The Following Event Occurred After the Company's Year-End but Before

question 141

Essay

The following event occurred after the company's year-end but before the completion of the audit. For this subsequent event, determine whether the event:
•requires an adjustment to the year-end financial statements,
•requires note disclosure, or
•requires neither adjustment to recognized amounts nor disclosure.
A new competitor enters the marketplace, which will result in serious price competition and, likely, reduced income next year. (Justify your recommendation.)

Recognize the implications of corporate personhood on rights and responsibilities.

Understand the concept of a corporation’s implied powers.

Know the procedures and consequences of the commingling of personal and corporate interests.

Understand the concept and application of neurogenesis.

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Definitions:

Collections Float

Float created while funds from customers’ cheques are being deposited and cleared through the cheque collection process.

Disbursement Float

Float created before cheques written by a firm have cleared and been deducted from the firm’s account. Disbursement float causes the firm’s own cheque-book balance to be smaller than the balance on the bank’s records.

Net Float

The difference between a firm’s disbursement float and collections float.

Marketable Securities

Financial instruments and assets that can easily be sold or converted into cash, typically within a year.