Below are several events that occur after your company's year end but before the completion of the audit Click the icon to view the events.) Requirements For each of the above subsequent events, determine whether the event requires an adjustment to the year end financial statements requires note disclosure, or requires neither adjustment to recognized amounts nor disclosure Justify your recommendation b. There is a significant fall in the market price of a major portion of inventory due to new technology making the existing items obsolete. The market price is lower than the current carrying value This event The drop in market price is to the measurement of inventories at year-end because inventory should be c. A new competitor enters the marketplace, which will result in serious price competition and, likely, reduced income next year This event The event d. New technology makes a major capital asset redundant or causes it to lose significant fair market and salvage value. This event The depreciation expense for the current year e. A major client unexpectedly goes bankrupt and it is determined that you will get 30% of the value of the accounts receivable as full and final settlement. This event Your company should f. The company experiences a major labour strike Workers are still on strike when the audit is finished Does your answer change if this strike might force the company into bankruptcy? Assuming that the labour strike does not threaten the company into bankruptcy, the event , Labour strikes a. There is a fire at the company's only warehouse, the company has insufficient fire insurance to replace the warehouse and contents such that a material loss will result and operations will be curtailed for six months b. There is a significant tall in the market price of a major portion of inventory duc to new technology making the existing items obsolete. The market price is lower than the current carrying value. C. A new competitor enters the marketplace, which will result in serious price competition and, likely, reduced income next year. d. New technology makes a major capital asset redundant or causes it to lose significant fair market and salvage value e. A major client unexpectedly goes bankrupt and it is determined that you will get 30% of the value of the accounts receivable as full and final settlement f. The company experiences a major labour strike. Workers are still on strike when the audit is finished. Does your answer change if this strike might force the company into bankruptcy? a. There is a fire at the company's only warehouse; the company has insufficient fire insurance to replace the warehouse and contents such that a material loss will result and operations will be curtailed for six months. This event The fire estimales or assumptions used in valuing year-end amounts. Disclosure is requires an adjustment to the year-end financial statements changes the not required as all the relevant information is yet to be known. requires neither adjustment to recognized amounts nor disclosure does not change any required as all the relevant information is known requires note disclosure b. There is a significant fall in the market price of a major portion of inventory due to new technology making the existing items obsolete. The market price is lower than the current carrying value. This event The drop in market price is to the measurement of inventories at year end because inventory should be requires an adjustment to the year-end financial statements irrelevant measured at cost requires neither adjustment to recognized amounts nor disclosure relevant valued at the lower of cost or market requires nole disclosure c. A new competitor enters the marketplace, which will result in serious price competition and, likely, reduced income next year This event The event requires an adjustment to the year-end financial statements could possibly affect income next year and therefore warrants disclosure, with the amount of the loss quantified requires neither adjustment to recognized amounts nor disclosure is neither specific nor unusual in nature to warrant disclosure. requires note disclosure. d. New technology makes a major capital asset redundant or causes it to lose significant fair market and salvage value. This event The depreciation expense for the current year requires an adjustment to the year-end financial statements should reflect these new estimates as the assumptions previously used to calculate depreciation are no longer appropriate requires neither adjustment to recognized amounts nor disclosure should not reflect these new estimates, but the estimate for salvage value should be evaluated and adjusted in the next year requires note disclosure Below are several events that occur after your company's year end but before the completion of the audit Click the icon to view the events.) Requirements For each of the above subsequent events, determine whether the event requires an adjustment to the year end financial statements requires note disclosure, or requires neither adjustment to recognized amounts nor disclosure Justify your recommendation b. There is a significant fall in the market price of a major portion of inventory due to new technology making the existing items obsolete. The market price is lower than the current carrying value This event The drop in market price is to the measurement of inventories at year-end because inventory should be c. A new competitor enters the marketplace, which will result in serious price competition and, likely, reduced income next year This event The event d. New technology makes a major capital asset redundant or causes it to lose significant fair market and salvage value. This event The depreciation expense for the current year e. A major client unexpectedly goes bankrupt and it is determined that you will get 30% of the value of the accounts receivable as full and final settlement. This event Your company should f. The company experiences a major labour strike Workers are still on strike when the audit is finished Does your answer change if this strike might force the company into bankruptcy? Assuming that the labour strike does not threaten the company into bankruptcy, the event , Labour strikes a. There is a fire at the company's only warehouse, the company has insufficient fire insurance to replace the warehouse and contents such that a material loss will result and operations will be curtailed for six months b. There is a significant tall in the market price of a major portion of inventory duc to new technology making the existing items obsolete. The market price is lower than the current carrying value. C. A new competitor enters the marketplace, which will result in serious price competition and, likely, reduced income next year. d. New technology makes a major capital asset redundant or causes it to lose significant fair market and salvage value e. A major client unexpectedly goes bankrupt and it is determined that you will get 30% of the value of the accounts receivable as full and final settlement f. The company experiences a major labour strike. Workers are still on strike when the audit is finished. Does your answer change if this strike might force the company into bankruptcy? a. There is a fire at the company's only warehouse; the company has insufficient fire insurance to replace the warehouse and contents such that a material loss will result and operations will be curtailed for six months. This event The fire estimales or assumptions used in valuing year-end amounts. Disclosure is requires an adjustment to the year-end financial statements changes the not required as all the relevant information is yet to be known. requires neither adjustment to recognized amounts nor disclosure does not change any required as all the relevant information is known requires note disclosure b. There is a significant fall in the market price of a major portion of inventory due to new technology making the existing items obsolete. The market price is lower than the current carrying value. This event The drop in market price is to the measurement of inventories at year end because inventory should be requires an adjustment to the year-end financial statements irrelevant measured at cost requires neither adjustment to recognized amounts nor disclosure relevant valued at the lower of cost or market requires nole disclosure c. A new competitor enters the marketplace, which will result in serious price competition and, likely, reduced income next year This event The event requires an adjustment to the year-end financial statements could possibly affect income next year and therefore warrants disclosure, with the amount of the loss quantified requires neither adjustment to recognized amounts nor disclosure is neither specific nor unusual in nature to warrant disclosure. requires note disclosure. d. New technology makes a major capital asset redundant or causes it to lose significant fair market and salvage value. This event The depreciation expense for the current year requires an adjustment to the year-end financial statements should reflect these new estimates as the assumptions previously used to calculate depreciation are no longer appropriate requires neither adjustment to recognized amounts nor disclosure should not reflect these new estimates, but the estimate for salvage value should be evaluated and adjusted in the next year requires note disclosure