Coronado Industries, a manufacturer of household paints, is preparing annual financial statements at December 31, 2020. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Coronado recall all cans of this paint sold in the last six months. The management of Coronado estimates that this recall would cost $ 810000. What accounting recognition, if any, should be accorded this situation? Appropriation of retained earnings of $ 810000 Operating expense of $ 810000 and liability of $ 810000 No recognition Note disclosure only
Coronado Industries, a manufacturer of household paints, is preparing annual financial statements at December 31, 2020. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Coronado recall all cans of this paint sold in the last six months. The management of Coronado estimates that this recall would cost $ 810000. What accounting recognition, if any, should be accorded this situation? Appropriation of retained earnings of $ 810000 Operating expense of $ 810000 and liability of $ 810000 No recognition Note disclosure only
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Coronado Industries, a manufacturer of household paints, is preparing annual financial statements at December 31, 2020. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Coronado recall all cans of this paint sold in the last six months. The management of Coronado estimates that this recall would cost $ 810000. What accounting recognition, if any, should be accorded this situation?
Appropriation of retained earnings of $ 810000
Operating expense of $ 810000 and liability of $ 810000
No recognition
Note disclosure only
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