Exercise $13-17($Static$)$ Contingency; product recall; financial statement effects $[$LO$13-5,13-6]$

Sound Audlo manufactures and sells audio equipment for automobiles. Engineers notified management in December $2024$ of a circult flaw in an amplifier, that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain, estimated to cost the company $$2$ million. The fiscal year ends on December $31.$

Required:

Should this loss contingency be accrued, only disclosed, or neither?

What loss, if any, should Sound Audio report in its $2024$ income statement?

What liability, If any, should Sound Audio report in its $2024$ balance sheet?

Prepare any journal entry needed.

Complete this question by entering your answers in the tabs below.

Should this loss contingency be accrued, only disclosed, or nelther?

What loss, If any, should Sound Audio report in its $2024$ income statement?

What llability, If any, should Sound Audio report in its $2024$ balance sheet?

Note: Enter your answers in millions $($i$.$e$.,10,000,000$ should be entered as $10).$

Show less $A$

$\backslash$table$[[1.$ Loss contingency,$],[2.$ Loss,,million$],[3.$ Liability,,million$]]$

Req $1$ to $3$

Req $4$

Prepare any journal entry needed.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account fleld. Enter your answers in millions $($i$.$e$.,10,000,000$ should be entered as $10).$

Journal entry worksheet

$1$

Record the liability on product recall.

Note: Enter debits before credits.

$\backslash$table$[[$Event$,$General Journal,Debit,Credit$],[1,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]$