CPA · Question 49 · Area III: Select Transactions
A company has a December 31 year-end. On January 15, Year 2, before the financial statements were issued, a major customer declared bankruptcy due to a fire that destroyed their plant on January 10, Year 2. The customer owed $50,000 at December 31. How should this be reported in the Year 1 financial statements?
Answer options:
Accrue a $50,000 loss in Year 1
Adjust the allowance for doubtful accounts in Year 1
Disclose the event in the notes to the Year 1 financial statements
No disclosure or accrual required
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