Which of the following items would most likely require an adjustment to the financial statements for the year ended December 31, year 1?
a. Uninsured loss of inventories purchased in year 1 as a result of a flood in year 2.
b. Settlement of litigation in year 2 over an event that occurred in year 2.
c. Loss on an uncollectible trade receivable recorded in year 1 from a customer that declared bankruptcy in year 2.
d. Proceeds from a capital stock issuance in year 2 which was being approved by the board of directors in year 1.
Answer: C
CPA Exam
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