Problem 9-2 Garcia Home Improvement Company installs replacement siding, windows

Question

Problem 9-2 Garcia 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, 2017. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2017, the balance in Garcia's Raw Materials Inventory account was $408,000, and Allowance to Reduce Inventory to NRV had a credit balance of $27,500. 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 Garcia's May 31, 2017, financial statements for inventory under the LCNRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle. Sales Price Net Realizable Value Cost $56,000 84,800 168,300 140,000 $449,100 70,000 86,000 $64,000 94,000 Louvered glass doors 112,000 186,400 140,000 154,800 $408,000 $499,200 Aluminum siding Cedar shake siding Thermal windows Total

Explanation / Answer

Cost NRV LCNRV

Aluminium siding 70000 56000 56000

Cedar shake siding 86000 84800 84800

Louvered glass doors 112000 168300 112000

Thermal windows 140000 140000 140000

TOTAL 408000 449100 392800

INVENTORY COST=408000

LCM VALUATION = 392800

Allowance at may 2017=$ 15200 (408000-392800)

The balance in allowance to reduce inventory at NRV at may 2017 should be $15200.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.