Mighty Burger Has Been Named as a Plaintiff in a $5

question 101

Multiple Choice

Mighty Burger has been named as a plaintiff in a $5 million lawsuit filed by a customer over the addictive nature of the company's french fries. Mighty Burger's attorneys have advised them that the likelihood of a future obligation from the suit is remote. As a result of the lawsuit, Mighty Burger should:

• A)Disclose the lawsuit in the footnotes to the financial statements.
• B)Recognize a $5 million liability on its balance sheet for the contingency.
• C)Ignore the lawsuit in its financial statements.
• D)Settle with the customer immediately for $5 million to avoid harmful publicity.

Calculate and comprehend the tax benefits of selling assets and depreciation.

Assess changes in net working capital and its impact on project cash flows.

Understand the principle of Capital Cost Allowance (CCA) and its application in depreciation.

Explain the concept of salvage value and its determination at the end of a project’s life.

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Definitions:

Economic Growth

A rise in the economy's inflation-adjusted value of produced goods and services over time.

Net Worth

Net Worth is the total value of an individual's or entity's assets minus liabilities, indicating financial health or wealth at a point in time.

Assets

Resources owned by a person or business that have economic value or expected future benefit.

Liabilities

Financial obligations or debts owed by a person or company to others.