Question

Brief Respite, Inc. sold underwear made from a fabric that gave many of its customers a serious rash. The customers are suing the company in a class action suit. Although the verdict is not yet in, Brief Respite's attorneys think it is probable that the case will cost the company $2 million. The company should:

A) not include this information in its annual report.

B) record a liability and a gain for $2 million.

C) only explain the situation in the notes to the financial statements.

D) record a liability and a loss for $2 million.

Answer

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