Sheffield 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 Sheffield, has gathered the following data concerning inventory. At May 31, 2020, the balance in Sheffields Raw Materials Inventory account was $444,720, and Allowance to Reduce Inventory to Market had a credit balance of $27,250. 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 Sheffields 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.

(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)

?

Aluminum siding Cedar shake siding Louvered glass doors Thermal windows Total Cost $76,300 93,740 122,080 152,600 $444,720 Replacement Cost $68,125 86,546 135,160 137,340 $427,171 Sales Price $69,760 102,460 203,176 168,732 $544,128 Net Realizable Value $61,040 92,432 183,447 152,600 $489,519 Normal Profit $5,559 8,066 20,165 16,786 $50,576