In an audit of the Cotula Corporation as at December 31, 19X4, you have learned that the following situation exists. No entry in respect thereto has been made in the accounting records. What entry would you recommend, and what disclosure, if any, would you make of this situation in the financial statements for December 31, 19X4? During the year 19X4, Cotula was named as a defendant in a suit for damages by the Bixby Company for breach of contract. An adverse decision to Cotula was rendered and Bixby was awarded $40,000 damages. At the time of the audit, the case was under appeal to a higher court.