Part 2: Lower-of-Cost-or-Market Value
Assume Garcia uses LIFO inventory costing, and that the Allowance to Reduce Inventory to
NRV had a credit balance of $27,500 on May 31, 2017 before adjustment.
Cost
Replacement
Cost
Net
Realizable
Normal
Sales Price Value
Profit
Aluminum siding
$ 70,000 $ 62,500 $ 64,000 $ 56,000 $ 5,100
Cedar shake siding
86,000
79,400
94,000 84,800
7,400
Louvered glass doors
112,000
124,000
186,400
168,300
18,500
Thermal windows
140,000
126,000
154,800 140,000 15,400
Total
$408,000 $ 391,900 $ 499,200 $ 449,100 $ 46,400
(a) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2017.
(b) For the fiscal year ended May 31, 2017, determine the amount of the gain or loss that would
be recorded due to the change in Allowance to Reduce Inventory to Market.