Final answer:
Loss of plant and equipment due to a fire is an example of a subsequent event that would typically require an adjustment to the financial statements, as it reflects conditions existing at the balance sheet date. Other events like a business combination, the sale of an investment, or the retirement of bonds payable typically only require disclosure unless they indicate conditions that existed on the balance sheet date.
Step-by-step explanation:
The question pertains to which of the following subsequent events might require an adjustment to the client's financial statements:
- A business combination with another company.
- Loss on the sale of a closely-held investment.
- Loss of plant and equipment due to a fire.
- Retirement of bonds payable at a loss.
According to accounting principles, particularly those concerning subsequent events, certain events that occur after the balance sheet date but before financial statements are issued or are available to be issued must be reflected in the financial statements if they provide additional information about conditions that existed at the date of the balance sheet.
Loss of plant and equipment due to fire is an example of a subsequent event that would usually require an adjustment to the financial statements as it is a recognition of conditions that existed at the balance sheet date. On the other hand, A business combination with another company or Retirement of bonds payable at a loss would typically only require disclosure, as these are indicative of conditions that arose after the balance sheet date. Loss on the sale of a closely-held investment would also typically only require disclosure unless the conditions for the loss existed at the balance sheet date.