Ogle Corporation, an eye drops manufacturer, is preparing annual financial statements as of December $31,20$X$1.$ In December, the company voluntarily recalled two of its products due to concerns that the drops could cause eye infections and possible blindness. Refunds of $$500,000$ have been paid. The management of Ogle estimates that the recall could cost the company an additional $$1,800,000.$ Ogle's lawyers expect that a class action suit related to the recall will be filed in early $202$ and that it will cost the company between $$2,000,000$ and $$5,000,000.$ How should Ogle report the recall and the potential class action suit in its $20$X$1$ financial statements?

Accrue a liability of $$1,800,000$ for the recall but give no financial statement recognition of the potential class action lawsuit.

Accrue a liability of $$2,300,000$ for the recall and disclose the potential class action suit in the notes to the financial statements.

Accrue a liability of $$2,300,000$ for the recall and a liability of $$5,000,000$ for the potential class action suit.

Accrue a liability of $$1,800,000$ for the recall and a liability of $$2,000,000$ for the potential class action suit.