Springer Anderson Gymnastics prepared its annual financial statements dated December 31, 2012. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary 2012 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 (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 2012 financial statements to incorporate LCM. You have developed the following data relating to the 2012 ending inventory:

Purchase Cost

Current Replacement

Cost per Unit

Item

Quantity

Per Unit

Total

(Market)

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

2.

Compare the LCM effect on each amount that was changed in requirement 1. (Decreases should be indicated by a minus sign.)

Item Changed	FIFO Cost Basis	LCM Basis	Amount of Increase (Decrease)
Ending Inventory
Cost of Goods Sold
Gross Profit
Income from Operations
Income Tax Expense
Net Income