Question

Sweet 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 Sweet, has gathered the following data concerning inventory.

At May 31, 2020, the balance in Sweet’s Raw Materials Inventory account was $485,520, and Allowance to Reduce Inventory to NRV had a credit balance of $27,670. 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 Sweet’s May 31, 2020, financial statements for inventory under the LCNRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the historical cost principle.

		Cost		Sales Price		Net Realizable Value
Aluminum siding		$83,300		$76,160		$66,640
Cedar shake siding		102,340		111,860		100,912
Louvered glass doors		133,280		221,816		200,277
Thermal windows		166,600		184,212		166,600
Total		$485,520		$594,048		$534,429

(a)

Determine the proper balance in Allowance to Reduce Inventory to NRV at May 31, 2020.

Balance in the Allowance to Reduce Inventory to NRV

$

Answer 1

Answer	Sweet Home Improvement Company:-
	Particulars	Cost	NRV	LCNRV
	Aluminum siding	83,300	66,640	66,640
	Cedar shake siding	1,02,340	1,00,912	1,00,912
	Louvered glass doors	1,33,280	2,00,277	1,33,280
	Thermal windows	1,66,600	1,66,600	1,66,600
	Total	4,85,520	5,34,429	4,67,432

	Inventory cost	4,85,520
	LCNRV valuation	4,67,432
	Allowance at May 31,2020	18,088