Required information (The following information applies to the questions displayed below.] Jaffa Company prepared its annual financial statements dated December 31 of the current year. The company applies the FIFO inventory costing method; however, the company neglected to apply lower of cost or net realizable value to the ending inventory. The preliminary current year income statement follows: $ 297,000 $ 34,700 201,000 235,700 68,521 Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory (FIFO cost) Cost of goods sold Gross profit Operating expenses Pretax income Income tax expense (40%) Net income 167,179 129,821 63,700 66,121 26,448 $ 39,673 Assume that you have been asked to restate the current year financial statements to incorporate lower of cost or NRV. You have developed the following data relating to the current year ending inventory: Item Tove Quantity 3,220 1,670 7,270 3,370 Unit $ 4.70 4.20 4.20 4.70 Acquisition Cost Total $ 15,134 7,014 30,534 15,839 $ 68,521 Net Realizable Value Per Unit $ 3.70 5.70 2.20 6.70 Required: 1. Prepare the income statement to reflect lower of cost or net realizable value valuation of the current year ending inventory. Apply Tower of cost or NRV on an item-by-item basis. (Round your answers to nearest dollar amount.) X Answer is not complete. JAFFA COMPANY Income Statement (Corrected) For the Year Ended December 31, Current Year Sales revenue $ 297,000 Cost of goods sold: Beginning inventory Purchases 34,700 201,000 Goods available for sale Ending inventory 235,700 68,521 Cost of goods sold Gross profit Operating expenses 167,179 X 129,821 63,700 Pretax income Income tax expense 10,579 X Net income $ 39,673 2. Compare the lower of cost or net realizable value effect on each amount that was changed on the income statement in requirement (1). (Decreases should be indicated by a minus sign.)(Round your answers to nearest dollar amount.) Item Changed FIFO Cost Basis Lower of Cost or NRV Amount of Change (Decrease) Ending inventory Cost of goods sold Gross profit Pretax income Income tax expense Net income