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Splish 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 Splish, has gathered the following data concerning inventory. At May 31, 2020, the balance in Splish's Raw Materials Inventory account was $481,440, and Allowance to Reduce Inventory to Market had a credit balance of $26.190. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the =chedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Splish's 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. Aluminum siding Cedar shake siding Louvered glass doors Cost $82,600 101,480 132,160 Replacement Cost $73,750 93,692 146,320 Sales Price $75.520 110.920 219,952 Net Realizable Value $66,080 100,064 198,594 Normal Profit $6,018 8,732 21,830

Splish 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 Splish, has gathered the following data concerning inventory. At May 31, 2020, the balance in Splish's Raw Materials Inventory account was $481,440, and Allowance to Reduce Inventory to Market had a credit balance of $26.190. Alcide summarized the relevant inventory cost and market data at May 31, 2020, in the =chedule below. Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Splish's 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. Aluminum siding Cedar shake siding Louvered glass doors Cost $82,600 101,480 132,160 Replacement Cost $73,750 93,692 146,320 Sales Price $75.520 110.920 219,952 Net Realizable Value $66,080 100,064 198,594 Normal Profit $6,018 8,732 21,830

FINANCIAL ACCOUNTING
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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Splish 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 Splish, has gathered the following data concerning inventory. At May 31, 2020, the balance in Splish's Raw Materials Inventory account was $481,440, and Allowance to Reduce Inventory to Market had a credit balance of $26,190. 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 Splish's 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. Aluminum siding Cedar shake siding Louvered glass doors Thermal windows Total Replacement Cost $73,750 93,692 146,320 148,680 $481,440 $462,442 Cost $82,600 101,480 132,160 165,200 Sales Price $75,520 110,920 219,952 182,664 The amount of the gain (loss) $ $589,056 Balance in the Allowance to Reduce Inventory to Market $ Net Realizable Value $66,080 100,064 198,594 165,200 $529,938 (a1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2020. Normal Profit $6.018 8,732 21,830 18,172 $54,752 (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.
Transcribed Image Text:Splish 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 Splish, has gathered the following data concerning inventory. At May 31, 2020, the balance in Splish's Raw Materials Inventory account was $481,440, and Allowance to Reduce Inventory to Market had a credit balance of $26,190. 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 Splish's 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. Aluminum siding Cedar shake siding Louvered glass doors Thermal windows Total Replacement Cost $73,750 93,692 146,320 148,680 $481,440 $462,442 Cost $82,600 101,480 132,160 165,200 Sales Price $75,520 110,920 219,952 182,664 The amount of the gain (loss) $ $589,056 Balance in the Allowance to Reduce Inventory to Market $ Net Realizable Value $66,080 100,064 198,594 165,200 $529,938 (a1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2020. Normal Profit $6.018 8,732 21,830 18,172 $54,752 (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.
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