P7-6 (Algo) Evaluating the Income Statement and Cash Flow Effects of Lower of Cost or Net Realizable Value LO7-4 [The following information applies to the questions displayed below.] 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 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 (35%) Net income $290,000 $ 34,000 194,000 228,000 63,300 164,700 125,300 63,000 62,300 21,805 $ 40,495 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: