Suppose that a Home Depot has $$2,000,000$ worth of lumber in inventory. Lumber prices drop and based on the current price of lumber futures on the CME, the inventory is now worth $$1,800,000.$

Which of the following will occur?

A$.$ This decline in inventory fair value is recognized immediately on the statement of cash flows but not on the income statement or balance sheet until a transaction occurs.

B$.$ This decline in inventory fair value is recognized immediately on the income statement but not on the balance sheet until a transaction occurs.

C$.$ This decline in inventory fair value is recognized immediately on the balance sheet but not on the income statement until a transaction occurs..

D$.$ This decline in inventory fair value is recognized immediately on both the balance sheet and the income statement.