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Product recallTripez Corporation, a manufacturer of household paints, is
preparing annual financial statements at December 31, 2007. Because of a
recently proven health hazard in one of its paints, the government has clearly
indicated its intention of having Tripez recall all cans of this paint sold in
the last six months. The management of Tripez estimates that this recall would
cost $600,000. What accounting recognition, if any, should be accorded this
situation? How should it be reported?