Question

Which of the following situations would require adjustment to or disclosure in the financial statements?

a. A merger discussion.
b. The application for a patent on a new production process.
c. Discussions with a customer that could lead to a 40 percent increase in the client's sales if agreement is successful.
d. The bankruptcy of a customer who regularly purchased 30 percent of the company's output.

Answer 1

Option d, the bankruptcy of a customer who regularly purchased 30 percent of the company's output, would require adjustment to or disclosure in the financial statements.

Step-by-step explanation:

In this case, the situation that would require adjustment to or disclosure in the financial statements is option d, the bankruptcy of a customer who regularly purchased 30 percent of the company's output.

This situation would require a disclosure in the financial statements because it represents a significant event that could have a material impact on the company's finances and operations. The bankruptcy of a major customer would likely result in a loss of revenue for the company and could also lead to potential write-offs or adjustments to the value of accounts receivable.

It is important for the company to provide this information in the financial statements to ensure transparency and to provide the necessary information for investors and stakeholders to make informed decisions.