Problem 9-2 (Part Level Submission) Sandhill Home Improvement Company installs r

Question

Problem 9-2 (Part Level Submission) Sandhill 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 Sandhill, has gathered the following data concerning inventory At May 31, 2017, the balance in Sandhill's Raw Materials Inventory account was $428,400, and Allowance to Reduce Inventory to NRV had a credit balance of $27,450. 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 Sandhill's May 31, 2017, financial statements for inventory under the LCNRV rule as applied to each item in inventory. Devereaux expressed concem over departing from the historical cost principle. Aluminum siding Cedar shake siding Louvered glass doors Thermal windowS Cost $73,500 90,300 117,600 147,000 $428,400 Sales Price $67,200 98,700 195,720 162,540 $524,160 Net Realizable Value $58,800 89,040 176,715 147,000 $471,55S Total (a) Determine the proper balance in Allowance to Reduce Inventory to NRV at May 31, 2017 Balance in the Allowance to Reduce Inventory to NRV

Explanation / Answer

Cost Sales price NRV VALUATION (lower of cost or NRV) Aluminium Siding 73500 67200 58800 58800 Cedar Shake siding 90300 98700 89040 89040 Louvered Glass doors 117600 195720 176715 117600 Tthermal windows 147000 162540 147000 147000 TOTAL 428400 412440 Total cost 428400 Less: Total valuation -412440 Balance required in Alowance to reduce Inventory to NRV 15960 Balance in Allowance to reduce Inventory is $15,960

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