A Restaurant Has Been Sued Because a Customer Claims to Have

A restaurant has been sued because a customer claims to have found a bug in her chili. The company's 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 company's management?

A) The situation should be described in a note to the financial statements.
B) The possible liability should not be shown in the financial statements.
C) The liability should be estimated and recorded as an expense.
D) Management should consider resigning.

Correct Answer:

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