Reference no: EM132936314

Problem 1: Gwen owns a company that sells camera lens. Two years ago she began selling the "super lens" which can extend from 20 MM to 1,000 MM. It was a huge hit and she sold over $100,000,000 in lens. Unfortunately, she has just learned that the lens has a flaw which can cause it to catch on fire as it gets older. She is considering what she needs to reflect on her financial statements. Which of the following items require some adjustment to the financial statements (there can be more than one correct answer).

Option 1: Lawsuits from people burned by the lenses that caught on fire. There are at least 17 known cases, several of which were photographed by others as they occurred.
Option 2: A consultants estimate of a $25,000,000 decrease in the brand value of her products
Option 3: A liability for the amounts to be refunded
Option 4: The drop of her company stock price by $50,000,000
Option 5: $150,000 of lenses being held as inventory