Question
MURPHY COMPANY has a financial year-end of 31 December 2020. The accounts are signed off by the directors (after the external audit is complete) on
MURPHY COMPANY has a financial year-end of 31 December 2020.
The accounts are signed off by the directors (after the external audit is complete) on 31 March 2021.
On 3 March 2021, MURPHY Company discovers that one of its largest customers (CHEN COMPANY) has been declared bankrupt. In the accounts for the year-ended 31 December 2020, MURPHY had included $5,000,000 due from CHEN in Accounts Receiveble. CHEN COMPANY will now not be able to pay anythign to MURPHY COMPANY.
CHEN COMPANY's bankruptcy should be dealt with in MURPHY COMPANY'S 2020 FInanical Statements as:
Select one:
a. An adjusting event which will require Accounts Receivable to be increased by $5,000,000
b. An adjusting event which will require Accounts Receivable to be unchanged
c. None of these answers
d. An adjusting event which will require Accounts Receivable to be reduced by $5,000,000
e. A non-adjusting event
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started