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PA7-2 (Algo) Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market/Net Realizable Value [LO 7.4) Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory using the LIFO inventory costing method but did not compare the cost of its ending inventory to its market value (replacement cost). The preliminary income statement follows: Sales Revenue $ 122,000 Cost of Goods Sold Beginning Inventory $ 10,500 Purchases 82,000 Goods Available for Sale 92,500 Ending Inventory 20,500 Cost of Goods Sold 72,000 Gross Profit 50,000 Operating Expenses 26,500 Income from Operations 23, See Income Tax Expense (304) 2.650 Net Income $ 16,450 Assume that you have been asked to restate the financial statements to incorporate the LCM/NRV rule. You have developed the following data relating to the ending inventory: Item A B Purchase Cost Replacement cost per Quantity Per Unit Total Unit 2,450 $ 2.10 $ 5,145 $ 3.10 700 3.50 2,450 1.10 2,600 1.10 2,860 .55 2,450 4.10 10,845 2.10 $ 20,500 D Complete this question by entering your answers in the tabs below. Required 1 Required 2 OK M Restate the income statement to reflect LCM/NRV valuation of the ending Inventory. Apply LCM/NRV on an item-by-item basis. SPRINGER ANDERSON GYMNASTICS Income Statement (LCM/NRV basis) For the Year Ended December 31 Sales Revenue Cost of Goods Sold Beginning Inventory Purchases Goods Available for Solo Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense Net Income Nes: Required 2 > 2. Compare the LCMNRV erect on eacn amount that was changea in the preminary income statement in requirement 1. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1. (Decreases should be indicated by a minus sign.) LIFO Cost Basis LCM/NRV Basis Amount of Increase (Decrease) Item Changed Ending Inventory Cost of Goods Sold Gross Profit Income from Operations Income Tax Expense Not Income