Question

Sunland 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 Sunland, has gathered the following data concerning inventory.

At May 31, 2020, the balance in Sunland’s Raw Materials Inventory account was $505,920, and Allowance to Reduce Inventory to NRV had a credit balance of $27,630. 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 Sunland’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		$86,800		$79,360		$69,440
Cedar shake siding		106,640		116,560		105,152
Louvered glass doors		138,880		231,136		208,692
Thermal windows		173,600		191,952		173,600
Total		$505,920		$619,008		$556,884

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

Therefore balance as on May 31, 2020 in Allowance to Reduce Inventory to NRV account will be $ 46,478 ($ 27,630 + $18,848)

Also all the details given in question have been complied with.