Sheridan 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,
2020. Jim Alcide, controller for Sheridan, has gathered the
following data concerning inventory.
At May 31, 2020, the balance in Sheridan’s Raw Materials Inventory
account was $493,680, and Allowance to Reduce Inventory to Market
had a credit balance of $28,380. Alcide summarized the relevant
inventory cost and market data at May 31, 2020, in the schedule
below.
Alcide assigned Patricia Devereaux, an intern from a local college,
the task of calculating the amount that should appear on Sheridan’s
May 31, 2020, 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.
Cost |
Replacement |
Sales Price |
Net Realizable |
Normal Profit |
||||||||||
Aluminum siding | $84,700 | $75,625 | $77,440 | $67,760 | $6,171 | |||||||||
Cedar shake siding | 104,060 | 96,074 | 113,740 | 102,608 | 8,954 | |||||||||
Louvered glass doors | 135,520 | 150,040 | 225,544 | 203,643 | 22,385 | |||||||||
Thermal windows | 169,400 | 152,460 | 187,308 | 169,400 | 18,634 | |||||||||
Total | $493,680 | $474,199 | $604,032 | $543,411 | $56,144 |
(a1) Determine the proper balance in Allowance to
Reduce Inventory to Market at May 31, 2020.
Balance in the Allowance to Reduce Inventory to Market |
$ |
(a2) For the fiscal year ended May 31, 2020,
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) |
$ |
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