PA7-2 Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market [LO 7-4] Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows: $134,000 Sales Revenue Cost of Goods Sold $13,500 88,000 Beginning Inventory Goods Available for Sale Ending Inventory (FIFO cost) 101,500 23,800 Cost of Goods Sold 77,700 Gross Profit Operating Expenses 56,300 29,500 Income from Operations 26,800 8,040 Income Tax Expense (30%) Net Income S 18,760 Assume that you have been asked to restate the financial statements to incorporate LCM. You have developed the following data relating to the ending inventory: Purchase Cost ltem Quantity Per Unit Total Market Value per Unit $2.70 5,805 $3.7 2,150 700 3,200 2,150 3.50 1.70 4.70 2,450 5,440 10,105 1.70 0.85 2.70 D $23,800