Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows: $146,000 Sales Revenue Cost of Goods Sold $ 16,500 94,000 Beginning Inventory Purchases 110,500 25,730 Goods Available for Sale Ending Inventory (FIFO cost) Cost of Goods Sold 84,770 Gross Profit Operating Expenses 61,230 32,500 Income from Operations Income Tax Expense (40 % ) 28,730 11,402 Net Income S 17,238 Assume that you have been asked to restate the financial statements to incorporate LCM. You have developed the following data relating to the ending inventory Market Value per Unit Purchase Cost Total S 5,445 2.800 8,740 8.745 Per Unit Item Quantity 1,650 700 3,800 1,850 $3.30 4.00 2.30 5.30 $4.30 2.30 1.15 3.30 $25.730 Required: 1. Restate the income statement to relect LCM valuation of the ending inventory. Apply LCM on an item- by-item basis SPRINGER ANDERSON GYMNASTICS Income Statement (LCM basis) For the Year Ended December 31 Market Value Purchase Cost Per Unit $3.30 4.00 2.30 5.30 per Unit Item Quantity 1,850 700 3,800 1,650 Total $ 5,445 2,800 8,740 8.745 $4.30 2.30 1.15 3.30 $25.730 Required: 1. Restate the income statement to reflect LCM valuation of the ending inventory. Apply LCM on an item- by-item basis. SPRINGER ANDERSON GYMNASTICS Income Statement (LCM basis) For the Year Ended December 31 Sales Revenue $146,000 Cost of Goods Sold: Beginning Inventory $ 16,500 Purchases 94,000 Goods Available for Sale 110.500 Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Incame Tax Expense Net Income ABCD 2. Compare the LCM effect on each amount that was changed in requirement 1. (Decreases should be indicated by a minus sign.) Amount of FIFO Cost Basis Item Changed LCM Basis Increase (Decrease Ending Inventory Cost of Goods Sold Gross Profit Income from Operations Income Tax Expense Net Income