Chapter 9, Problem 5MCQ

A company is facing a lawsuit from a customer. It is possible, but not probable, that the company will have to pay a settlement that management estimates to be $2,000,000. How would this fact be reported in the financial statements to be issued at the end of the current month?

1. a. $2,000,000 in the Current Liability section.
2. b. $2,000,000 in the Long-Term Liability section.
3. c. In a descriptive narrative in the footnote section.
4. d. None because disclosure is not required.

6. Which of the following transactions would usually cause accounts payable turnover to increase?