In 2020, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2021 for $700,000. Before the December 31, 2020 balance sheet date, the market price for these materials dropped to $510,000. The journal entry to record this situation at December 31, 2020 will result in a credit that should be reported

as a current liability.

on the income statement.

as a valuation account to Inventory on the balance sheet.

as an appropriation of retained earnings.