Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December $2024$ of a circuit

flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain,

estimated to cost the company $$1\mathrm{.}5$ million. The fiscal year ends on December $31.$

Required:

Should this loss contingency be accrued, only disclosed, or neither?

What loss, if any, should Sound Audio report in its $2024$ income statement?

What liability, if any, should Sound Audio report in its $2024$ balance sheet?

Prepare any journal entry needed.

Complete this question by entering your answers in the tabs below.

Should this loss contingency be accrued, only disclosed, or neither?

What loss, if any, should Sound Audio report in its $2024$ income statement?

What liability, if any, should Sound Audio report in its $2024$ balance sheet?

Note: Enter your answers in millions rounded to $1$ decimal place $($i$.$e$.,5,500,000$ should be entered as $5\mathrm{.}5).$