Question

A restaurant has been sued because a customer claims to have found a bug in her chili. The company's lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability. Which of the following actions should be taken by the company's management?a.The situation should be described in a note to the financial statements.b.The possible liability should be ignored.c.The liability should be estimated and recorded as an expense.d.Management should consider resigning

Answer 1

Answer:The situation should be described in a note to the financial statement.

Explanation:

Since there is a remote possibility of a liability been incurred in the case, the management should only bring it to shareholders knowledge by way of note in the financial statement and