A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if:

Multiple Choice

The likelihood of a loss is remote.

The incurrence of a loss is reasonably pssible.

The incurrence of a loss is more likely than not.

The likelihood of a loss is probable.

Paul Company issues a product recall due to an apparently preexisting and material defect discovered after the end of its fiscal year. Financial statements have not yet been issued. The action required of Paul Company for this reasonably estimable contingency for the year just ended is:

Multiple Choice

To disclose it in a note to the financial statements.

To accrue a long$-$term liability.

To accrue the liability and explain it in a note to the financial statements.

$$ To do nothing relative to the contingency.