Question

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 Con The preliminary income statement follows: 83,ece 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 (355) Net Income 94,000 20. zee 7.30 50,700 27.ee 23,700 295 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 Quantity Per Unit Total Replacement cost per unit 3.se 2,200 1e ese $2,700 Required: 1. Restate the income statement to reflect LCMNRV valuation of the ending Inventory Apply LCMNRV on an item-by-item basis. 2. Compare the LCMINRV effect on each amount that was changed in the preliminary income statement in requirement 1 Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-stem basis. SPRINGER ANDERSON GYMNASTICS

Answer 1

1.

SPRINGER ANDERSON GYMNASTICS
Income Statement (LCM/NRV basis)
For the Year Ended December 31
Sales revenue		124000
Cost of goods sold:
Beginning inventory	11000
Purchases	83000
Goods available for sale	94000
Ending inventory	13020
Cost of goods sold		80980
Gross profit		43020
Operating expenses		27000
Income from operations		16020
Income tax expense (35% x $16020)		5607
Net income		10413

Working:

Item	Quantity	Cost per unit $	Market Price per unit $	Lower of Cost or Market price $	Ending inventory at LCM $
A	2400	2.20	3.20	2.20	5280
B	700	3.00	1.20	1.20	840
C	2700	1.20	0.60	0.60	1620
D	2400	4.20	2.20	2.20	5280
					13020

2.

Item Changed	LIFO Cost Basis	LCM/NRV Basis	Amount of Increase (Decrease)
Ending Inventory	20700	13020	-7680
Cost of Goods Sold	73300	80980	7680
Gross Profit	50700	43020	-7680
Income from Operations	23700	16020	-7680
Income Tax Expense	8295	5607	-2688
Net Income	15405	10413	-4992