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: 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 : Required: 1. Restate the statement of earnings to reflect the valuation of the ending inventory on December 31, 2020, at the LC\&NRV. Apply the LC\&NRV 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.) 4-a. What effect (increase, decrease, no effect) did the LC\&NRV rule have on the cash flow for 2020? Increased Decreased No effect 4-b. What will be the long-term effect on cash flow (increase, decrease, no effect)? Decreased Increased No effect