KLR Oil Company Is Being Investigated, Following an Explosion on One

question 133

Multiple Choice

KLR Oil Company is being investigated, following an explosion on one of their oil rigs. They have multiple prior citations for safety violations, and this explosion killed several workers. The related damages are still unknown and cannot be reasonably estimated. What accounting treatment should KLR use for the investigation?

• A)Because damages are still unknown, no action is necessary.
• B)Because the likelihood of the obligation occurring is remote, footnote disclosure is all that is required.
• C)Because the likelihood of the obligation occurring is probable, but the amount is unknown, this should be disclosed in the footnotes.
• D)Because the likelihood of the obligation occurring is reasonably possible, this should be disclosed in the footnotes.

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Definitions:

Fast-Second Strategy

A business approach where companies wait to see which innovations prove viable and then quickly follow with improvements and cost reductions.

Collusion

A situation in which firms act together and in agreement (collude) to fix prices, divide a market, or otherwise restrict competition.

Process Innovation

The implementation of a new or significantly improved production or delivery method, enhancing efficiency or quality in operations.

Total Product Curve

A graphical representation showing how the quantity of output varies with changes in the quantity of a single input, holding all other inputs constant.