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.
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Raw Material
|
FIFO
Cost
|
Replacement Cost
|
Ceiling
|
Floor
|
Deemed Market Value
|
Lower of Cost or Market
|
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Raw Material
|
Fifo Cost
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Replacement Cost
|
Ceiling
|
Floor
|
Deemed MV
|
Lower of Cost or Market
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(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.