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What accounting recognition should be accorded

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Reference no: EM132619868

Question 1: Crane Company, 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 Crane recall all cans of this paint sold in the last six months. The management of Crane estimates that this recall would cost $790000. What accounting recognition, if any, should be accorded this situation?

Appropriation of retained earnings of $790000

No recognition

Note disclosure only

Operating expense of $790000 and liability of $790000

Reference no: EM132619868

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