In the audit of O'Brian Tools for the year ended 30 June 20X2, Mary Ellen Vercon lists the following items that she considers material for review by the engagement manager.

1. A $26 000 sale on 14 July 20X2 for fabrication tools that was included in inventory at a cost of $35 000.

2. Bonds that were issued on 16 August 20X2 in the amount of $5 000 000.

3. Equipment purchased on 31 July 20X2 for the amount of $125 000.

4. A major customer filed for bankruptcy on 15 June 20X2.

5. A legal action in the amount of $150 000 was settled on 6 August 20X2 and is listed as a contingent liability on the financial statements.

6. A legal action was filed against O'Brian for an injury to a customer's employee using a tool sold to them by O'Brian.

7. O'Brian has had discussions with a larger tool company for possible merger or sale.

REQUIRED

a. Which of the preceding seven items are most likely to be considered subsequent events?

b. How could Vercon have found each of the seven items? (There is more than one answer for each of these.)

c. What is the appropriate treatment of each of these seven items on 31 December 20X2 financial statements, assuming each one is material?