10. Ortiz Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2021. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Ortiz recall all cans of this paint sold in the last six months. The management of Ortiz estimates that this recall would cost P800,000. What accounting recognition, if any, should be accorded this situation? a. No recognition b. Note disclosure only c. Expense of P800,000 and liability of P800,000 d. Appropriation of retained earnings of P800,000

11. Information available prior to the issuance of the financial statements indicates that it is probable that, at the date of the financial statements, a company has a present obligation related to product warranties. The amount of the expense involved can be reasonably estimated. Based on the above facts, the estimated warranty expense should be a. accrued. b. disclosed but not accrued. c. neither accrued nor disclosed. d. classified as an appropriation of retained earnings.

12. Tender Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be P500,000. What is the required journal entry as a result of this litigation? a. Debit Litigation Expense for P500,000 and credit Litigation liability for P500,000. b. Debit Litigation Expense for P200,000 and credit Litigation Liability for P200,000. c. Debit Litigation Expense for P300,000 and credit Litigation Liability for P300,000. d. No journal entry is required.