Consultants notified management of Goo Goo Baby Products that a crib toy poses a

Question

Consultants notified management of Goo Goo Baby Products that a crib toy poses a potential health hazard. Counsel indicated that a product recall is probable and is estimated to cost the company $3.2 million.

How will this affect the company’s income statement and balance sheet this period? (Enter your answers in millions rounded to 1 decimal place (i.e., 1,200,000 should be entered as 1.2).)

How will this affect the company’s income statement and balance sheet this period? (Enter your answers in millions rounded to 1 decimal place (i.e., 1,200,000 should be entered as 1.2).)

Explanation / Answer

Dear Student…Thank you for using chegg…
Company should report 3.2M loss in its income statement and 3.2m liability in its balance sheet…This is because It is both probable and amount can be reasonably estimated. Thus it is loss contigency.
Also a disclosure note is also reuired to be made for the abive scenario.
Entry is
Loss—product recall 3,200,000
Liability—product recall 3,200,000

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