For each of the following items, assume that Josh Feldstein, CPA, is expressing an

opinion on Scornick Companys financial statements for the year ended December 31,

2015; that he completed fieldwork on January 21, 2016; and that he now is preparing

his opinion to accompany the financial statements. In each item a subsequent event is

described. This event was disclosed to the CPA either in connection with his review

of subsequent events or after the date on which the auditor has obtained sufficient

appropriate audit evidence. Describe the financial statement effects, if any, of each

of the following subsequent events. Each of the five items is independent of the other

four and is to be considered separately.

1. A large account receivable from Agronowitz Company (material to financial

statement presentation) was considered fully collectible at December 31, 2015.

Agronowitz suffered a plant explosion on January 25, 2016. Because Agronowitz

was uninsured, it is unlikely that the account will be paid.

2. The tax court ruled in favor of the company on January 25, 2016. Litigation

involved deductions claimed on the 2012 and 2013 tax returns. In accrued taxes

payable, Scornick had provided for the full amount of the potential disallowances.

The Internal Revenue Service will not appeal the tax courts ruling.

3. Scornicks Manufacturing Division, whose assets constituted 45 percent of

Scornicks total assets at December 31, 2015, was sold on February 1, 2016. The

new owner assumed the bonded indebtedness associated with this property.

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4. On January 15, 2016, R. E. Fogler, a major investment adviser, issued a negative

report on Scornicks long-term prospects. The market price of Scornicks com- mon stock subsequently declined by 40 percent.

5. At its January 5, 2016, meeting, Scornicks board of directors voted to increase

substantially the advertising budget for the coming year and authorized a change