Ca 24-4 post balance sheet events

CA 24-4 Post Balance Sheet Events
At December 31, 2014, Coburn Corp has assets of $10,000,000, Liabilities of $6,000,000, common Stock of $2,000,000 (representing 2,000,000 shares of $1 par common stock), and retained earnings of $2,000,000. Net sales for the year 2014 were $18,000,000 and net income was $800,000. As auditors of this company, you are making a review of subsequent events on February 13, 2015, and you find the following:

(1)    On February 3, 2015 one of Coburn’s customers declared bankruptcy. At December 31, 2014 the company owed Coburn $300,000 of which $60,000 was paid in January 2015.
(2)    On January 18, 2015 one of the three major plants of the client burned.
(3)    On January 23, 2015 a strike was called at one of Coburn’s largest plants, which halted 30% of its production. As of today (February 13) the strike has not been settled.
(4)    A major electronics enterprise has introduced a line of products that would compete directly with Coburn’s primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor has been able to achieve quality similar to that of Coburn’s products but at a price3 of 50% lower. Coburn officials say they will meet the lower prices, which are high enough to cover variable manufacturing and selling costs but which permit recovery of only a portion of fixed costs.
(5)    Merchandise traded in the open market is recorded in the company’s records at $1.40 per unit on December 31, 2014. This price had prevailed for 2 weeks after release of an official market report that predicted vastly enlarged supplies: however, no purchases were made at $1.40. The price throughout the preceding year had been about $2, which was the level experienced over several years. On January 18, 2015 the price returned to $2 after public disclosure of an error in the official calculations of the prior December, correction of which destroyed the expectations of excessive supplies. Inventory at December 31, 2015, was on a lower-of-cost-or-market basis.
(6)    On February 01, 2015, the board of directors adopted a resolution accepting the offer of an investment banker to guarantee the marketing of $1,200,000 of preferred stock.

Don't use plagiarized sources. Get Your Custom Essay on
Ca 24-4 post balance sheet events
Just from $13/Page
Order Essay

State in each case how the 2014 financial statements would be affected IF at all.


Calculate the price of your paper

Total price:$26
Our features

We've got everything to become your favourite writing service

Need a better grade?
We've got you covered.

Order your paper