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					$	128,000
Cost of Goods Sold
Beginning Inventory	$	12,000
Purchases		85,000
Goods Available for Sale		97,000
Ending Inventory		21,800
Cost of Goods Sold						75,200
Gross Profit						52,800
Operating Expenses						28,000
Income from Operations						24,800
Income Tax Expense (30%)						7,440
Net Income					$	17,360

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		2,300		$	2.40			$	5,520			$	3.40
B		700			3.00				2,100				1.40
C		2,900			1.40				4,060				0.70
D		2,300			4.40				10,120				2.40
								$	21,800

Required:

1. Restate the income statement to reflect LCM/NRV valuation ofthe ending inventory. Apply LCM/NRV on an item-by-item basis.
2. Compare the LCM/NRV effect on each amount that was changed inthe preliminary income statement in requirement 1.
   1. LIFO cost, LCM/NRV basis and amount of increase (decrease) forending inventory, cost of goods sold, gross profit, income fromoperations, income tax expense, net income