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: $320,000 Sales Revenue Cost of Goods Sold Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense (308) $ 50,000 222,000 272,000 92,500 179,500 140,500 81,000 59,500 17,850 $ 41,650 Net Income 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: $ 7 Purchase Cost Net Realizable Item Quantity Per Unit Total Value per Unit 3,900 $27, 300 $ 8 1,700 6,800 9,000 36,000 3,200 22,400 $92,500 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 Cost of Goods Sold: Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense Net Income Required 1 Required 2 > 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.). IIIIIIIIIIIIIIIIIIIIIIIIIIIII ULTUUTUULILULILULUI LIELIIIIIIIIIIIIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII 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