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Assess product liability damages as sole prop, partnership

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A business entity has the following assets and liabilities on its balance sheet:

Net Book Value Fair Market Value
Assets 675000 950000
Liabilities 100000 100000

The business entity has just lost a product liability suit with damages of $5 million being awarded to the plaintiff. Although the business entity 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 the business has a policy ceiling of $3 million. What is the amount of liability of the entity and its owners is the form of the business entity is:

A. A sole proprietorship
B. A partnership
C. A C corporation
D. An S corporation

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https://brainmass.com/business/accounting-for-liabilities/assess-product-liability-damages-sole-prop-partnership-311538

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ANSWERS

Net book value = 675000-100000=575000
Net fair value = 950000-100000=850000

Additional liability = ...

Solution Summary

The expert asses product liability damages as a sole prop and partnership.

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