fx 12 3 4 5 A B D E G Garcia Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes in northern New Jersey and southern New York. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2022, and Jim Alcide, controller for Garcia, has gathered the following data concerning inventory. 6 At May 31, 2022, the balance in Garcia's Raw Material Inventory account was 7 and the Allowance to Reduce Inventory to NRV had a credit balance of $272,500 $10,750 8 Alcide summarized the relevant inventory cost and market data at May 31, 2022, in the schedule below. 9 10 11 Alcide assigned Patricia Devereaux, an intern from a local college, the task of calculating the amount that should appear on Garcia's May 31, 2022, financial statements for inventory under the lower-of-cost-or-NRV rule as applied to each item in inventory. Devereaux expressed concern over departing from the cost principle. 12 Cost 13 Replacement Sales Price Cost Net Normal Profit 14 Aluminum siding $35,200 $32,500 $34,000 Realizable Value $24,000 $2,100 15 Cedar shake siding 87,500 79,400 94,000 83,800 7,400 112,700 124,000 186,400 16 Louvered glass doors 160,300 18,500 37,100 26,000 17 Thermal windows 54,800 38,000 5,400 18 Total 19 20 21 LCNRV valuation Allowance at May 31, 2022 24 25 26 34 35 222222222222232233 cost net value LCNRV Aluminum siding $35,200 $24,000 27 Cedar shake siding 87,500 83,800 28 Louvered glass doors 112,700 160,300 29 Thermal windows 37.100 38,000 30 Totals $272,500 $306,100 31 Inventory cost $272,500 $272,500 $261,900 $369,200 $306,100 $33,400 Instructions: (1) Determine the proper balance in the Allowance to Reduce Inventory to NRV at May 31, 2022. Calculations of Proper Balance on the Allowance to Reduce Inventory to NRV At May 31, 2022 36 (2) For the fiscal year ended May 31, 2022, determine the amount of the gain or loss that would be recorded due to the change in the Allowance to Reduce Inventory to NRV. Reord the journal entry. 37 38 39 40 41 42 43 44 45 46 47 48 journal entry