Decision 27-1/3

Decision 27-1/3 Ball Dropped in Area Where Original Ball Lost

A player, unable to find his ball, drops another ball in the area where his original ball was lost and plays that ball. What is the ruling?
In match play, the player loses the hole – Rule 20-7b.
In stroke play, the player incurs the stroke-and-distance penalty prescribed by Rule 27-1 and an additional penalty of two strokes for a breach of that Rule. If the breach was a serious one, he must rectify the error as provided in the second paragraph of Rule 20-7c; otherwise, he is disqualified.