Smart Company prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows:

Assume that you have been asked to restate the financial statements to incorporate LCM. You have developed the following data relating to the ending inventory:

Required:
1. Restate the income statement to reflect LCM valuation of the ending inventory. Apply LCM on an item-by-item basis and show computations.
2. Compare and explain the LCM effect on each amount that was changed in requirement 1.

Sales Revenue Cost of Goods Sold $280,000 $ 30,000 182,000 212,000 44,000 Beginning Inventory Purchases Goods Available for Sale Ending Inventory (FIFO cost) Cost of Goods Sold Gross Profit Operating Expenses Income from Operaticns Income Tax Expense (30%) Net Income 168,000 112,000 61,000 51,000 15.300 $ 35,700 Purchase Cost Item Per Unit Quantity 3,000 1,500 7,000 3,000 Total Market Value per Unit $4 2 $3 $9000 6,000 14,000 15,000