A Company Has Been Sued for Product Failures Allegedly Resulting

question 202

Multiple Choice

A company 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.

---

Definitions:

Superficial to Deeply Entrenched

Superficial to Deeply Entrenched describes a progression from surface-level to deeply rooted or firmly established states or conditions.

Short-term Memory

A temporary storage system that holds a small amount of information in mind in an active, readily-available state for a short period of time.

Items

Individual objects, units, or components that are part of a larger set or list.

Less than

A mathematical term indicating that one quantity or number is smaller or lower in value when compared to another.