A Corporation Has Been Sued for Product Failures Allegedly Resulting

question 94

Multiple Choice

A corporation has been sued for product failures allegedly resulting in injuries to the individuals bringing the lawsuit.The company's lawyers believe it is more than remote,but less than probable,that the lawsuit will result in an actual liability.Which of the following actions should be taken by the company's management?

• A)The liability should be estimated and recorded as an expense.
• B)The situation should be described in a note to the financial statements.
• C)The possible liability should be ignored.
• D)Management should consider resigning.

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Definitions:

Liability

The state of being legally responsible for something, such as a debt or obligation.

Revised Uniform Partnership Act

An updated set of laws that provide a legal framework for the formation, operation, and dissolution of partnerships in the United States.

RUPA

The Revised Uniform Partnership Act, which regulates the operation of partnerships within the United States.

Partnership Law

Legal regulations that govern the formation, operation, and dissolution of partnerships.