Long and Short,CPAs,were Auditing Island Corporation for the Year Ended

question 20

Multiple Choice

Long and Short,CPAs,were auditing Island Corporation for the year ended December 31,2017.On January 11,2018,a major customer of Island Corporation declared bankruptcy as the result of an uninsured loss due to a major fire in their warehouse on January 8,2018.As a result,a material accounts receivable from the customer was determined to be uncollectible.Long and Short,CPAs,would expect the client to

• A)Record the loss on uncollectible accounts as a routine transaction in the year 2018.
• B)Treat the loss as a subsequent event and provide a footnote about the loss in the 2017 financial statements.
• C)Treat the loss as a subsequent event and adjust the 2017 financial statements to record the loss on uncollectible accounts.
• D)File a lawsuit against the customer in hopes of collecting some of the money owed to the client.

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Definitions:

Nonconforming Transistors

Transistors that do not meet the predefined standards or specifications.

Electronics Company

A business involved in the manufacturing, design, development, or selling of electronic devices and components.

Lower Control Limit

The threshold in control charts below which the process variability is considered to be in control and acceptable.

Nonconforming Transistors

Transistors that do not meet specified criteria or operational standards set by quality control, often due to manufacturing defects.