PA7-2 (Algo) Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market/Net Realizable Value (LO 7-4] Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory using the LIFO inventory costing method but did not compare the cost of its ending inventory to its market value (replacement cost). The preliminary income statement follows: Sales Revenue Cost of Goods Sold Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Bold Gross Profit Operating Expenses Income from Operations $124,000 $11,000 3,000 94,000 20,700 23,300 50,700 27,000 23.700 Income Tax Expense (354) Net Income 4,295 $15,405 Assume that you have been asked to restate the financial statements to incorporate the LCM/NRV rule. You have developed the following data relating to the ending inventory: Purchase Cost Iten Quantity Per Unit c D 2,400 700 2,700 2,400 $2.20 Total $ 5,280 Replacement Cost per Unit $3.20 3.00 1.20 4:20 2,100 3,240 10,080 1.20 2.20 $ 20,700 Required: 1. Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis 2. Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1. (Decreases should be indicated by a minus sign.) Item Changed LIFO Cost Basis LCM/NRV Basis Amount of increase (Decrease Ending Inventory $ 20.700 Cost of Goods Sold $ 73,300 Gross Profit $ 50,700 Income from Operations $ 23.700 Income Tax Expense $8.295 Net income