Referring to the situation in P9-2 for Garcia Home Improvement Company, consider the following expanded data at May 31, 2017. Assume Garcia uses LIFO inventory costing.

Instructions
(a) (1) Determine the proper balance in Allowance to Reduce Inventory to Market at May 31, 2017.
(2) For the fiscal year ended May 31, 2017, determine the amount of the gain or loss that would be recorded due to the change in Allowance to Reduce Inventory to Market.
(b) Explain the rationale for the use of the lower-of-cost-or-market rule as it applies to inventories.

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Sales Price S 64,000 94,000 186,400 154,800 $499,200 Replacement Net Realizable Normal Cost S 70,000 86,000 112,000 140,000 $408,000 Cost Value S 56,000 84,800 168,300 140,000 9,100 Profit Aluminum siding Cedar shake siding Louvered glass doors Thermal windows $5,100 7,400 18,500 15,400 $ 62,500 79,400 124,000 126,000 5391,900 Total