PA7-2 Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market [LO 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: $154,000 Sales Revenue Cost of Goods Sold Beginning Inventory Purchases S 18,500 98,000 Goods Available for Sale Ending Inventory (FIFO cost) 116,500 31,930 Cost of Goods Sold 84,570 Gross Profit Operating Expenses 69,430 34,500 Income from Operations 34,930 13,972 Income Tax Expense (40%) Net Income S 20,958 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: Market Value Purchase Cost Item Quantity Per UnitTotal per Unit A 1,850$3.70 6,845 3,200 11,340 10,545 $4.70 800 4,200 1,850 4.00 2.70 5.70 2.70 1.35 3.70 $31,930