The Following Events All Occurred After the Balance Sheet Date

question 87

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) Uninsured inventory valued at $100 000 on 30 June 2012 was destroyed in a fire on 5 July 2012.
• B) Investments recorded at cost ($100 000) were sold on 2 July 2012 for $60 000.
• 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) A customer declared bankruptcy on 31 July 2012.

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Definitions:

Note Payable

Note payable is a written promise to pay a specified amount of money, often with interest, by a certain date, serving as a formal loan agreement between a borrower and a lender.

Factory Equipment

Durable goods or machinery used in manufacturing processes, typically involving production or maintenance tasks.

Indirect Method

A type of cash flow reporting in financial statements where net income is adjusted for changes in balance sheet accounts to calculate the cash flow from operating activities.

Financing Activities

Transactions that result in changes in the size and composition of the equity and borrowings of an entity, such as issuing stock or obtaining loans.