Multiple Choice
ABC Inc.has 50 pending lawsuits for which it may be found liable.The expected value (sum of the probabilities of the outcomes multiplied by their respective payouts) amounts to $100,000.However, the company's controller believes that the most likely outcome will be a payout of $120,000.Which of the following statements pertaining to the accrual of the provision is correct?
A) There is a small population of lawsuits, so a provision of $100,000 must be accrued.
B) There is a large population of lawsuits, so a provision of $100,000 must be accrued.
C) There is a large population of lawsuits, so a provision of $120,000 must be accrued.
D) There is a small population of lawsuits, so a provision of $120,000 must be accrued.
Correct Answer:
Verified
Correct Answer:
Verified
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