An entity issues shares as consideration for the purchase of inventory. The shares were issued on January 1, 20X4. The inventory is eventually sold on December 31, 20X5. The value of the inventory on January 1, 20X4, was $3 million. This value was unchanged up to the date of sale. The sale proceeds were $5 million. The shares issued have a market value of $3.2 million. Which of the following statements correctly describes the accounting treatment of this share based payment transaction?
(a) Equity is increased by $3 million, inventory is increased by $3 million; the inventory value is expensed on sale on December 31, 20X5.
(b) Equity is increased by $3.2 million, inventory is increased by $3.2 million; the inventory value is expensed on sale on December 31, 20X5.
(c) Equity is increased by $3 million, inventory is increased by $3 million; the inventory value is expensed over the two years to December 31, 20X5.
(d) Equity is increased by $3.2 million, inventory is increased by $3.2 million; the inventory value is expensed over the two years to December 31, 20X5.