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.

---

Definitions:

Negative Outcomes

Undesirable or unfavorable results deriving from specific actions, decisions, or circumstances.

Sexual Harassment

Involves unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature in the workplace or learning environments.

Psychological Well-being

An individual's overall mental health and life satisfaction, encompassing emotional, psychological, and social aspects.

Intentionally Deceives

Deliberately misleading or causing someone to believe something that is not true, often for personal gain or advantage.