CP7-2 (Algo) Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market/Net Realizable Value [LO 7.4] Smart Company prepared its annual financiai statements dated December 31. The company reported its inventory using the FIFO inventory costing method and failed to evaluate its net resizable value at December 3t. The preliminary income. stmement follows Assume you have been aiked to restate the fensial statemerts to incorporse LCM NRY tou have develioced the following data reiating to the ending invertory. Assume you have been asked to restrte the financiat statements to incorporate LCMNRV. You have developed the following dota relating to the ending inventory T1P. Inventory write-downs do not affect the cost of goods avaiable for sale instesd, the effect of the write-down w 10 reduce ending ifventory, which increases Cost of Goods Sold and then attects other amourts in the income statement. Required: 1. Restate the income statement to refiect LCMNRV valuotion of the ending inventory. Aoply LCMNNV on an wemby-tem basis 2. Compare and explain the LCMNRV effect on each amount in the inconse stasment that was changed in requerenertt Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis