Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply the LC&NRV to the ending inventory. The preliminary income statement is as follows:

Sales Revenue				$	140,000
Cost of Goods Sold
Beginning Inventory	$	15,000
Purchases		91,000
Goods Available for Sale		106,000
Ending Inventory (FIFO cost)		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 LC&NRV. You have developed the following data relating to the ending inventory:

				Purchase Cost						Current Replacement Cost per Unit (Net Realizable Value)
Item	Quantity			Per Unit			Total
A		1,500		$	3		$	4,500		$	4
B		750			4			3,000			2
C		3,500			2			7,000			1
D		1,500			5			7,500			3
							$	22,000

1-a. Restate the income statement to reflect the LC&NRV rule of the ending inventory.

1-b. Apply the lower of cost and net realizable value on an item-by-item basis and show computations.