Homework answers / question archive / Rizal Technological University CBET 01-502A Chapter 5 1)Financial statements are authorized for issue   When the board of directors reviews and authorized the financial statements for issue   When the shareholders approve the financial statements at their annual meeting When the financial statements are filed with the regulatory agency When a supervisory board made solely of nonexecutives approves the financial statements   Adjusting events after the reporting period include all of the following, except   The settlement of a court case after the issuance of the financial statements that confirms that the entity had already a present obligation Bankruptcy of a customer which occurs after the end of reporting period but before issuance of financial statements Discovery of errors that show that the financial statements were incorrect Determination after the end of reporting period and before issuance of financial statements of the cost of asset purchased before end of reporting period   Which of the following events after the reporting period would require adjustment?   Loss of plant as a result of fire Change in the market price of investment Loss on inventory resulting from flood loss Loss on a lawsuit the outcome of which was deemed uncertain at year-end   Which of the following events after the end of reporting period would generally require disclosure?   Retirement of key management personnel Settlement of litigation when the event that gave rise to the litigation occurred in a prior period Strike of employees Issue of a large amount of ordinary shares   Events after the reporting period are favorable or unfavorable events that occur between   The end of the reporting period and the date of the next annual financial statements The end of the reporting period and the date of the next interim or annual financial statements The end of the reporting period and the date when the financial statements are authorized for issue The end of reporting period and the date of the next interim statements   Adjusting events are those that   Provide evidence of condition that exited at the end of the reporting period Are indicative of conditions that arose after the end of the reporting period Are indicative of conditions that arose after the approval of the financial statements by shareholders Provide for conditions that existed after the date the financial statements were issued   Non adjusting event include all, except   The entity announced the discontinuation of an operation The entity entered into an agreement to purchase the leased building Destruction of a major production plant by fire   A mistake in the calculation of allowance for uncollectible accounts receivable   Events that occur after the current year-end but before the financial statements are issued and affect the realizability of accounts receivable should be   Discussed only in the management annual report Discussed only in the notes to financial statements Used to record an adjustment to bad debt expense An adjustment directly to retained earnings   At the end of the current reporting period, an entity carried a receivable from a major customer who declared bankruptcy after the end of reporting period and before the issuance of financial statements

Rizal Technological University CBET 01-502A Chapter 5 1)Financial statements are authorized for issue   When the board of directors reviews and authorized the financial statements for issue   When the shareholders approve the financial statements at their annual meeting When the financial statements are filed with the regulatory agency When a supervisory board made solely of nonexecutives approves the financial statements   Adjusting events after the reporting period include all of the following, except   The settlement of a court case after the issuance of the financial statements that confirms that the entity had already a present obligation Bankruptcy of a customer which occurs after the end of reporting period but before issuance of financial statements Discovery of errors that show that the financial statements were incorrect Determination after the end of reporting period and before issuance of financial statements of the cost of asset purchased before end of reporting period   Which of the following events after the reporting period would require adjustment?   Loss of plant as a result of fire Change in the market price of investment Loss on inventory resulting from flood loss Loss on a lawsuit the outcome of which was deemed uncertain at year-end   Which of the following events after the end of reporting period would generally require disclosure?   Retirement of key management personnel Settlement of litigation when the event that gave rise to the litigation occurred in a prior period Strike of employees Issue of a large amount of ordinary shares   Events after the reporting period are favorable or unfavorable events that occur between   The end of the reporting period and the date of the next annual financial statements The end of the reporting period and the date of the next interim or annual financial statements The end of the reporting period and the date when the financial statements are authorized for issue The end of reporting period and the date of the next interim statements   Adjusting events are those that   Provide evidence of condition that exited at the end of the reporting period Are indicative of conditions that arose after the end of the reporting period Are indicative of conditions that arose after the approval of the financial statements by shareholders Provide for conditions that existed after the date the financial statements were issued   Non adjusting event include all, except   The entity announced the discontinuation of an operation The entity entered into an agreement to purchase the leased building Destruction of a major production plant by fire   A mistake in the calculation of allowance for uncollectible accounts receivable   Events that occur after the current year-end but before the financial statements are issued and affect the realizability of accounts receivable should be   Discussed only in the management annual report Discussed only in the notes to financial statements Used to record an adjustment to bad debt expense An adjustment directly to retained earnings   At the end of the current reporting period, an entity carried a receivable from a major customer who declared bankruptcy after the end of reporting period and before the issuance of financial statements

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1. 4. A mistake in the calculation of allowance for uncollectible accounts receivable

 

8. Events that occur after the current year-end but before the financial statements are issued and affect the realizability of accounts receivable should be

 

1. 1. Discussed only in the management annual report
   2. Discussed only in the notes to financial statements
   3. Used to record an adjustment to bad debt expense
   4. An adjustment directly to retained earnings

 

9. At the end of the current reporting period, an entity carried a receivable from a major customer who declared bankruptcy after the end of reporting period and before the issuance of financial statements. What should be reported at the current year-end?

 

1. 1. Disclose the fact that the customer has declared bankruptcy
   2. Make a provision for the event after reporting period in the financial statements
   3. Ignore the event and wait for the outcome of the bankruptcy
   4. Reverse the sale pertaining to the receivable in the comparative statement for the prior period

 

10. An entity decided to build and operate an amusement park next year. The entity has applied for a letter of guarantee which was issued before the issuance of the financial statements of the current year. What is the adjustment required at the current year-end?

 

1. 1. Book a long-term payable for the amount of guarantee
   2. Disclose the guarantee as a contingent liability
   3. Increase the contingency reserve
   4. Do nothing

 

11. An entity built a new factory building during the current year. Subsequent to the current year-end and before issuance of financial statements, the building was destroyed by fire and the claim against the insurance entity proved futile because the cause of the fire was negligence on the part of the caretaker of the building. What should be reported at the current year-end?

 

1. 1. Write off the carrying amount of the building
   2. Make a provision for one-half of the carrying amount of the building
   3. Make a provision for three-fourths of the carrying amount of the building
   4. Disclose the non adjusting event in the notes to financial statements

 

12. An entity deals extensively with foreign currency transactions. Subsequent to the end of reporting period and before the date of authorization of the issuance of the financial statements, there were abnormal fluctuations in foreign currency rate. What should be reported at the current year-end?

 

1. 1. Adjust the foreign exchange year-end balances to reflect the abnormal adverse fluctuations
   2. Adjust the foreign exchange year-end balances to reflect all abnormal fluctuations and not just adverse movements
   3. Disclose the post-reporting period event
   4. Ignore the post-reporting period event

 

13. Which of the following statements is true in relation to events after reporting period?

 

1. 1. Notes to the financial statements should give details of material adjusting events included in those financial statements
   2. Notes to the financial statements should give details of material non adjusting events which should influence the economic decisions of users
   3. A decline in the market value of investments would normally be classified as an adjusting event
   4. The settlement of a long-running court case would normally be classified as a non adjusting event

 

14. An entity’s financial statements for the year ended April 30 were approved by the finance director on July 7 an a public announcement of the profit for the year was made on July 10. The board of directors authorized the financial statements for issue on July 15 and the financial statements were approved by the shareholders on July 20. After what date should consideration no longer be given as to whether the financial statements on April 30 need to reflect adjusting and non adjusting events?

 

1. 1. July 7
   2. July 10
   3. July 15
   4. July 20