1 2 Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes in northern New Jersey and southern New York. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2017, and Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. 4 6 At May 31,2017, the balance in Garcia's Raw Material Inventory account was 7 and the Allowance to Reduce Inventory to NRV had a credit balance of 8 Alcide summarized the relevant inventory cost and market data at May 31, 2017, in the schedule below. 9 Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Garcia's May 31 10 2017, financial statements for inventory under the lower-of-cost-or-NRV rule as applied to each item in inventory. Devereaux expressed concern S394,000 S12,700 from the cost principle. 12 Replacement Cost Net Realizable Cost Sales Price Value Nomal Profit 14 Aluminum sidin 15 Cedar shake sidin 16 Louvered glass doors 17 Thermal windows 18 Total 564,000 89,000 101,000 140,000 S394,000 500 79,400 124,000 126,000 S391,900 564,000 94,000 186,400 154,800 S499,200 S56,000 84,800 168,300 138,000 S447,100 S5,100 7,400 18.500 15.400 S46,400 20 Instructions: 21 1) Determine the proper balance in the Allowance to Reduce Inventory to NRV at May 31, 2017 23 Calculations of Proper Balance on the Allowance to Reduce Inventory to NRV At May 31, 2017 24 25 26 Aluminum sidin 27 Cedar shake sidin 28 Louvered glass doors 29 Thermal windows 30 Totals LCNRV Inventory cost LCNRV valuation 34 Allowance at May 31, 2017 3(2) 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 the Allowance to 37 Reduce Inventory to NRV. Reord the journal e 38 39 Balance prior to adjustment Less: Required balance Loss to be recorded journal entry 42 43 45 47