TCO D) Ortiz Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2010. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Ortiz recall all cans of this paint sold in the last 6 months. The management of Ortiz estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation? (Points : 5)

No recognition

Note disclosure only

Operating expense of $800,000 and liability of $800,000

Appropriation of retained earnings of $800,000