Exercise Algo Analyze and record a contingent liability LO
Top Sound International designs and sells highend stereo equipment for auto and home use. Engineers notified management in
December of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is
probable, estimated to cost the company $ million. The fiscal year ends on December
Required:
Should this contingent liability be reported, disclosed in a note only, or neither?
What loss, if any, should Top Sound report in its income statement?
What liability, if any, should Top Sound report in its balance sheet?
What entry, if any, should be recorded?
Complete this question by entering your answers in the tabs below.
Should this contingent liability be reported, disclosed in a note only, or neither?
