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.

At May 31, 2017, the balance in Garcias Raw Material Inventory account was

$394,000

and the Allowance to Reduce Inventory to NRV had a credit balance of

$12,700

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 Garcias May 31, 2017, financial statements for inventory under the lower-of-cost-or-NRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the cost principle.

		Cost	Replacement Cost	Sales Price	Net Realizable Value	Normal Profit
Aluminum siding		$64,000	$62,500	$64,000	$56,000	$5,100
Cedar shake siding		89,000	79,400	94,000	84,800	7,400
Louvered glass doors		101,000	124,000	186,400	168,300	18,500
Thermal windows		140,000	126,000	154,800	138,000	15,400
Total		$394,000	$391,900	$499,200	$447,100	$46,400 Instructions: (1) Determine the proper balance in the Allowance to Reduce Inventory to NRV at May 31, 2017. Calculations of Proper Balance on the Allowance to Reduce Inventory to NRV At May 31, 2017. (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 Reduce Inventory to NRV. Reord the journal entry.