LO.2 The Shale Company reports the following assets and liabilities on its balance sheet.

Net Book Value Fair Market Value Assets $675,000 $975,000 Liabilities 200,000 200,000 Shale has just lost a product liability suit with damages of $5 million being awarded to the plaintiff. Although Shale will appeal the judgment, legal counsel indicates the judgment is highly unlikely to be overturned by the appellate court. The product liability insurance carried by Shale includes a payout ceiling of $3 million. What is the amount of liability of the entity and its owners if Shale is:

a. A sole proprietorship?

b. A partnership or LLC?

c. A C corporation?

d. An S corporation?
ETHICS AND EQUITY