Exercise 24-2
For each of the following subsequent (post-balance-sheet) events, indicate whether a company
should adjust the financial statements, disclose in notes to the financial statements, or neither adjust
nor disclose.
Sr.
No.
Subsequent (Post-Balance-Sheet) Events
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.
Disclose in Notes to the Financial Statements
9.
Material loss on a year-end receivable
because of a customer’s bankruptcy.
Adjust the Financial Statements
10. Hiring of a new president.
Settlement of prior year’s litigation
11. against the company (no loss was
accrued).
12.
Merger with another company of
comparable size.
Adjust the Financial Statements
Neither Adjust nor Disclose.
Disclose in Notes to the Financial Statements
Disclose in Notes to the Financial Statements
Neither Adjust nor Disclose.
Neither Adjust nor Disclose.
Neither Adjust nor Disclose.
Neither Adjust nor Disclose.
Adjust the Financial Statements
Disclose in Notes to the Financial Statements
Exercise 24-3
Pina Company is involved in four separate industries. The following information is available for
each of the four industries.
Operating
Segment
Total
Revenue
Operating Profit
(Loss)
Identifiable
Assets
W
$57,478
$17,360
$169,940
X
9,900
2,610
84,970
Y
24,775
(3,320)
20,510
Z
6,947
1,250
17,580
$99,100
$17,900
$293,000
Determine which of the operating segments are reportable based on the:
Reportable Segments
(a) Revenue test.
W&Y
(b) Operating profit (loss) test.
W, X & Y
(c) Identifiable assets test.
W&X
(a) Revenue test: 10% x $99,100 = $9,910.
Segments W ($57,478) and Y ($24,775) both meet this test.
(b) Operating profit test: 10% x ($17,360 + $2,610 + $1,250) = $2,122.
Segments W ($17,360), X ($2,610), and Y ($3,320 absolute amount) all meet this test.
(c) Identifiable assets test: 10% x $293,000 = $29,300.
Segments W ($169,940) and X ($84,970) both meet this test.