Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory...


Sales Revenue			$	140,000
Cost of Goods Sold
Beginning Inventory	$	15,000
Purchases		91,000
Goods Available for Sale		106,000
Ending Inventory		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 financial statements to incorporate the LCM/NRV rule. You have developed the following data relating to the ending inventory:

			Purchase Cost
			Purchase Cost
Item	Quantity		Per Unit		Total		Replacement Cost per Unit
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

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.

Solutions

Expert Solution

Solution 1:

Solution 2:

ekkarill92 answered 1 year ago

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