Ivanhoe Corporation, a manufacturer of household paints, is preparing annual financial statements as of December 31, 2025. Because
of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Ivanhoe recall all
cans of this paint sold in the last six months. The management of Ivanhoe estimates that this recall could cost the company $804000.
What accounting recognition, if any, should be accorded this situation?
O Operating expense of $804000 and liability of $804000
Appropriation of retained earnings of $804000
O No recognition
O Note disclosure only
