In 2006, Lucas Manufacturing Signed a Contract with a Supplier

Multiple Choice

In 2006, Lucas Manufacturing signed a contract with a supplier to purchase raw materials in 2007 for $700,000.Before the December 31, 2006 balance sheet date, the market price for these materials dropped to $510,000.The journal entry to record this situation at December 31, 2006 will result in a credit that should be reported

A) as a valuation account to Inventory on the balance sheet.
B) as a current liability.
C) as an appropriation of retained earnings.
D) on the income statement.