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: $294,000 $ 32,400 198,000 230,400 70, 244 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 (30%) Net earnings 160, 156 133,844 63,400 70,444 21,133 $ 49, 311 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 Value $5.40 Item A B D Quantity 3,190 1,640 7,240 3,340 4.90 Unit Total $4.40 $14,036 6.40 10,496 2.90 20,996 7.40 24,716 $70, 244 4.90 5.40 Required: 1. Restate the statement of earnings to reflect the valuation LC&NRV rule on an item-by-item basis. the ending inventory on December 31, 2020, at the LC&NRV. Apply the SMART COMPANY Statement of Earnings (LC&NRV Basis) For the Year Ended December 31, 2020 Cost of sales: 0 0 0 $ 0