Assume that a CPA is expressing an opinion on Azalea Company's financial statements for the year ended September 30, 19X3, that the CPA completed field work on October 21, 19X3, and that the CPA now is preparing the opinion to accompany the financial statements. In each item a "subsequent event" is described. This event either was disclosed to the CPA in connection with the review of subsequent events or after the completion of field work. You are to indicate in each case the required financial statement disclosure of this event. Each of the six cases is independent of the other five and is to be considered separately.

1. A large account receivable from Taylor Industries (material to financial-statement presentation) was considered fully collectible at September 30, 19X3. Taylor suffered a plant explosion on October 25, 19X3. Since Taylor was uninsured, it is unlikely that the account will be paid.

2. The tax court ruled in favor of the company on October 25, 19X3. Litigation involved deductions claimed on the 19X1 and 19X2 tax returns. Azalea had pro- vided in accrued taxes payable for the full amount of the potential disallowances. The IRS will not appeal the tax court's ruling.

3. Based on a directors' resolution on October 5, 19X3, Azalea's common stock was split 3-for-1 on October 10, 19X3. Azalea's earnings per share have been computed based upon common shares outstanding at September 30, 19X3.

4. Azalea's manufacturing division, whose assets constituted 75 percent of Azalea's total assets at September 30, 19X3, was sold on November 1, 19X3. The new owner assumed the bonded indebtedness associated with this property.

5. On October 15, 19X3, a major investment adviser issued a pessimistic report on Azalea's long-term prospects. The market price for Azalea's common stock subsequently declined by 50 percent.

6. At its October 5, 19X3, meeting, Azalea's Board of Directors voted to double the advertising budget for the coming year and authorized a change in advertising agencies.