Exercise 13-17 (Algo) Contingency; product recall [LO13-5, 13-6) Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain. estimated to cost the company $2.0 million. The fiscal year ends on December 31. Required: 1. Should this loss contingency be accrued, only disclosed, or neither? 2. What loss, if any, should Sound Audio report in its 2021 income statement? 3. What liability, if any, should Sound Audio report in its 2021 balance sheet? 4. Prepare any journal entry needed. Complete this question by entering your answers in the tabs below. Req 4 Should this loss contingency be accrued, only disclosed, or neither? What loss and liability, if any, should Sound Audio report in its 2021 income statement and balance sheet respectively? (Enter your answers in millions rounded to 1 decimal place (i.e.. 5,500,000 should be entered as 5.5).) Req 1 to 3 1. Loss contingency 2. Loss 3. Liability million million < Req 1 to 3 Req 4 >
Exercise 13-17 (Algo) Contingency; product recall [LO13-5, 13-6) Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain. estimated to cost the company $2.0 million. The fiscal year ends on December 31. Required: 1. Should this loss contingency be accrued, only disclosed, or neither? 2. What loss, if any, should Sound Audio report in its 2021 income statement? 3. What liability, if any, should Sound Audio report in its 2021 balance sheet? 4. Prepare any journal entry needed. Complete this question by entering your answers in the tabs below. Req 4 Should this loss contingency be accrued, only disclosed, or neither? What loss and liability, if any, should Sound Audio report in its 2021 income statement and balance sheet respectively? (Enter your answers in millions rounded to 1 decimal place (i.e.. 5,500,000 should be entered as 5.5).) Req 1 to 3 1. Loss contingency 2. Loss 3. Liability million million < Req 1 to 3 Req 4 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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![Exercise 13-17 (Algo) Contingency; product recall [LO13-5, 13-6]
Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit
flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain,
estimated to cost the company $2.0 million. The fiscal year ends on December 31.
Required:
1. Should this loss contingency be accrued, only disclosed, or neither?
2. What loss, if any, should Sound Audio report in its 2021 income statement?
3. What liability, if any, should Sound Audio report in its 2021 balance sheet?
4. Prepare any journal entry needed.
Complete this question by entering your answers in the tabs below.
Req 1 to 3
Req 4
Should this loss contingency be accrued, only disclosed, or neither? What loss and liability, if any, should Sound Audio report
in its 2021 income statement and balance sheet respectively? (Enter your answers in millions rounded to 1 decimal place (i.e.,
5,500,000 should be entered as 5.5).)
1. Loss contingency
2. Loss
3. Liability
million
million
Req 1 to 3
Req 4 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F05c29da8-5e07-472c-a295-a56e55cdcfad%2F4878eff2-84ed-4e1f-9847-33a669872ec2%2Fl7mhyjp_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 13-17 (Algo) Contingency; product recall [LO13-5, 13-6]
Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit
flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain,
estimated to cost the company $2.0 million. The fiscal year ends on December 31.
Required:
1. Should this loss contingency be accrued, only disclosed, or neither?
2. What loss, if any, should Sound Audio report in its 2021 income statement?
3. What liability, if any, should Sound Audio report in its 2021 balance sheet?
4. Prepare any journal entry needed.
Complete this question by entering your answers in the tabs below.
Req 1 to 3
Req 4
Should this loss contingency be accrued, only disclosed, or neither? What loss and liability, if any, should Sound Audio report
in its 2021 income statement and balance sheet respectively? (Enter your answers in millions rounded to 1 decimal place (i.e.,
5,500,000 should be entered as 5.5).)
1. Loss contingency
2. Loss
3. Liability
million
million
Req 1 to 3
Req 4 >
![Exercise 13-17 (Algo) Contingency; product recall [LO13-5, 13-6]
Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit
flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain,
estimated to cost the company $2.0 million. The fiscal year ends on December 31.
Required:
1. Should this loss contingency be accrued, only disclosed, or neither?
2. What loss, if any, should Sound Audio report in its 2021 income statement?
3. What liability, if any, should Sound Audio report in its 2021 balance sheet?
4. Prepare any journal entry needed.
Complete this question by entering your answers in the tabs below.
Req 1 to 3
Req 4
Prepare any journal entry needed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account
field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
View transaction list
Journal entry worksheet
<
1
Record the liability on product recall.
Note: Enter debits before credits.
Transaction
1
Record entry
General Journal
Clear entry
< Req 1 to 3
Debit
Credit
View general journal
Req 4 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F05c29da8-5e07-472c-a295-a56e55cdcfad%2F4878eff2-84ed-4e1f-9847-33a669872ec2%2Fci4duvq_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 13-17 (Algo) Contingency; product recall [LO13-5, 13-6]
Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2021 of a circuit
flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain,
estimated to cost the company $2.0 million. The fiscal year ends on December 31.
Required:
1. Should this loss contingency be accrued, only disclosed, or neither?
2. What loss, if any, should Sound Audio report in its 2021 income statement?
3. What liability, if any, should Sound Audio report in its 2021 balance sheet?
4. Prepare any journal entry needed.
Complete this question by entering your answers in the tabs below.
Req 1 to 3
Req 4
Prepare any journal entry needed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account
field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
View transaction list
Journal entry worksheet
<
1
Record the liability on product recall.
Note: Enter debits before credits.
Transaction
1
Record entry
General Journal
Clear entry
< Req 1 to 3
Debit
Credit
View general journal
Req 4 >
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