Sheridan Company has a loss contingency. The company's legal council's opinion is that the contingency is probable and that they

estimate that the amount of the loss will be $$534000.$ What is the proper accounting treatment for this contingency?

Only the amount of $$534000$ should be disclosed in the notes to the financial statements.

There is not enough information given to determine the accounting treatment.

$$534000$ should be accrued as a liability.

The amount is neither accrued nor disclosed.