Question
Kid Toys, a manufacturer of childrens toys, is preparing annual financial statements at December 31. Because of a recently proven health hazard in one of
Kid Toys, a manufacturer of childrens toys, is preparing annual financial statements at December 31. Because of a recently proven health hazard in one of its toys, the government has indicated its intention of having Kid Toys recall toys sold during the last four months. The management of Kid Toys estimates that the recall would cost $1,100,000. What accounting recognition, if any, will this situation warrant?
A. | Statement of comprehensive income amount totaling $1,100,000 and note disclosure | |
B. | Operating expense and a liability of $1,100,000 and note disclosure | |
C. | No recognition necessary | |
D. | Note disclosure only |
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