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pringer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory using the LIFO inventory costing method but did not
pringer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory using 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 $ 146,000 Cost of Goods Sold Beginning Inventory $ 16,500 Purchases 94,000 Goods Available for Sale 110,500 Ending Inventory 25,730 Cost of Goods Sold 84,770 Gross Profit 61,230 Operating Expenses 32,500 Income from Operations 28,730 Income Tax Expense (40%) 11,492 Net Income $ 17,238 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 Cost Item Quantity Per Unit Total Replacement Cost per Unit A 1,650 $ 3.30 $ 5,445 $ 4.30 B 700 4.00 2,800 2.30 C 3,800 2.30 8,740 1.15 D 1,650 5.30 8,745 3.30 $ 25,730 Required: Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis. Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1
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