Answer:
C) Operating expense of $800,000 and liability of $800,000
Step-by-step explanation:
As based on accrual basis, an expense is the amount recognized and provided in the period to which it relates, if not paid then it is a liability and an expense.
Whereas a contingent liability is the one which is provided only in notes as the probability of its occurrence is estimated to be less than the probability of its non occurrence.
A contingent liability, when is sure to be incurred, and even the amount is known, then it is recorded as and when know, and not delayed.
Here, in the given instance the recall has to be made, and it is 100% sure, also the amount is know that is $800,000 and thus, it shall be provided in operating expense, and in balance sheet as a liability.