Question 1 Culver Home Improvement Company installs replacement siding, windows,

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Question 1 Culver 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 Culver, has gathered the following data concerning inventory At May 31, 2017, the balance in Culver's Raw Materials Inventory account was $469,200, and Allowance to Reduce Inventory to NRV had a credit balance of $27,400. 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 Culver's May 31, 2017, financial statements for inventory under the LCNRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle Aluminum siding Cedar shake siding Louvered glass doors Thermal windows Sales Price $73,600 108,100 214,360 178,020 $469,200 $574,080 Cost $80,500 98,900 128,800 161,000 Net Realizable Value $64,400 97,520 193,545 161,000 $516,465 Total Determine the proper balance in Allowance to Reduce Inventory to NRV at May 31, 2017 Balance in the Allowance to Reduce Inventory to NRV For the fiscal year ended May 31, 2017, determine the amount of the gain or loss that would be recorded (using the loss method) due to the change in Allowance to Reduce Inventory to NRV. (Enter loss using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) The amount of the gain (loss) s

Explanation / Answer

Cost Net realizable value Minimum of cost and net realizable value Allowance required over cost price Aluminium siding 80500 64400 64400 16100 cedar shake siding 98900 97520 97520 1380 louvered glass doors 128800 193545 128800 0 Thermal windows 161000 161000 161000 0 Total 469200 516465 451720 17480 Balance in the allowance to reduce inventory to NRV 17480 Ending inventory cost 469200 Ending inventoryLCM 451720 balance in allowance 17480 NRV credit balance 27400 The amount of gain (27400-17480) 9920

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