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Question(s) / Instruction(s):

A restaurant has been sued because a customer claims to have found a cockroach in her chili. The companys 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 companys 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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