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) Record decrease stockholders' equity and increase liabilities.
B) Record increase stockholders' equity and decrease liabilities.
C) Disclose no effect in the balance sheet.
D) Disclose decrease stockholders' equity and decrease liabilities.
Answer: C
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