P7-6 Reporting the Statement of Earnings and Cash Flow Effects of Lower of Cost and Net Realizable Value LO7-5 Smart Company prepared its annual financial statements dated December 31, 2020. The company applies the FIFO inventory costing method; however, the company neglected to apply the LC&NRV valuation to the ending inventory. The preliminary 2020 statement of earnings follows: Sales revenue Cost of sales Beginning inventory Purchases Cost of goods available for sale Ending inventory (FIFO cost) Cost of sales Gross profit Operating expenses Pretax earnings Income tax expense (40%) Net earnings $285,000 $ 31,500 189,000 220,500 54,800 165,700 119,300 62,500 56,800 22,720 $ 34,080 Assume that you have been asked to restate the 2020 financial statements to incorporate the LC&NRV inventory valuation rule. You have developed the following data relating to the ending inventory at December 31, 2020: Acquisition Cost Net Realizable Item Quantity Unit A 3,100 Total $3.50 $10,850 Value $4.50 B 1,550 5.50 8,525 4.00 7,150 2.00 14,300 4.00 D 3,250 6.50 21,125 4.50 $54,800