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Production Accident In October 2020, RFB found out that one of the air tubes used in its barbecues was incorrectly made. As a result, several

Production Accident

In October 2020, RFB found out that one of the air tubes used in its barbecues was incorrectly made. As a result, several customers throughout Western Canada and the Northeastern United States became ill or were injured. There is currently a lawsuit pending that may result in claims being paid out. When your partner asked Margie about insurance, she stated that she had downgraded the insurance this year, saving the company $100,000. In doing so, exposure of damages as a result of these tubes is not covered. Margie has not recorded any amount yet in the financial statements because the lawsuit has yet to go to trial. Documentation from the lawyers suggests that there is a 5% probability that there will be no amount payable for the claim, a 25% chance that $200,000 would have to be paid, a 50% chance that $500,000 would be due, and a 20% chance that $700,000 in claims will have to be paid.

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