Answer:

We know that a ball is not lost when declared lost. The Definition of “Lost Ball” states that a ball is lost when “the player has put another ball in play under penalty of stroke and distance”. We know that was Dr. Smith’s intent and we know the ball was in play when dropped, Rule 20-4. Also, see Decision 27-1/2.

Note that in the Definition of “Lost Ball”, revised for 2008, there are five ways for a ball to become lost.