Smart Company prepared its annual financial statements dated December 31. The company reported its inventory using the FIFO Inventory costing method and failed to evaluate its net realizable value at December 31. The preliminary income statement follows: $282,000 $ 31,000 184,000 215,000 55,900 Sales Revenge Cast of Goods Sold Beginning Inventory Purchases Goods Available for sale Ending Inventory Cost of Goods Sold Gross Prote Operating Expenses Theone from Operations Income Tax Expense (30%) Net Income 159, 100 122.900 62.000 60.900 Assume you have been asked to restate the financial statements to incorporate LCM/NRV. You have developed the following data relating to the ending inventory Purchase Cost Quantity Per Unit Total Value per Unit $ 8.000 18,600 $55.900 TIP: Inventory write downs do not affect the cost of goods available for sale. Instead, the effect of the write down is to reduce ending inventory, which increases Cost of Goods Sold and then affects other amounts in the income statement Required: 1. Restate the income statement to reflect LCM/NRV Valuation of the ending inventory. Apply LCM/NRV on an item by.item basis 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 and explain the LCMNRV effect on each amount in the income statement that was changed 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. SMART COMPANY Income Statement (LCM/NRV basis) For the Year Ended December 31 Sales Revenue $ 282,000 Cost of Goods Sold: Beginning Inventory $31.000 Purchases 184,000 Goods Available for Sale 215.000 Ending Inventory 56,900 Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense Net Income OOOOO Required: 1. Restate the income statement to reflect LCM/NRV valuation of the ending Inventory. Apply LCMNRV on an item-by-item basi xplain the LCM/NRV effect on each amount in the income statement that was changed in requirement Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compare and explain the LCM/NRV effect on each amount in the income statement that was changed in requirement 1. (Decreases should be indicated by a minus sign.) Item Changed FIFO Cost Basis LCM/NRV Basis Amount of Increase (Decrease) Ending Inventory Cost of Goods Sold Gross Profit Income from Operations Income Tax Expense Net Income
