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 cost). The preliminary income statement follows:Sales Revenue $152,000 Cost of Goods Sold Beginning Inventory $18,000 Purchases 97,000 Goods Available for Sale 115,000 Ending Inventory 30,420 Cost of Goods Sold 84,580 Gross Profit 67,420 Operating Expenses 34,000 Income from Operations 33,420 Income Tax Expense (30%) 10,026 Net Income $23,394 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 Item Quantity Per Unit Total Replacement Cost per Unit A 1,800 $3.60 $6,480 $4.60 B 800 4.00 3,200 2.60 C 4,100 2.60 10,660 1.30 D 1,800 5.60 10,080 3.60 $30,420 Required: 1. Restate the income statement to reflect LCM/NRV valuation of the ending inventory. Apply LCM/NRV on an item-by-item basis. 2. Compare the LCM/NRV effect on each amount that was changed in the preliminary income statement in requirement 1. REQUIRED 1 SPRINGER ANDERSON GYMNASTICS Income Statement (LCM/NRV basis) For the Year Ended December 31 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 Net Income REQUIRED 2 Item Changed LIFO Cost Basis | LCM/NRV Basis | Amount of Increase (Decrease) Ending Inventory Cost of Goods Sold Gross Profit Income from Operations Income Tax Expense Net Income

Name: Springer Anderson Gymnastics prepared its annual financial statements
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Description: 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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 cost). The preliminary income statement follows:Sales Revenue $152,000

Cost of Goods Sold

Beginning Inventory $18,000

Purchases 97,000

Goods Available for Sale 115,000

Ending Inventory 30,420

Cost of Goods Sold 84,580

Gross Profit 67,420

Operating Expenses 34,000

Income from Operations 33,420

Income Tax Expense (30%) 10,026

Net Income $23,394

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

Item Quantity Per Unit Total Replacement Cost per Unit

A 1,800 $3.60 $6,480 $4.60

B 800 4.00 3,200 2.60

C 4,100 2.60 10,660 1.30

D 1,800 5.60 10,080 3.60

$30,420

Required:

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

REQUIRED 1

SPRINGER ANDERSON GYMNASTICS

Income Statement (LCM/NRV basis)

For the Year Ended December 31

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

Net Income

REQUIRED 2

Item Changed LIFO Cost Basis | LCM/NRV Basis | Amount of Increase (Decrease)

Ending Inventory

Cost of Goods Sold

Gross Profit

Income from Operations

Income Tax Expense

Net Income

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