Question : PA7-2 Evaluating the income statement and tax effects of lower of cost or marketet realizable value [LO 7-4]
PA7-2 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 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: 312000 Sales Ravne Cost of Gands Sold Beginning Imetery 12.000 5.000 Purchases 21.8 200 Goals Available for Sale Endury Tentory Cost of Gool Sell Gross Profit Operating Expenses Income from Operations Income Tax (s) Nature 28.00 2480 Assume that you have been asked to restate the financial statements to incorporate the LCMNRV rule. You have developed the following data relating to the ending inventory hers Rplacement There Assume that you have been asked to restate the financial statements to incorporate the LCMNRV rule. You have developed the following data relating to the ending inventory. Purchase Cost Cost pertinet Per init $2.40 Total $ 5520 2,100 700 2.300 10,120 $21.00 Required: 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 LCMNRV effect on each amount that was changed in the preliminary income statement is requirement1 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.) Item Changed LIFO Cost LCMINRV Basis Basis Amount of Increase Ending Inventory Cost of Goods Sold 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 I $ 128,000 Cost of Goods Sold: Beginning Inventory $ 12,000 Purchases 85.000 Goods Available for Sale 97,000 Ending Inventory 21,800 Cost of Goods Sold 75 200 Gross Profit S Operating Expenses Income from Operations Income Tax Expense Net Income $ 17,360 Required 2 > 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 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.) Item Changed LIFO Cost LCM/NRV Basis Basis Amount of Increase (Decrease) Ending Inventory Cost of Goods Sold Gross Profit Income from Operations Income Tax Expense Net Income
