Question 1 Cullumber Home Improvement Company installs replacement siding, windo

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Question 1 Cullumber Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2017. Jim Alcide, controller for Cullumber, has gathered the following data concerning inventory At May 31, 2017, the balance in Cullumber's Raw Materials Inventory account was $424,320, and Allowance to Reduce Inventory to Market had a credit balance of $25,440. Alcide summarized the relevant inventory cost and market data at May 31, 2017, in the schedule below Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Cullumber's May 31, 2017, financial statements for inventory at lower-of-cost-or-market as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Assume Garcia uses LIFO inventory costing Net Realizable Value $58,240 88,192 175,032 145,600 $467,064 Normal Profit $5,304 7,696 19,240 16,016 $48,256 Replacement Cost Sales Price $66,560 97,760 193,856 160,992 $519,168 Cost Aluminum siding Cedar shake siding Louvered glass doors Thermal windows 72,800 $65,000 82,576 128,960 131,040 $424,320 $407,576 89,440 116,480 145,600 Total (a1) Determine the proper balance in Allowance to Redue Inventory to Market at May 31, 2017 Balance in the Allowance to Reduce Inventory to Market (a2) For the fiscal year ended May 31, 2017, determine the amount of the gain or loss that would be recorded due to the change in Allowance to Reduce Inventory to Market. The amount of the gain (loss)

Explanation / Answer

Cost Replacement cost Net realizable value Minimum of cost and net realizable value and replacement value Allowance required over cost price Aluminium siding 72800 65000 58240 58240 14560 cedar shake siding 89440 82576 88192 82576 6864 louvered glass doors 116480 128960 175032 116480 0 Thermal windows 145600 131040 145600 131040 14560 Total 424320 407576 467064 388336 35984 Balance in the allowance to reduce inventory to Market 35984 Ending inventory cost 424320 Ending inventoryLCM 388336 balance in allowance 35984 NRV credit balance 25440 The amount of loss (35984-25440) -10544

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