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 Type 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 Type 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. Attached are some helpful audio notes: (You may ignore references to chapter 8 & 9 in the recordings as there were based on a prior text book) 8 - Perpetual Periodic FIFO LIFO 9 - Lower of Cost or Market (LCM)