Accounting clarifications

##Why is the answer D? I was between A and D…

For Fords, how should they treat the expected costs of brake recalls in the current accounting period?

a)Record the expected loss of sales revenue for new cars.
b)Reduce cash for the estimated costs to repair the cars affected by the recall.
c)Do not need to give financial recognition to the recall.
d)Establish a liability for estimated costs to repair cars affected by the recall.***

###Is the following the current AND adjusted journal entries correct?

b. On December 1, 2013 signed a note with a bank and borrowed $30,000. The annual interest rate is 10% and both principal and interest are payable at maturity on December 31, 2013.

12/1/2013
Cash 30,000
Notes payable 30,000

12/31/2013
Interest expense (E) 250
Interest payable 250
($30,000 x 10% x 1/24 months)

Accounts are records of numbers - sales are sales, regardless of what may or may not happen to the vehicle later on.

A brake repair is a brake repair, a separate accounting transaction regardless of whether it's normal servicing, warranty work or a recall.

As a recall, it's a loss rather than a sale so liability is appropriate.

(Reduced sales due to a publicly announced recall may affect sales projections, but they are hypothetical figures and not accounting facts).

b) is nonsensical or lacking information - it was borrowed 1st December and matured 31st December the same year?

The 1/24th implies two years, but in that case the 10% annual interest is either 20% simple or 21% compound - and payable on maturity means the whole of both capitral and interest in a single payment, so no fractions / monthly amounts involved?

If the interest is monthly or the dates are accurate, then it's the 10% annual divided over 12 months. 1/12 of 10% for one month.