Garcia Home Improvement Company installs replacement siding,windows, and louvred glass doors for single-family homes andcondominium complexes in northern New Jersey and southern New York.The company is in the process of preparing its annual financialstatements for the fiscal year ended May 31, 2019, and Jim Alcide,a controller for Garcia, has gathered the following data concerninginventory.

At May 31, 2019, the balance in Garcia’s Raw Material Inventoryaccount was $268,000

and the Allowance to Reduce Inventory to NRV had a creditbalance of $10,700

Alcide summarized the relevant inventory cost and market data onMay 31, 2019, in the schedule below.

Alcide assigned Patricia Devereaux, an intern from a localcollege, the task of calculating the amount that should appear onGarcia’s May 31, 2019, financial statements for inventory under thelower-of-cost-or-NRV rule as applied to each item in inventory.Devereaux expressed concern over departing from the costprinciple.

		Cost	Replacement Cost	Sales Price	Net Realizable Value	Normal Profit
Aluminumsiding		$34,000	$32,500	$34,000	$26,000	$2,100
Cedar shakesiding		89,000	79,400	94,000	83,800	7,400
Louveredglass doors		105,000	124,000	186,400	160,300	18,500
Thermalwindows		40,000	26,000	54,800	38,000	5,400
Total		$268,000	$261,900	$369,200	$308,100	$33,400

Instructions:
(1)Determine the proper balance in the Allowance to Reduce Inventoryto NRV at May 31, 2019.
Calculations ofProper Balance on the Allowance to Reduce Inventory to NRV At May31, 2019.
		COST	NRV	LCNRV
	Aluminum siding
	Cedar shake siding
	Louvred glass doors
	Thermal windows
	Totals
	Inventory cost
	LCNRV valuation
	Allowance on May 31, 2019
(2) Forthe fiscal year ended May 31, 2019, determine the amount of thegain or loss that would be recorded due to the change in theAllowance to Reduce Inventory to NRV. Record the journalentry.
	Balance prior to adjustment
	Less: Required balance
	Loss to be recorded
	journal entry