Ogden Motors, Inc. is involved in a lawsuit. It is reasonably possible that the jury will find in favor of the plaintiff and Ogden will owe ten million dollars. What is the appropriate reporting of this lawsuit and what is the effect in the balance sheet?
A. Disclose; no effect in the balance sheet.
B. Record; increase stockholders' equity and decrease liabilities.
C. Disclose; decrease stockholders' equity and decrease liabilities.
D. Record; decrease stockholders' equity and increase liabilities.
Answer: A
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