Top Sound International designs and sells high$-$end stereo equipment for auto and home use. Engineers notified management in December $2024$ of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $$3\mathrm{.}6$ million. The fiscal year ends on December $31.$

Required:

$1.$ Should this contingent liability be reported, disclosed in a note only, or neither?

$2.$ What loss, if any, should Top Sound report in its $2024$ income statement?

$3.$ What liability, if any, should Top Sound report in its $2024$ balance sheet?

$4.$ What entry, if any, should be recorded?