Solution-Determine the proper balance in the allowance

Determine the proper balance in the allowance

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Reference no: EM13488950

Question

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 Grande's 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

(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.

Reference no: EM13488950

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Determine the proper balance in the allowance

Reference no: EM13488950

Reference no: EM13488950

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