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What happens when a company learns of the bankruptcy of a customer that occurs after the year end what does the company have to do
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- How should a company handle a LIFO liquidation in an interim period when the liquidated inventory is expected to be replaced by year-end?What is the effect on the financial statements when a company fails to adjust the prepaid insurance account at year-end for insurance coverage that has been used?A company going through a Chapter 7 bankruptcy has the following account balances: How much will be paid to each of the following? Salaries payable Accounts payable Note payable Bonds payable
- After the end of the reporting period, prior to authorizing for issue the financial statementsof Chubby the Piggy Ltd for the year ended 31 March 20X7 the following issues were raised:1. The notification of the bankruptcy of a customer: The balance of trade receivablesdue from the customer at 31 March 20X7 was $23,000 and at the date of thenotification it was $25,000. No payment is expected from the bankruptcyproceedings.2. Sales of some items of product ChoCoCo were made at a price of $5,40 each in Apriland May 20X7. Sales staff receives a commission of 15% of the sales price on theseproducts. At 31 March 20X7 the company had 12,000 units of this product ininventory included at cost of $6 each.3. The company is being sued by an employee who lost a limb in an accident while atwork on March 15 20X7. The company is contesting the claim as the employee wasnot following the safety procedures that he had been instructed to follow.Accordingly the financial statements include a note of a…What would be the result if a company inadvertently neglected to close out one of its expense accounts at year-end during the closing process?Explain how interim financial statements areprepared in a business that closes its accountsonly at year-end.
- Sid Berhad year end is 31 December 2020. The accountant of Sid Berhad has asked for your opinion on the accounting treatment of the following items: (i) On 18 February 2021, before the financial statements were authorised for issue, it was found that one of the customers, owing RM28,000 at 31 December 2020, had been declared bankrupt. Required: Advise Sid Berhad’s accountant on the accounting treatments for all the above- mentioned items. Your answer shall make reference to relevant MFRS Standards.Mega Company has a December 31 year-end. All of the following events occurred between December 31, 2021, and March 1, 2022 when its financial statements were issued. Which is a recognized subsequent event? Answer a. A key supplier declared bankruptcy as a result of uninsured flood damage that occurred in February 2022. b. A lawsuit for which the company had accrued a contingent liability at December 31,2021 of $1,000,000 was settled for $900,000 in January 2022 c. Employees at one of the company’s plants went on strike in late January 2022. d. Additional shares of 3%, $100 par preferred stock were issued for $5,000,000 in February 2022.The following selected circumstances relate to pending lawsuits for Erismus, Incorporated Erismus’s fiscal year ends on December 31. Financial statements are issued in March 2025. Erismus prepares its financial statements according to U.S. GAAP. Required: Indicate the amount Erismus would record as an asset, a liability or if no accrual would be necessary in the following circumstances. Erismus is defending against a lawsuit. Erismus's management believes the company has a slightly worse than 50/50 chance of eventually prevailing in court, and that if it loses, the judgment will be $1,430,000. Erismus is defending against a lawsuit. Erismus's management believes it is probable that the company will lose in court. If it loses, management believes that damages could fall anywhere in the range of $2,830,000 to $5,660,000, with any damage in that range equally likely. Erismus is defending against a lawsuit. Erismus's management believes it is probable that the company will lose in court.…
- Which of the following is not a liability that has priority in a liquidation?a. Administrative expenses incurred during the liquidation.b. Salary payable of $1,250 per person owed to 26 employees.c. Payroll taxes due to the federal government.d. Advertising expense incurred before the company became insolvent but not recorded until after the order of relief.For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. ______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end. ______ 2. Introduction of a new product line. ______ 3. Loss of assembly plant due to fire. ______ 4. Sale of a significant portion of the company's assets. ______ 5. Retirement of the company president. ______ 6. Prolonged employee strike. ______ 7. Loss of a significant customer. ______ 8. Issuance of a significant number of shares of common stock. ______ 9. Material loss on a year-end receivable because of a customer's bankruptcy. ______ 10. Hiring of a new president. ______ 11. Settlement of prior year's litigation against the company (no loss was accrued). ______ 12. Merger with another company of comparable size.The following events occurred for Scythian, Inc. between its December 31, 2022 year-end and the issuance of its financial statements on February 28, 2023: Event 1: The company settled a disagreement with the Internal Revenue Service regarding income taxes payable for 2021. Scythian had accrued income taxes payable of $3,000,000. The settlement requires payment of $3,200,000. Event 2: The company’s 3rd largest customer abruptly declared bankruptcy because of the CEO’s embezzlement of company funds. At year-end, the customer owed Scythian $1,200,000 but had made a payment of $400,000 in January 2023. Event 3: Employees at one of the company’s largest plants went on strike in January 2023. The strike is expected to cost the company between $500,000 and $1,000,000 in lost revenue. What is the net effect of these events on 2022 net income?
