(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) %24 %24

FINANCIAL ACCOUNTING
10th Edition
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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,
2020. Jim Alcide, controller for Sandhill, has gathered the following data concerning inventory.
At May 31, 2020, the balance in Sandhill's Raw Materials Inventory account was $510,000, and Allowance to Reduce Inventory to
Market had a credit balance of $29,580. 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 Sandhill'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.
Replacement
Net Realizable
Cost
Cost
Sales Price
Value
Normal Profit
Aluminum siding
$87,500
$78,125
$80,000
$70,000
$6,375
Cedar shake siding
107,500
99,250
117,500
106,000
9,250
Louvered glass doors
140,000
155,000
233,000
210,375
23,125
Thermal windows
175,000
157,500
193,500
175,000
19,250
Total
$510,000
$489,875
$624,000
$561,375
$58,000
(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)
$
Transcribed Image Text: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, 2020. Jim Alcide, controller for Sandhill, has gathered the following data concerning inventory. At May 31, 2020, the balance in Sandhill's Raw Materials Inventory account was $510,000, and Allowance to Reduce Inventory to Market had a credit balance of $29,580. 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 Sandhill'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. Replacement Net Realizable Cost Cost Sales Price Value Normal Profit Aluminum siding $87,500 $78,125 $80,000 $70,000 $6,375 Cedar shake siding 107,500 99,250 117,500 106,000 9,250 Louvered glass doors 140,000 155,000 233,000 210,375 23,125 Thermal windows 175,000 157,500 193,500 175,000 19,250 Total $510,000 $489,875 $624,000 $561,375 $58,000 (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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