Grande Incorporated, a window installation company, is preparing its annual financial statements for the year ended December 31, 2009 and the following information in dollars is available:
Raw Material
FIFO Cost
Replacement Cost
Sales Price
Aluminum
70,000
50,000
79,000
Cedar shake siding
84,000
90,000
81,000
Lowered glass doors
116,000
120,000
150,000
Thermal windows
110,000
150,000
145,000
Total
380,000
410,000
455,000
·Selling Expenses are 15% of Sales.
·Normal Profit Margin is 20% of Sales.
·At December 31, 2009, the balance in Grandes Raw Material inventory account was $380,000 and the Allowance to Reduce Inventory to Market had a credit balance of $50,000.
Required:
(a)Prepare a table with the headings below (and a row for each type of raw material) and determine the proper balance in the Allowance to Reduce Inventory to Market account at December 31, 2009.
Raw Material
FIFO
Cost
Replacement Cost
Ceiling
Floor
Deemed Market Value
Lower of Cost or Market
(20 points)
Raw Material
Fifo Cost
Replacement Cost
Ceiling
Floor
Deemed MV
Lower of Cost or Market
(b)Determine the amount of gain or loss that would be recorded due to the change in the Allowance to Reduce Inventory to Market account.