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: Sales Revenue $152,000

Cost of Goods Sold

Beginning Inventory $18,000

Purchases 97,000

Goods Available for Sale 115,000

Ending Inventory 30,420

Cost of Goods Sold 84,580

Gross Profit 67,420

Operating Expenses 34,000

Income from Operations 33,420

Income Tax Expense (30%) 10,026

Net Income $23,394

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:

Purchase Cost

Item Quantity Per Unit Total Replacement Cost per Unit

A 1,800 $3.60 $6,480 $4.60

B 800 4.00 3,200 2.60

C 4,100 2.60 10,660 1.30

D 1,800 5.60 10,080 3.60

$30,420

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.

REQUIRED 1

SPRINGER ANDERSON GYMNASTICS

Income Statement (LCM/NRV basis)

For the Year Ended December 31

Sales Revenue

Cost of Goods Sold:

Beginning Inventory

Purchases

Goods Available for Sale

Ending Inventory

Cost of Goods Sold

Gross Profit

Operating Expenses

Income from Operations

Income Tax Expense

Net Income

REQUIRED 2

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