For all of the following answer how this would be handled in the financial statements at December 31, 2019.

A. Eastern offers a one-year warranty against manufacturer's defects for all its products. Industry experience indicates that warranty costs will approximate 2% of sales. Actual warranty expenditures were $3.5 million in 2019 and were recorded as warranty expense when incurred.

B. In December, 2019, Eastern became aware of an engineering flaw in a product that poses a potential risk of injury. As a result, a product recall appears inevitable. This move would likely cost the company $1.5 million.

C. Eastern is the plaintiff in a $40 million lawsuit filed against a customer for costs and lost profits from contracts rejected in 2019. The lawsuit is in final appeal and attorneys advise that it is virtually certain that Eastern will be awarded $30 million.