A Restaurant Has Been Sued Because a Customer Claims to Have

question 64

Multiple Choice

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.

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Definitions:

State-run Lotteries

Lotteries operated by state governments in which participants buy tickets for a chance to win monetary prizes, often contributing to public funding.

Education Sector

A segment of society focused on the provision, development, and delivery of educational services and institutions.

Tax Incidence

The degree to which a tax falls on a particular person or group.

Business Property

Assets owned by a business, including both real estate and personal property used for business operations.