The following events occurred after the end of the company’s fiscal year but before the annual audit was completed. Classify each event as to its impact on the financial statements, that is,
(1) Reported by changing the amounts in the financial statements,
(2) Reported in notes to the financial statements, or
(3) Does not require reporting.
Include support for your classification.
(a) Major customer went bankrupt due to a deteriorating financial condition.
(b) Company sustained extensive hurricane damage to one of its plants.
(c) Company lost a major lawsuit that had been pending for two years.
(d) Increasing U.S. trade deficit may have impact on company’s overseas sales.
(e) Company sold a large block of preferred stock.
(f) Preparation of current year’s income tax return disclosed that an additional $25,000 is due on last year’s return.
(g) Company’s controller resigned and was replaced by an audit manager from the company’s audit firm.