Paul Company issues a product recall due to an apparently pre-existing 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:
A. To disclose it in a footnote.
B. To accrue a long-term liability.
C. To accrue the liability and explain it in a footnote.
D. To do nothing relative to the contingency.
Answer: C
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