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Required information [The following information applies to the questions displayed below.] Top Sound International designs and sells high-end stereo equipment for auto and home use. management in December 2021 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 $3.9 million. The fiscal year ends on December Engineers notified 31. Required: 1. Should this contingent liability be reported, disclosed in a note only, or neither? This contingent liability should be Required information [The following information applies to the questions displayed below.] Top Sound International designs and sells high-end stereo equipment for auto and home use. management in December 2021 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 $3.9 million. The fiscal year ends on December Engineers notified 31. Required: 1. Should this contingent liability be reported, disclosed in a note only, or neither? This contingent liability should be Required information [The following information applies to the questions displayed below.] Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2021 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 $3.9 million. The fiscal year ends on December 31. 3. What liability, if any, should Top Sound report in its 2021 balance sheet? (Enter your answer in dollars, not in millions (i.e. 5.5 should be entered as 5,500,000).) Liability to be reported

Answer 1

1. It should be reported.

2. $3.9 Million Loss to be reported.

3. $3.9 Million Liability to be reported in balance sheet