P6-6 (Algo) Reporting the Statement of Earnings and Cash Flow Effects of Lower of Cost and Net Reallzable Value LO6-5 Smart Company prepored its annusl financial statements dated December 31 of the current year. The compony opplies the FIFO inventory costing method; however, the company neglected to apply the LC\&NRV valustion to the ending inventory. The preliminary statement of eornings for the current yeor follows: Assume that you have been ssked to restate the financial statements to incorporste the LC\&NRV inventory voluation rule. You hove developed the following data relating to the ending inventory at December 31 of the current year: Required: 1. Restate the stotement of earnings to reflect the volustion of the ending inventory on December 31 of the current yeor, ot the LC\&NRV. Apply the LC\&NRV rule on an item-by-item bosis. 2. Compore ond explain the LC\&NRV effect on esch omount thot wos changed in port 1. (Negative answers should be Indicated by minus sign.) 3. This port of the question is not port of your Connect ossignment. 4.0. What effect (increase, decreose, no effect) did the LC\&NRV rule hove on the cosh flow for the current yeor? Increosed No effect Decreosed 4.b. What will be the long-term effect on cosh flow (incresse, decresse, no effect)? No effect Decreosed Increosed