SavedIn connection with your audit of the financial statements of Hollis Manufacturing Corporation for the year ended December 31, 20X3.your review of subsequent events disclosed the following items:a. January 7, 20X4: The mineral content of a shipment of ore en route to Hollis Manufacturing Corporation on December 31, 20X3, wasdetermined to be 72 percent. The shipment was recorded at year-end at an estimated content of 50 percent by a debit to RawMaterials Inventory and a credit to Accounts Payable in the amount of $82,400. The final liability to the vendor is based on theactual mineral content of the shipment.b. January 15, 20X4: Following a series of personal disagreements between Ray Hollis, the president, and his brother-in-law, thetreasurer, the latter resigned, effective immediately, under an agreement whereby the corporation would purchase his 10 percentstock ownership at book value as of December 31, 20X3. Payment is to be made in two equal amounts in cash on April 1 andOctober 1, 20X4. In December, the treasurer had obtained a divorce from his wife, who is Ray Hollis's sister.C. January 16, 20X4: As a result of reduced sales, production was curtailed in mid-January and some workers were laid off.d. On January 18, 20X4, a major customer filed for bankruptcy. The customer's financial condition had been degenerating over recentyears.e. On January 28, 20X4, a famous analyst who followed the industry provided a negative report on his expectations concerning theshort and intermediate term for the industry.Required:1. For each of the subsequent events, indicate whether they should result in:Adjustment-an adjusting entry as of 20X3.Consider Disclosure-consideration of note disclosure as of 20X3.Itemsa.b.< Prev15 of 20Next >Untitled docume...pdfUntitled docume...pdfUntitled docume....pdfdocxPresentation se...pdfMacBook Air114F864F6F5F4F3F2&%236084.M.

Adjusting entry is made for the adjustments that affect the financial statement of the company. a. Adjustment: In the present case, it was estimated that 75% mineral content is presented but an actual 50% mineral content was actually presented. Therefore, the adjusting entry for 25% of mineral content would be required. b. Consider disclosure: The personal disagreement and stock ownership of 10% would not require the adjusting entry but the disclosure requires. c. Consider disclosure: The workers laid off requires disclosure but the adjusting entry would not require because it does not affect the accounting balance. d. Adjustment: The bankruptcy of the customer would require adjusting entry. Because it affects the financial condition of the company. e. Consider disclosure: The negative report by the analyst does not affect the financial statement of the company.

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In connection with your audit of the financial statements of Hollis Manufacturing Corporation for the year ended Decem your review of subsequent events disclosed the following items: a. January 7, 20X4: The mineral content of a shipment of ore en route to Hollis Manufacturing Corporation on Decembe determined to be 72 percent. The shipment was recorded at year-end at an estimated content of 50 percent by a del Materials Inventory and a credit to Accounts Payable in the amount of $82,400. The final liability to the vendor is base actual mineral content of the shipment.

In connection with your audit of the financial statements of Hollis Manufacturing Corporation for the year ended Decem your review of subsequent events disclosed the following items: a. January 7, 20X4: The mineral content of a shipment of ore en route to Hollis Manufacturing Corporation on Decembe determined to be 72 percent. The shipment was recorded at year-end at an estimated content of 50 percent by a del Materials Inventory and a credit to Accounts Payable in the amount of $82,400. The final liability to the vendor is base actual mineral content of the shipment.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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