Whispering Home Improvement Co

Whispering Home Improvement Company installs replacement siding,windows, and louvered glass doors for single-family homes andcondominium complexes. The company is in the process of preparingits annual financial statements for the fiscal year ended May 31,2020. Jim Alcide, controller for Whispering, has gathered thefollowing data concerning inventory.At May 31, 2020, the balance in Whispering’s Raw MaterialsInventory account was $424,320, and Allowance to Reduce Inventoryto NRV had a credit balance of $27,440. Alcide summarized therelevant inventory cost and market data at May 31, 2020, in theschedule below.Alcide assigned Patricia Devereaux, an intern from a local college,the task of calculating the amount that should appear onWhispering’s May 31, 2020, financial statements for inventory underthe LCNRV rule as applied to each item in inventory. Devereauxexpressed concern over departing from the historical costprinciple.


Sales Price

Net Realizable Value

Aluminum siding $72,800 $66,560 $58,240
Cedar shake siding 89,440 97,760 88,192
Louvered glass doors 116,480 193,856 175,032
Thermal windows 145,600 160,992 145,600
      Total $424,320 $519,168 $467,064


Determine the proper balance in Allowance to Reduce Inventory toNRV at May 31, 2020.

Balance in the Allowance to Reduce Inventory to NRV




Determine the balance in the allowance to reduceinventory to NRV

Particulars Cost NRV LCNRV
Aluminium siding $        72,800 $        58,240 $              58,240
Cedar shake siding $        89,440 $        88,192 $              88,192
Louvered glass doors $      116,480 $      175,032 $            116,480
Thermal windows $      145,600 $      145,600 $            145,600
Total $      424,320 $      467,064 $            408,512
Inventory cost $424320
LCNRV ($408512)
Balance in the allowance to reduce inventory to NRV$15,808

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