Jaffa Company prepared its annual financial statements dated December 31 of the current year. The company applies the FIFO inventory costing method; however, the company neglected to apply lower of cost or net realizable value to the ending inventory. The preliminary current year income statement follows: $296,000 $ 34,600 200,000 234,600 66,794 Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory (FIFO cost) Cost of goods sold Gross profit Operating expenses Pretax income Income tax expense (35%) Net income 167, 806 128, 194 63,600 64,594 22,608 $ 41,986 Assume that you have been asked to restate the current year financial statements to incorporate lower of cost or NRV. You have developed the following data relating to the current year ending inventory: Acquisition Cost Item A B C D Quantity 3,210 1,660 7,260 3,360 Unit $4.60 4.10 4.10 Total $ 14,766 6,806 29,766 15,456 $ 66,794 Net Realizable Value Per Unit $ 3.60 5.60 2.10 6.60 4.60 P7-6 Part 2 2. Compare the lower of cost or net realizable value effect on each amount that was changed on the income statement in requirement (1). (Decreases should be indicated by a minus sign.)(Round your answers to nearest dollar amount.) 2. Compare the lower of cost or net realizable value effect on each amount that was changed on the income statement in requirement (1). (Decreases should be indicated by a minus sign.)(Round your answers to nearest dollar amount.) Item Changed FIFO Cost Basis Lower of Cost or NRV Amount of Change (Decrease) Ending inventory Cost of goods sold Gross profit Pretax income Income tax expense Net income