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PA7-2 Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Marke 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: $136,000 Sales Revenue Cost of Goods Sold Beginning Inventory 14,000 89,000 Purchases Goods Available for Sale 103,000 Ending inventory (FIFO cost) 24,150 Cost of Goods Sold 78,850 Gross Profit 57, 150 Operating Expenses 30,000 Income from Operations 27,150 Income Tax Expense (30%) 8, 145 19,005 Net Income Assume that you have been asked to restate the financial statements to incorporate LCM. Youhave developed the following data relating to the ending inventory: Purchase Cost Market value r Unit Per Unit Total Quantity d tem A 2,100 $2.80 5,880 3.80 1.80 2,250 750 3.00 5,940 0.90 1.80 3,300 2.80 10,080 2,100 4,80 $24,150 Required 1. Restate the income statement to reflect LCM valuation of the ending inventory. Apply LCM on an item- by-item basis. SPRINGER ANDERSON GYMNASTICS Income Statement (LCM basi For the Year Ended December 31 Sales Revenue Cost of Goods Sold Beginning Inventory Goods Available for Sale rr 1