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 french fries.Burger Barn's attorneys have advised them that the likelihood of a future obligation from the suit is remote.As a result of the lawsuit,Burger Barn should:
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

Since the likelihood of a future obligation is considered remote, Burger Barn is not required to disclose or recognize the lawsuit in its financial statements.

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