Question:
The fiscal year-end for the Northwest Distribution Corporation is December 31. The company’s 2013
financial statements were issued on March 15, 2014. The following events occurred between December
31, 2013, and
March 15, 2014.
1. On January 22, 2014, the company negotiated a major merger with Blandon Industries. The merger
will be completed by the middle of 2014.
2. On February 3, 2014, Northwest negotiated a $10 million long-term note with the Credit Bank of Ohio.
The amount of the note is material.
3. On February 25, 2014, a flood destroyed one of the company’s manufacturing plants causing $600,000
of uninsured damage.
Required:
Determine the appropriate treatment of each of these events in the 2013 financial statements of Northwest
Distribution Corporation.
Answer:
1. This is a significant event occurring after the end of the fiscal year but prior to the issuance of the
financial statements. Details of the merger should be disclosed in a note to the financial statements.
2. This is a significant event occurring after the end of the fiscal year but prior to the issuance of the
financial statements. Details of the issuance of the new debt should be described in a note to the
financial statements.
3. This is a significant event occurring after the end of the fiscal year but prior to the issuance of the
financial statements. The event should be described in a note to the financial statements along with
the amount of uninsured damage.
The fiscal year-end for the Northwest Distribution Corporation is December 31. The company’s 2013
financial statements were issued on March 15, 2014. The following events occurred between December
31, 2013, and
March 15, 2014.
1. On January 22, 2014, the company negotiated a major merger with Blandon Industries. The merger
will be completed by the middle of 2014.
2. On February 3, 2014, Northwest negotiated a $10 million long-term note with the Credit Bank of Ohio.
The amount of the note is material.
3. On February 25, 2014, a flood destroyed one of the company’s manufacturing plants causing $600,000
of uninsured damage.
Required:
Determine the appropriate treatment of each of these events in the 2013 financial statements of Northwest
Distribution Corporation.
Answer:
1. This is a significant event occurring after the end of the fiscal year but prior to the issuance of the
financial statements. Details of the merger should be disclosed in a note to the financial statements.
2. This is a significant event occurring after the end of the fiscal year but prior to the issuance of the
financial statements. Details of the issuance of the new debt should be described in a note to the
financial statements.
3. This is a significant event occurring after the end of the fiscal year but prior to the issuance of the
financial statements. The event should be described in a note to the financial statements along with
the amount of uninsured damage.
