Lump sum Problem 9-4 Indigo Home Improvement Company installs replacement siding
ID: 2596173 • Letter: L
Question
Lump sum Problem 9-4 Indigo 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. im Alcide, controler for Indigo, has gathered the following data concerming inventory At May 31, 2017, the balance in Indigo's Raw Materials Inventory account was $489,600, and Allowance to Reduce Inventory to Market had a credit balance of $29,890. Aldde summarred the meant inventory cost and market data at May 31, 2017, in the sched-below. Aloide assigned Patrida Devereaux, an intern from a local college, the task of calculating the amount that should appear on Indigo's May 31, 2017, financial princmlin Aourme caus ro invetory s applied to each tem in invetory.Deveresx expressed concem over departing from the historical cost Net Realizable Normal Profi $6,120 CostSales PriceValue Aluminum siding Cedar shake siding Louvered glass doors Thermal windows $84,000 $75,000 103,200 95,280 148,800 168,000 151,200 $470,280 $67,200 101,760 201,960 168,000 538,920 5S 6mo 223,680 185,760 134,400 18,480 $599,040 55,680 Total $489,600 (ai) Determine the proper Balance in the Allowance to Reduce Inventory to Market (a2) For the fiscal year ended May 31, 2017, determine the balance in Allowance to Reduce Inventory to Market at May 31, 2017 y amount of the gain or loss that would be recorded due to the change in Allowance to Inventory to Market 6 8 3Explanation / Answer
Answer (a1)
Note : Generally replacement cost is the market value except in following two conditions
Required Balance in Allowance to Reduce Inventory at May 31, 2017
= Total cost - LCM = $489,600 - $448,080 = $41,520
Answer (a2)
Loss due tochange in Allowance to Reduce Inventory to market for year ended May 31, 2017
= Balance prior to adjustment - Required Balance = $29,890 - $41,520 = ($11,630) loss
Cost ($) Replacement Cost ($) NRV - normal profit (Floor) ($) NRV (Ceiling) ($) Market Value ($) Lower of Cost or Market (LCM)($) Aluminum siding 84,000 75,000 61,080 67,200 67,200 67,200 Cedar shake siding 103,200 95,280 92,880 101,760 95,280 95,280 Louvered glass doors 134,400 148,800 179,760 201,960 179,760 134,400 Thermal windows 168,000 151,200 149,520 168,000 151,200 151,200 Total 489,600 448,080Related Questions
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