P6-6 (Algo) Reporting the Statement of Earnings and Cash Flow Effects of Lower of Cost and Net Realizable Value LO6-5 Smart Comparry prepared its annual financial statements dated December 31 of the current year. The company applies the FIFO imventory costing method; however, the company neglected to apply the LCSNRV valuation to the ending inwertory. The preliminary statement of earnings for the current year follows: Assume that you have been asked to restate the financial statements to incorporate the LCBNRV inventory valuation rule. You have developed the following data relating to the ending inventory at December 31 of the current year: Aequired: 1. Restate the statement of earnings to reflect the valuation of the ending inwentory on December 31 of the current year, at the LCBNFV. Apply the LCBNRV rule on an item-by-item basis. 2. Compare and explain the LC\&NRV effect on each amount that was changed in part 1. (Negative answers should be indicated by a minus sign.) 3. This part of the question is not part of your Connect assignment. 4-a. What effect (increase, decrease, no effect) did the LCBNRV rule have on the cash flow for the current year? Increased Decreased No effect 3. This part of the question is not part of your Connect assignment. 4-a. What effect (increase, decrease, no effect) did the LC\&NRV rule have on the cash flow for the current year? Increased Decreased No effect 4-b. What will be the long-term effect on cash flow (increase, decrease, no effect)? No effect Decreased Increased