Information obtained prior to the issuance of the current period's financial statements of KG Company indicates that it is probable that, at the date of the financial statements, a liability will be incurred for obligations related to product warranties on products sold during the current period. During the past three years, product warranty costs have been approximately 11/2 percent of annual sales revenue. An estimated loss contingency should be: Multiple Choice Neither accrued nor disclosed in the financial statements. Recognized as an appropriation of retained earnings. Accrued in the accounts and reported in the financial statements. Disclosed in the financial statements but not accrued.