A company has a pending lawsuit that has a remote possibility of being settled in favor of the plaintiff who is a former employee.What should the company do?
A)Nothing.
B)Prepare a note to the financial statements.
C)Prepare a journal entry.
D)Prepare a note to the financial statements and a journal entry.

Question

Quizplus · Accepted Answer

The company should do nothing because the possibility of the lawsuit being settled in favor of the plaintiff is remote. According to accounting standards, remote contingencies do not require disclosure or recognition in the financial statements.

A Company Has a Pending Lawsuit That Has a Remote