Sheridan 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 Sheridan recall all cans of this paint sold in the last six months. The management of Sheridan estimates that this recall could cost the company $$796000.$ What accounting recognition, if any, should be accorded this situation?

Appropriation of retained earnings of $$796000$

Note disclosure only

No recognition

Operating expense of $$796000$ and liability of $$796000$