An Example of a Type I Subsequent Event Is

question 66

Multiple Choice

An example of a Type I subsequent event is:

• A)a tornado that destroys an entity's factory after the balance sheet date.
• B)an event after the balance sheet date that confirms the auditor's belief (documented prior to the end of the entity's fiscal year)that a large portion of the entity's inventory is obsolete.
• C)notification of an IRS audit after the balance sheet date.
• D)the entity's Board of Directors unexpectedly resigns after the balance sheet date.

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Definitions:

Cash

Money in the form of currency that is used to conduct transactions.

Reversing Entries

Journal entries that are recorded on the first day of the next period that are the exact opposite of the related adjusting entry from the last day of the prior period.

Adjusting Entries

Accounting records entries documented at the conclusion of an accounting cycle to distribute revenues and expenses to the period they genuinely took place.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary accounts' balances to permanent accounts and prepare the company's books for the next period.