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 $287,000 Cost of sales Beginning inventory $31,700 Purchases 191,000 Cost of goods available for sale 222,700 Ending inventory (FIFO cost) 58,176 Cost of sales 164,524 122,476 62,700 59,776 23,910 $ 35,866 Gross profit Operating expenses Pretax earnings Income tax expense (40%) Net earnings 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 Total Value A 3,120 $3.70 $11,544 $4.70 B 1,570 5.70 8,949 4.20 c 7,170 2.20 15,774 4.20 D 3,270 6.70 21,909 $58,176 4.70