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Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2012 of a circuit flaw in

Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2012 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 $6.5 million. The fiscal year ends on December 31.

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What loss, if any, should Top Sound report in its 2012 income statement?

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