Ef 477. Vaughn 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 yearended May 31, 2025. Jim Alcide, controller for Vaughn, has gathered the following data concerning inventory.At May 31, 2025, the balance in Vaughn's Raw Materials Inventory account was $501,840. Alcide summarized the relevant inventory cost and market data at May 31, 2025, in the schedule below.Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Vaughn's May 31, 2025, financial statements for inventory under the lower-of-cost-or-market rule as applied to each item ininventory. Devereaux expressed concern over departing from the historical cost principle. Consider the following expanded data at May 31, 2025. Assume Vaughn uses LIFO inventory costing.Aluminum sidingCedar shake sidingLouvered glass doorsThermal windowsTotalInventory lossCost$$86,100May 31105,780137,760172,200$501,840ReplacementCost$76,87597,662152,520154,980$482,037Sales Price$78,720115,620229,272Date Account Titles and Explanation190,404$614,016(a1) Determine the write-down, if any, to reduce inventory to market at May 31, 2025.Net RealizableValue$68,880104,304207,009172,200$552,393(a2) For the fiscal year ended May 31, 2025, prepare the entry to record the decline in inventory to market, if any, using the loss method. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Donot indent manually. If no entry is required, select "No entry for the account titles and enter O for the amounts.)Normal ProfitDebit$6,2739,10222,75518,942$57,072Credit

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Description: Ef 477. Vaughn 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 yearen

It has been given in the question that lower of cost or market rule has been applied on each of item…

Business

Accounting

(a1) Determine the write-down, if any, to reduce inventory to market at May 31, 2025. Inventory loss $ (a2) For the fiscal year ended May 31, 2025, prepare the entry to record the decline in inventory to market, if any, using the loss method. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry for the account titles and enter O for the amounts.)

(a1) Determine the write-down, if any, to reduce inventory to market at May 31, 2025. Inventory loss $ (a2) For the fiscal year ended May 31, 2025, prepare the entry to record the decline in inventory to market, if any, using the loss method. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry for the account titles and enter O for the amounts.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

Topic Video

Question

Ef 477.

Vaughn 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, 2025. Jim Alcide, controller for Vaughn, has gathered the following data concerning inventory.
At May 31, 2025, the balance in Vaughn's Raw Materials Inventory account was $501,840. Alcide summarized the relevant inventory cost and market data at May 31, 2025, in the schedule below.
Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Vaughn's May 31, 2025, financial statements for inventory under the lower-of-cost-or-market rule as applied to each item in
inventory. Devereaux expressed concern over departing from the historical cost principle. Consider the following expanded data at May 31, 2025. Assume Vaughn uses LIFO inventory costing.
Aluminum siding
Cedar shake siding
Louvered glass doors
Thermal windows
Total
Inventory loss
Cost
$
$86,100
May 31
105,780
137,760
172,200
$501,840
Replacement
Cost
$76,875
97,662
152,520
154,980
$482,037
Sales Price
$78,720
115,620
229,272
Date Account Titles and Explanation
190,404
$614,016
(a1) Determine the write-down, if any, to reduce inventory to market at May 31, 2025.
Net Realizable
Value
$68,880
104,304
207,009
172,200
$552,393
(a2) For the fiscal year ended May 31, 2025, prepare the entry to record the decline in inventory to market, if any, using the loss method. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do
not indent manually. If no entry is required, select "No entry for the account titles and enter O for the amounts.)
Normal Profit
Debit
$6,273
9,102
22,755
18,942
$57,072
Credit

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