Assume thаt yоu аre the аuditоr fоr Spring Green Company, a manufacturer of gardening tools. The year-end is December 31, 2025. The audit report date is March 10,2026. The date the financial statements are issued is March 21,2026. Consider each of the following situations. Assume each transaction and amount is material. For each of the following situations, determine the appropriate financial statement treatment, including the dollar amount of any adjustment, if appropriate. Your choices are: Ask the client to adjust the 12-31-25 financial statements and disclose the information in a footnote. Ask the client to disclose the information in a footnote in the 12-31-25 financial statements. No action is necessary. On March 1, 2026, the auditor discovered that a customer of Spring Green had gone bankrupt. The customer owed an accounts receivable, in the amount of $4,000,000. Assume this amount is material. Also assume no allowance for uncollectible accounts has yet been set up related to this account. The last sale to the customer was made on June 29, 2025, and the last payment was received on September 15, 2025. The customer has been experiencing gradually worsening financial conditions. On February 10, 2026, the auditor discovered that a customer of Spring Green had gone bankrupt. The customer owed an account receivable, in the amount of $2,000,000. Assume this amount is material. Also assume no allowance for uncollectible accounts has yet been set up related to this account. The sale, which created this account receivable, was made on January 20, 2026. The customer experienced a totally unexpected and devastating loss, which was not adequately insured. On March 2, 2026, the auditor discovered that a major subsidiary was to be sold. A buyer had been found. The purchase will be completed on July 15, 2026.