Which of the Following Subsequent Events Might Require an Adjustment

question 9

Multiple Choice

Which of the following subsequent events might require an adjustment to the client's financial statements?

• A) A business combination with another company.
• B) Loss on the sale of a closely-held investment.
• C) Loss of plant and equipment due to a fire.
• D) Retirement of bonds payable at a loss.

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Definitions:

Settlor

A settlor is the person who creates a trust by transferring assets into it, setting the terms and electing trustees to manage the trust assets for the benefit of the beneficiaries.

Creates

Refers to the act of bringing something into existence or producing something through a process.

Trust

A fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.

Implied Trust

A trust formed by the law from the conduct or circumstances of the parties involved, rather than by explicit written agreement.