Current Attempt in Progress

Carla Vista Corporation, a manufacturer of household paints, is preparing annual financial statements as of

December $31,2025.$ Because of a recently proven health hazard in one of its paints, the government has clearly

indicated its intention of having Carla Vista recall all cans of this paint sold in the last six months. The management

of Carla Vista estimates that this recall could cost the company $$798000.$ What accounting recognition, if any,

should be accorded this situation?

Operating expense of $$798000$ and liability of $$798000$

Appropriation of retained earnings of $$798000$

Note disclosure only

No recognition