Paul Company Issues a Product Recall Due to an Apparently

question 27

Multiple Choice

Paul Company issues a product recall due to an apparently preexisting and material defect discovered after the end of its fiscal year. Financial statements have not yet been issued. The action required of Paul Company for this reasonably estimable contingency for the year just ended is:

• A) To disclose it in a note to the financial statements.
• B) To accrue a long-term liability.
• C) To accrue the liability and explain it in a note to the financial statements.
• D) To do nothing relative to the contingency.