Chapter 24: 4CA_1 (page 1454)
At December 31, 2017, 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 \(2,000,000. Net sales for the year 2017 were \)18,000,000, and net income was \(800,000. As auditors of this company, you are making a review of subsequent events on February 13, 2018, and you find the following.
- On February 3, 2018, one of Coburn’s customers declared bankruptcy. At December 31, 2017, this company owed Coburn \)300,000, of which $60,000 was paid in January 2018.
Instructions
State in each case how the 2017 financial statements would be affected, if at all.
Short Answer
A loss of $240,000 should be adjusted in financial statements.