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, 2025. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2025, the balance in Garcia's Raw Materials Inventory account was $408,000. 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 Garcia'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 Garcia uses LIFO inventory costing. Aluminum siding Cedar shake siding Louvered glass doors Thermal windows Total Cost Inventory loss $70,000 86,000 112,000 140,000 $408,000 Replacement Cost $62,500 79,400 124,000 126,000 $391,900 Sales Price $64,000 94,000 186,400 154,800 $499,200 Net Realizable Value $56,000 84,800 168,300 140,000 $449,100 (a1) Determine the write-down, if any, to reduce inventory to market at May 31, 2025. Normal Profit $5,100 7,400 18,500 15,400 $46,400 (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)
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, 2025. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. At May 31, 2025, the balance in Garcia's Raw Materials Inventory account was $408,000. 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 Garcia'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 Garcia uses LIFO inventory costing. Aluminum siding Cedar shake siding Louvered glass doors Thermal windows Total Cost Inventory loss $70,000 86,000 112,000 140,000 $408,000 Replacement Cost $62,500 79,400 124,000 126,000 $391,900 Sales Price $64,000 94,000 186,400 154,800 $499,200 Net Realizable Value $56,000 84,800 168,300 140,000 $449,100 (a1) Determine the write-down, if any, to reduce inventory to market at May 31, 2025. Normal Profit $5,100 7,400 18,500 15,400 $46,400 (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)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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,
2025. Jim Alcide, controller for Garcia, has gathered the following data concerning inventory.
At May 31, 2025, the balance in Garcia's Raw Materials Inventory account was $408,000. 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 Garcia'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 Garcia uses LIFO inventory costing.
F5
Aluminum siding
Cedar shake siding
Louvered glass doors
Thermal windows
5
Total
Inventory loss $
F6
%
BA
T
B
8
Cost
6
$70,000
Y
86,000
H
112,000
140.000
$408,000
Date Account Titles and Explanation
C5
N XE B
05
Replacement
Cost
$62,500
N
&
79,400
124,000
7
126,000
(a1) Determine the write-down, if any, to reduce inventory to market at May 31, 2025.
$391,900
B
U
(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)
J
Sales Price
F9
$64,000
*
8
94,000
186,400
154,800
$499,200
DELL
I
K
Net Realizable
Value
F10
$56,000
84,800
(
9
168,300
140,000
$449,100
Debit
0
F11
O
Normal Profit
L
$5,100
7,400
18,500
15,400
$46,400
F12
P
Credit
A
PrtScr
{
+
Insert
**
A
Delete
Backspace
1
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