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: Sales revenue $298,000 Cost of goods sold Beginning inventory $ 34,800 Purchases 202,000 Goods available for sale 236,800 70,256 Ending inventory (FIFO cost) Cost of goods sold Gross profit Operating expenses 166,544 131,456 63,800 Pretax income 67,656 Income tax expense (30%) 20,297 $47,359 Net income 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 Net Realizable Quantity Unit Item Total Value Per Unit 3,230 1,680 7,280 $4.80 $15,504 7,224 31,304 16,224 $3.80 A 4.30 5.80 B 2.30 6.80 4.30 C 4.80 3,380 $ 70,256 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 $ 298,000 Sales revenue Cost of goods sold: 34,800 Beginning inventory Purchases 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.) Amount of FIFO Cost Basis Lower of Cost Item Changed Change (Decrease) or NRV Ending inventory Cost of goods sold Gross profit Pretax income Income tax expense Net income