Ruby Slippers, Inc. is involved in litigation regarding toxic glitter on shoes it sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a $20\%$ chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $$800,000.$

As a partner for Dorothy, Toto, & Co$.($auditors for Ruby Slippers, Inc.$)$ prepare a brief explanation to management outlining the proper accounting for this contingency in Ruby's December $31,2023$ financial statements.