Question

Which of the following would not require the company to record an accrual on the balance sheet? Select one: A. The company owes $43,000 in wages to its employees for the previous two weeks. B. Interest will be paid when a note payable matures in the following accounting period C. Management believes a lawsuit against the company is meritless because they have never had a single complaint about dangerous side effects of their drug in two years. D. The company knows that they will be fined for pollution as a result of their manufacturing process and can estimate the amount of the obligation. E. None of the above

Answer 1

C. Management believes a lawsuit against the company is meritless because they have never had a single complaint about dangerous side effects of their drug in two years

Step-by-step explanation:

The contingency is not estimable, and the company is not expecting to do any cash disbursement. At most, it will be disclosure on a footnote because it doesn't know the amount of the lawsuit or probability of occurring.