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:

Sales Revenue $ $140,000$

Cost of Goods Sold

Beginning Inventory $ $15,000$

Purchases $91,000$

Goods Available for Sale $106,000$

Ending Inventory $22,000$

Cost of Goods Sold $84,000$

Gross Profit $56,000$

Operating Expenses $31,000$

Income from Operations $25,000$

Income Tax Expense $(30\%)7,500$

Net Income $ $17,500$

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:

Item Quantity Purchase Cost Replacement Cost per Unit

Per Unit Total

A $1,500$ $ $3$ $ $4,500$ $ $4$

B $75043,0002$

C $3,50027,0001$

D $1,50057,5003$

$ $22,000$

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 $1.$