Mondetta Clothing prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows:

Net Sales				$	424,000
Cost of Goods Sold
Beginning Inventory	$	46,000
Purchases		275,000
Goods Available for Sale		321,000
Ending Inventory (FIFO cost)		72,960
Cost of Goods Sold					248,040
Gross Profit					175,960
Operating Expenses					94,000
Income from Operations					81,960
Income Tax Expense (30%)					24,588
Net Income				$	57,372

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

				Acquisition Cost						Market Value per Unit
Item	Quantity			Per Unit			Total
A		3,200		$	4.70		$	15,040		$	6.20
B		1,600			6.40			10,240			3.20
C		7,200			3.20			23,040			6.20
D		3,200			7.70			24,640			4.70
							$	72,960

Required 1. Restate the income statement to reflect LCM valuation of the ending inventory. Apply LCM on an item-by-item basis MONDETTA CLOTHING Income Statement (LCM basis) For the Year Ended December 31 Net Sales Cost of Goods Sold Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense Net Income 2. Compare the LCM effect on each amount that was changed in requirement 1. (Decreases should be indicated by a minus sign.) Amount of FIFO Cost LCM Basis Increase Item Changed Basis (Decrease) Ending Inventory Cost of Goods Sold Gross Profit Income from Operations Income Tax Expense Net Income