PB7-2 Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market [LO 7-4] Mondetta Clothing 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 Net Sales Cost of Goods Sold $412,000 Beginning Inventory Purchases $ 43,000 269,000 Goods Available for Sale Ending Inventory (FIFO cost) 312,000 53,040 Cost of Goods Sold 258,960 Gross Profit Operating Expenses 153,040 91,000 Income from Operations Income Tax Expense (30%) 62,040 18,612 Net Income $ 43,428