What Situation Represents a Contingent Liability for a Company

question 9

Multiple Choice

What situation represents a contingent liability for a company?

• A)A candy company's monthly production requires 1000 kg of chocolate.The company entered into a contract with a chocolate producer to purchase 6000 kg of chocolate over the next six months at the market price.
• B)A bike company learned that a racer using its bike was seriously injured in an accident on December 30,2018,as the front wheel of the bike was released as the result of a manufacturing defect.The company had not received a claim at December 31,2018,but management expects to receive a claim.
• C)A restaurant received a $10 000 claim from a customer for emotional damages as a result of poor service.The legal counsel of the restaurant indicated that the claim was not supported and there was less than a 5% chance that the restaurant would have to pay.
• D)A hotel chain was found guilty by a judge for not refunding customers who had online reservations.The hotel chain will have to pay $50 000 to various customers in the following year.

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Definitions:

Task Oriented

Focused on completing tasks and achieving goals, often valuing efficiency and productivity over interpersonal relationships.

Frequent Feedback

The regular and consistent provision of comments, criticisms, and suggestions aimed at improving performance or understanding.

Standards For Performance

The expected levels of achievement or excellence within a particular area.

Babble Effect

A phenomenon in group or network communication where an increase in messages leads to information overload, reducing the overall coherence and effectiveness of communication.