space

Commercial Space generally refers to buildings or land intended for use in commerce or business activities, such as retail stores, offices, or factories.

Fifth Amendment

Refers to a part of the U.S. Constitution that protects individuals against self-incrimination, ensures due process of law, and provides protections against double jeopardy among other rights.

Caveat Emptor

A Latin term meaning "let the buyer beware," indicating that the buyer is responsible for checking the quality and suitability of goods before a purchase is made.

Let the Buyer Beware

A traditional caveat in commerce, indicating that the buyer assumes the risk regarding the quality and condition of the product being sold.