Springer Anderson Gymnastics prepared its annual financialstatements dated December 31. The company reported its...

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Accounting

Springer Anderson Gymnastics prepared its annual financialstatements dated December 31. The company reported its inventoryusing the LIFO inventory costing method but did not compare thecost of its ending inventory to its market value (replacementcost). The preliminary income statement follows:
Sales Revenue $ 160,000
Cost of Goods Sold
Beginning Inventory $ 20,000
Purchases 101,000
Goods Available for Sale 121,000
Ending Inventory 38,140
Cost of Goods Sold 82,860
Gross Profit 77,140
Operating Expenses 36,000
Income from Operations 41,140
Income Tax Expense (20%) 8,228
Net Income $ 32,912
Assume that you have been asked to restate the financialstatements to incorporate the LCM/NRV rule. You have developed thefollowing data relating to the ending inventory:
Purchase Cost
Item Quantity Per Unit Total Replacement
Cost per Unit
A 2,000 $ 4.00 $ 8,000 $ 5.00
B 800 5.80 4,640 2.90
C 4,500 3.00 13,500 1.45
D 2,000 6.00 12,000 4.00
$ 38,140

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

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Springer Anderson Gymnastics Income statement LCMNRV basis For the year ended December 31 Particulars Amount Sales revenue 160000 Cost of goods sold Beginning inventory 20000 Purchases 101000 Goods Available for Sale 121000 Note 1 See Answer

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In: AccountingSpringer Anderson Gymnastics prepared its annual financialstatements dated December 31. The company reported its inventory...Springer Anderson Gymnastics prepared its annual financialstatements dated December 31. The company reported its inventoryusing the LIFO inventory costing method but did not compare thecost of its ending inventory to its market value (replacementcost). The preliminary income statement follows:Sales Revenue$160,000Cost of Goods SoldBeginning Inventory$20,000Purchases101,000Goods Available for Sale121,000Ending Inventory38,140Cost of Goods Sold82,860Gross Profit77,140Operating Expenses36,000Income from Operations41,140Income Tax Expense (20%)8,228Net Income$32,912Assume that you have been asked to restate the financialstatements to incorporate the LCM/NRV rule. You have developed thefollowing data relating to the ending inventory:Purchase CostItemQuantityPer UnitTotalReplacementCost per UnitA2,000$4.00$8,000$5.00B8005.804,6402.90C4,5003.0013,5001.45D2,0006.0012,0004.00$38,140Required:Restate the income statement to reflect LCM/NRV valuation of theending inventory. Apply LCM/NRV on an item-by-item basis.Compare the LCM/NRV effect on each amount that was changed inthe preliminary income statement in requirement 1.


Sales Revenue			$	160,000
Cost of Goods Sold
Beginning Inventory	$	20,000
Purchases		101,000
Goods Available for Sale		121,000
Ending Inventory		38,140
Cost of Goods Sold				82,860
Gross Profit				77,140
Operating Expenses				36,000
Income from Operations				41,140
Income Tax Expense (20%)				8,228
Net Income			$	32,912

			Purchase Cost
			Purchase Cost
Item	Quantity		Per Unit		Total		Replacement Cost per Unit
A		2,000	$	4.00	$	8,000	$	5.00
B		800		5.80		4,640		2.90
C		4,500		3.00		13,500		1.45
D		2,000		6.00		12,000		4.00
					$	38,140