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 LCM to the ending inventory. The preliminary current year income statement follows:

Sales revenue				$	286,000
Cost of goods sold
Beginning inventory	$	33,600
Purchases		190,000
Goods available for sale		223,600
Ending inventory (FIFO cost)		56,484
Cost of goods sold					167,116
Gross profit					118,884
Operating expenses					62,600
Pretax income					56,284
Income tax expense (30%)					16,885
Net income				$	39,399

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

		Acquisition Cost				Net Realizable Value
Item	Quantity	Unit		Total		(Market)
A	3,110	$	3.6	$	11,196	$	4.6
B	1,560		5.6		8,736		4.1
C	7,160		2.1		15,036		4.1
D	3,260		6.6		21,516		4.6
				$	56,484

Prepare the income statement to reflect LCM valuation of the current year ending inventory. Apply LCM on an item-by-item basis

Compare the LCM effect on each amount that was changed on the income statement in requirement (1).

JAFFA COMPANY Income Statement (LCM basis) For the Year Ended December 31, Current Year