Burger Barn has been named as a plaintiff in a $5 million lawsuit filed by a customer over the addictive nature of the company's burgers.Burger Barn's attorneys have advised them that the likelihood of a future obligation from the suit is remote.What should Burger Barn do as a result of the information that is available?
A)Disclose the lawsuit in the notes 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

Question

Quizplus · Accepted Answer

Because the obligation is considered remote,it is neither recognized nor disclosed in Burger Barn's financial statements.

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