1. Quayle Company has been sued by a customer who claims injury from use of Quayle s product. The company s lawyers and a consultant believe the likelihood of a judgment against Quayle is remote. What

1. Quayle Company has been sued by a customer who claims injury from use of Quayle’s product. The company’s lawyers and a consultant believe the likelihood of a judgment against Quayle is remote. What should Quayle do to account for this potential liability? (Points : 2)

Recognize the liability and report it on the balance sheet.

Provide disclosure in the footnotes to the financial statements.

Report an allowance account on the balance sheet.

Do nothing.

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