2. Compare and explain the LC&NRV effect on each amount that was changed in part 1 (Negative answers should be indicated by a minus sign.) Item Changed Effect Amount of Change $ 298,000 SMART COMPANY Statement of Earnings (LC&NRV Basis) For the Year Ended December 31, 2020 Sales revenue Cost of sales: Beginning inventory $ 32,800 Purchases 202.000 Cost of goods available for sale 234,800 Operating expense 469,600 Ending inventory 68,036 Cost of sales Gross profit Operating expense 166,764 131,236 63,800 67,436 20,231 47.205 Income tax expense Net eamings $ Smart Company prepared its annual financial statements dated December 31, 2020. The company applies the FIFO inventory costing method; however, the company neglected to apply the LC&NRV valuation to the ending inventory. The preliminary 2020 statement of earnings follows: $299,000 Sales revenue Cost of sales Beginning inventory Purchases Cost of goods available for sale Ending inventory (FIFO cost) Cost of sales Gross profit Operating expenses Pretax earnings Income tax expense (304) Net earnings $ 32,800 202.000 234,800 77,316 152,484 140,516 63,800 76,716 23,015 $ 53,701 Assume that you have been asked to restate the 2020 financial statements to incorporate the LC&NRV Inventory valuation rule. You have developed the following data relating to the ending inventory at December 31, 2020: Acquisition Cost Item A B C D Quantity Unit Total 3,230 $4.80 $15.504 1,680 6.80 11, 424 7.280 3.30 24,024 3,380 7.80 26,364 $77,316 Net Realizable Value $5.80 5.30 5.30 5.80