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- Subsequent Events and Contingent Liabilities. Crankwell Inc. is preparing its annualfinancial statements and annual report to stockholders. Management wants to be sure thatall of the necessary and proper disclosures have been incorporated into the financial statements and the annual report. Two classes of items that have an important bearing on thefinancial statements are subsequent events and contingent liabilities. The financial statements could be materially inaccurate or misleading if proper disclosure of these items isnot made.Required:a. With respect to subsequent events1. Define what is meant by a subsequent event.2. Identify two types of subsequent events and explain the appropriate financial statement presentation of each type.3. What are the procedures that should be performed to ascertain the existence of subsequent events?b. With respect to contingent liabilities1. Identify the essential elements of a contingent liability.2. Explain how a contingent liability should be…In what respects is a review of interim financial information similar to a review of the unaudited annual financial statements of a nonissuer?For a publicly owned company, indicate which of the fol-lowing accounting activities are likely to occur at or shortly after year-end. (More than one answer may be correct.)a. Preparation of income tax returns.b. Adjusting and closing of the accounts.c. Drafting of disclosures that accompany the fi nancialstatements.d. An audit of the fi nancial statements by an independentCPA fi rm.
- Which of the following is not a way to manage earnings? A. Change the method for bad debt estimation. B. Change the figure for the uncollectible percentage. C. Under the balance sheet aging method, change the past-due categories. D. Change the dates of common stock issuance.Why are these statements are false?I. Non-compliance with IAS 34 indicated that the entity does not comply with the requirements of IAS 1.II. IAS 34 requires entities whose equity or debt securities are traded in a public capital market to publish interim reports at least as of the end of the first half of the financial year.Show the solution in good accounting form How much total current liabilities should be reported on the statement of financial position as of December 31, 20X1?
- Entities should disclose all of the following in interim financial report, except: a. Basic and diluted earnings per share b. Change in accounting policy c. Events after the end of reporting period d. Seasonal revenue, cost or expenses1.At year-end, what amount should be reported as total retained earnings? 2. At year-end, what amount should be reported as total noncurrent liabilities? 3. At year-end, what amount should be reported as total shareholders' equity?Where financial statements for a single year are being presented, a prior period error recognized in the current year ordinarily would a. Affect net income of the current year. b. Be shown as an adjustment of the affected component of equity at the start of the current year. c. Be included in the statement of recognized gains and losses. d. Be shown as an extraordinary item on the current year's financial statement of comprehensive income.
- Which of the following is not a common way that managers use the balance sheet? To analyze the balance between debt and common stock financing To determine if the cash balance is sufficient for future needs To analyze the balance of accounts receivable on the last day of the accounting period To analyze the balances of assets, liabilities, and stockholders' equity throughout the accounting periodWhich of the following statements is false? Select one: a. The separation of current debt from long-term debt is done on the date of the balance sheet b. Each year, the amount of long-term debt would increase, as a portion is classified as current debt. c. Current assets include cash, accounts receivable and prepaid insurance. d. Long-term assets include vehicles, computers and furniture.f. What is the effect of these errors on Net Income, Earnings per Share, Total Liabilities and Retained Earnings if they are not discovered (detected) before the publication of the annual report?