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:

1. Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis.
2. Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1.

$150,000 Sales Revenue Cost of Goods Sold Beginning Inventory $ 17,500 96,000 Purchases 113,500 29,150 Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense (30%) Net Income 84,350 65,650 33,500 32,150 9,645 $ 22,505 Purchase Cost Item Quantity 1,750 800 4,000 1,750 $3.50 4.25 2.50 5.50 Total $ 6, 125 3,400 10,000 9,625 $29,150 Replacement Cost per Unit $4.50 2.50 1.25 3.50 Required 1 Required 2 Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis. SPRINGER ANDERSON GYMNASTICS Income Statement (LCM/NRV basis) For the Year Ended December 31 Sales Revenue $150,000 Cost of Goods Sold: Beginning Inventory $ 17,500 Purchases 96,000 Goods Available for Sale 113,500 Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense Net Income Required 1 Required 2 Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1. (Decreases should be indicated by a minus sign.) Item Changed LIFO Cost Basis LCM/NRV Basis Amount of Increase (Decrease) Ending Inventory Cost of Goods Sold Gross Profit Income from Operations Income Tax Expense Net Income