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: $ 298,000 $ 34,800 202,000 236,800 70, 256 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 (30%) Net income 166,544 131,456 63,800 67,656 20,297 $ 47,359 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 Unit Total Quantity 3,230 1,680 7,280 3,380 $ 4.80 4.30 4.30 4.80 $ 15,504 7,224 31,304 16,224 $ 70,256 Net Realizable Value Per Unit $ 3.80 5.80 2.30 6.80 Required: 1. Prepare the income statement to reflect lower of cost or net realizable value valuation of the current year ending inventory. Apply lower of cost or NRV on an item-by-item basis. (Round your answers to nearest dollar amount.) JAFFA COMPANY Income Statement (Corrected) For the Year Ended December 31, Current Year Sales revenue $ 298,000 Cost of goods sold: Beginning inventory Purchases 34,800 202,000 Goods available for sale 236,800 Cost of goods sold Pretax income 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