F2 M3 Subsequent Events

Question 1

For a reasonably possible loss what is required?

Answer 1

Only a footnote disclosure

Question 2

Drexler Corp has a June 30 fiscal year-end and plans to issue its annual (Y3) financial statements by September 30, Y3. On August 15, a warehouse fire destroys an estimated $250,000 of inventory. As a result of the fire, in its Y3 financial statements Drexler should:

Answer 2

Disclose the nature of the event along with the estimated financial impact

Question 3

Ace co settled litigation on Feb 1 Y2 for an event that occurred during Y1. An estimated liability was determined as of Dec 31 Y1. This estimate was significantly less than the final settlement. The transaction is considered to be material. The financial statements for year-end Y1 have not been issued. How should the settlement be reported in Ace's year-end Y1 financial statements?
A. Disclosure only of the settlement
B. Both a disclosure and an accrual
C. Only an accrual of the settlement
D. Neither a disclosure nor an accrual

Answer 3

B

Question 4

Financial statements are considered to be available to be issued when: (choose all that apply)
1 The financial statements are in form and format that comply with GAAP
2 All approvals necessary for the issuance of the financial statements have been received
3 The financial statements have been widely distributed to financial statement users

Answer 4

1 & 2 only

Question 5

Financial statements are considered to be issued when: (choose all that apply)
1 The financial statements are in form and format that comply with GAAP
2 Shareholders owning more than 50% of the company’s stock have acknowledged receiving the financial statements
3 The financial statements have been widely distributed to financial statement users

Answer 5

1 & 3 only

Question 6

The subsequent event evaluation period for a filer with the SEC is through the date that its financial statements are ____

Answer 6

Issued, widely distributed to financial statement users

Question 7

Entities that file financial statements with the SEC (are/are not) required to disclose the date through which subsequent events have been evaluated.

Answer 7

Are not

Question 8

Entities that DO NOT file financial statements with the SEC (are/are not) required to disclose the date through which subsequent events have been evaluated.

Answer 8

Are

Question 9

The Dec 31 Y1 financial statements of Edward Co (a privately held company) were available to be issued on March 1, Y2 and were actually issued on March 3 Y2. As of Dec 31 Y1 Edwards Co had 250,000 shares of common stock outstanding. On Feb 15 Y2, Edwards Co issued 500,000 more shares of common stock. As a result of this transaction Edward Co must:
1 Adjust the amount of common stock reported on its Dec 31 Y1 balance sheet.
2 Provide disclosure about the stock issuance in the footnotes included with the Dec 31 Y1 financial statements
A. 1 2
B. 1 only
C. 2 only
D. Neither 1 nor 2

Answer 9

C