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:

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:

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.

Sales Revenue Cost of Goods Sold $128,000 $12,000 85,000 Beginning Inventory Purchases Goods Available for Sale 97,000 21,800 Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense (30%) Net Income 75,200 52,800 28,000 24,800 7,440 $ 17,360