PA7-2 (Static) 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 usin 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 $ 140,000 cost of Goods Sold Beginning Inventory $ 15,000 Purchase 91,000 Goods Available for sale 106,000 Ending Inventory 22,000 Coat of Goods Sold 84,000 Gross Profit 56,000 Operating Expenses 31.000 Income from Operations 25,000 Income Tax Expense (301) 7.500 Net Income $ 17,500 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 Contreplacement Per Cost per Quantity Unit Total Unit 1,500 $ 4,500 $4 750 3.000 2 3,500 7.000 1 1,500 7500 $ 22,000 Item B 4 2 5 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 Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis. SPRINGER ANDERSON GYMNASTICS Income Statement (LCM/NRV basis) For the Year Ended December 31 Sales Revenue Cost of Goods Sold Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense Net Income 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.). LIFO Cost LCM/NRV Basis Basis Amount of Increase (Decrease) Item Changed Ending Inventory Cost of Goods Sold Gross Profit Income from Operations Income Tax Expense Net Income