Revenue recognised

Hello tutor, I have been trying on this question, my answer is A, but the solution is C. I know my answer is not correct, but I could not understand the solution. The liability should be recorded at 420,000, but why HTI sold already the goods but the inventory is still in SOFP when it should be recorded as cost of sales. Can you please enlight me?

Thank you!

“On December 31, X1, HTI engaged in a transaction to transfer the legal title of inventories that required time to mature. At that time, the inventories had a cost of $450,000. They were sold to a financial institution for $420,000, with an option for HTI to repurchase them on December 31, X3, for $463,050. By that date, the inventories were expected to have a market value of approximately $540,000, and it was anticipated that HTI would exercise the repurchase option.

How should the above transaction be accounted for in HTI’s financial statements for the
year ended 31 December X1?
A The inventory cost of $4-50,000 should be recognised in cost of sales and revenue of
$4-20,000 should be recognised.
B The inventories should be recorded in the statement of financial position at $4-20,000
and the $4-20,000 received should be reported as a liability. An inventory write-down of
$30,000 should be reported in profit or loss.
C The inventories should be recorded in the statement of financial position at $4-50,000
and the $4-20,000 received should be reported as a liability. There is no profit or loss
effect.
D The inventories should be recorded in the statement of financial position at $4-50,000
and the $4-20,000 received should be reported as a liability. Interest expense of
$4-3,050 using the effective interest method should be reported in profit or loss”