nment has clearly indicated its intention of having the company recall all cans of this paint sold in the last three months. The management estimates that this recall would cost P800,000. What accounting recognition, if any, should be accorded this situation? Statement 1: Recognize expense of P800,000 and liability of P5,800,000. Statement 2: Disclosed P800,000 as contingent liability in the notes to financial statement. Group of answer choices Only statement 2 is correct Only statement
nment has clearly indicated its intention of having the company recall all cans of this paint sold in the last three months. The management estimates that this recall would cost P800,000. What accounting recognition, if any, should be accorded this situation? Statement 1: Recognize expense of P800,000 and liability of P5,800,000. Statement 2: Disclosed P800,000 as contingent liability in the notes to financial statement. Group of answer choices Only statement 2 is correct Only statement
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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6
Mama Mo Na Tita Ko Corporation, a manufacturer of cleaning products, is preparing annual financial statements at December 31, 2022. Because of a recently proven health hazard in one of its cleaning products, the government has clearly indicated its intention of having the company recall all cans of this paint sold in the last three months. The management estimates that this recall would cost P800,000. What accounting recognition, if any, should be accorded this situation?
Statement 1: Recognize expense of P800,000 and liability of P5,800,000.
Statement 2: Disclosed P800,000 as
Group of answer choices
Only statement 2 is correct
Only statement 1 is correct
Both statements are correct
Both statements are incorrect
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