Smart Company prepared its annual financial statements dated December 31. The company reported its inventory using the FIFO inventory costing method and failed to evaluate its net realizable value at December 31. The preliminary income statement follows: Sales Revenue Cost of Goods Sold Beginning Inventory Purchases $296,000 $ 38,000 198,000 236,000 131,900 Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit 104, 100 191,900 69,000 122,900 36,870 $ 86,030 Operating Expenses Income from Operations Income Tax Expense (30%) Net Income Assume you have been asked to restate the financial statements to incorporate LCM/NRV. You have developed the following data relating to the ending inventory: Item Quantity Per Unit 2,700 1,700 7,800 3,400 $ 8 5 10 7 Purchase Cost Total $ 21,600 8,500 78,000 23,800 Net Realizable Value per Unit $ 9 3 12 A В C $131,900
Smart Company prepared its annual financial statements dated December 31. The company reported its inventory using the FIFO inventory costing method and failed to evaluate its net realizable value at December 31. The preliminary income statement follows: Sales Revenue Cost of Goods Sold Beginning Inventory Purchases $296,000 $ 38,000 198,000 236,000 131,900 Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit 104, 100 191,900 69,000 122,900 36,870 $ 86,030 Operating Expenses Income from Operations Income Tax Expense (30%) Net Income Assume you have been asked to restate the financial statements to incorporate LCM/NRV. You have developed the following data relating to the ending inventory: Item Quantity Per Unit 2,700 1,700 7,800 3,400 $ 8 5 10 7 Purchase Cost Total $ 21,600 8,500 78,000 23,800 Net Realizable Value per Unit $ 9 3 12 A В C $131,900
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Smart Company prepared its annual financial statements dated December 31. The company reported its inventory using the FIFO
inventory costing method and failed to evaluate its net realizable value at December 31. The preliminary income statement follows:
Sales Revenue
Cost of Goods Sold
$296,000
$ 38,000
198,000
236,000
131,900
Beginning Inventory
Purchases
Goods Available for Sale
Ending Inventory
Cost of Goods Sold
104,100
191,900
69,000
122,900
36,870
$ 86,030
Gross Profit
Operating Expenses
Income from Operations
Income Tax Expense (30%)
Net Income
Assume you have been asked to restate the financial statements to incorporate LCM/NRV. You have developed the following data
relating to the ending inventory:
Purchase Cost
Item Quantity Per Unit
2,700
1,700
7,800
3,400
Net Realizable
Value per Unit
$ 9
3
Total
$ 21,600
8,500
78,000
23,800
$131,900
$ 8
10
12
7
4
ABCD](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd3215fb2-ae12-4c55-8d5d-080f3ac38d0c%2F8609f3ea-ce37-4b69-a6d5-4ca03c953511%2Fyijunwc_processed.png&w=3840&q=75)
Transcribed Image Text:Smart Company prepared its annual financial statements dated December 31. The company reported its inventory using the FIFO
inventory costing method and failed to evaluate its net realizable value at December 31. The preliminary income statement follows:
Sales Revenue
Cost of Goods Sold
$296,000
$ 38,000
198,000
236,000
131,900
Beginning Inventory
Purchases
Goods Available for Sale
Ending Inventory
Cost of Goods Sold
104,100
191,900
69,000
122,900
36,870
$ 86,030
Gross Profit
Operating Expenses
Income from Operations
Income Tax Expense (30%)
Net Income
Assume you have been asked to restate the financial statements to incorporate LCM/NRV. You have developed the following data
relating to the ending inventory:
Purchase Cost
Item Quantity Per Unit
2,700
1,700
7,800
3,400
Net Realizable
Value per Unit
$ 9
3
Total
$ 21,600
8,500
78,000
23,800
$131,900
$ 8
10
12
7
4
ABCD
![Required 1
Required 2
Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis.
SMART COMPANY
Income Statement (LCM/NRV basis)
For the Year Ended December 31
Sales Revenue
$
296,000
Cost of Goods Sold:
Beginning Inventory
$
38,000
Purchases
Goods Available for Sale
Ending Inventory
Cost of Goods Sold
Gross Profit
Operating Expenses
69,000
Income from Operations
Income Tax Expense
Net Income
86,030
Required 1
Required 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd3215fb2-ae12-4c55-8d5d-080f3ac38d0c%2F8609f3ea-ce37-4b69-a6d5-4ca03c953511%2Fsc0meou_processed.png&w=3840&q=75)
Transcribed Image Text:Required 1
Required 2
Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis.
SMART COMPANY
Income Statement (LCM/NRV basis)
For the Year Ended December 31
Sales Revenue
$
296,000
Cost of Goods Sold:
Beginning Inventory
$
38,000
Purchases
Goods Available for Sale
Ending Inventory
Cost of Goods Sold
Gross Profit
Operating Expenses
69,000
Income from Operations
Income Tax Expense
Net Income
86,030
Required 1
Required 2 >
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