Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory i 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: $ 142,000 Sales Revenue Cost of Goods Sold $ 15,500 92,000 107,500 Beginning Inventory Purchases Goods Available for Sale Ending Inventory 23,245 84,255 57,745 31,500 Cost of Goods Sold Gross Profit Operating Expenses Income from Operations 26,245 Income Tax Expense (40%) 10,498 $ 15,747 Net Income 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 Replacement Cost per Unit Quantity Per Unit 1,550 Item Total $ 3.10 $ 4.10 $ 4,805 2,975 7,560 A B. 700 4.25 2.10 3,600 2.10 1.05 1,550 5.10 7,905 3.10 $ 23,245
Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory i 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: $ 142,000 Sales Revenue Cost of Goods Sold $ 15,500 92,000 107,500 Beginning Inventory Purchases Goods Available for Sale Ending Inventory 23,245 84,255 57,745 31,500 Cost of Goods Sold Gross Profit Operating Expenses Income from Operations 26,245 Income Tax Expense (40%) 10,498 $ 15,747 Net Income 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 Replacement Cost per Unit Quantity Per Unit 1,550 Item Total $ 3.10 $ 4.10 $ 4,805 2,975 7,560 A B. 700 4.25 2.10 3,600 2.10 1.05 1,550 5.10 7,905 3.10 $ 23,245
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
$ 142,000
Cost of Goods Sold
Beginning Inventory
$ 15,500
Purchases
92,000
Goods Available for Sale
107,500
Ending Inventory
23,245
Cost of Goods Sold
84,255
Gross Profit
57,745
Operating Expenses
31,500
Income from Operations
Income Tax Expense (40%)
26,245
10,498
Net Income
$ 15,747
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
Replacement
Cost per
Quantity
1,550
Item
Per Unit
Total
Unit
A
$ 3.10
$ 4,805
$ 4.10
2,975
7,560
B
700
4.25
2.10
3,600
2.10
1.05
D
1,550
5.10
7,905
3.10
$ 23,245
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.
Complete this question by entering your answers in the tabs below.
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.
SPRINGER ANDERSON GYMNASTICS
Income Statement (LCM/NRV basis)
For the Year Ended December 31
Sales Revenue
$
142,000
Cost of Goods Sold:
Beginning Inventory
$
15,500
Purchases
92,000
Goods Available for Sale
107,500
Ending Inventory
23,245
Cost of Goods Sold
84,255
Gross Profit
Operating Expenses
Income from Operations
Income Tax Expense
Net Income](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F49b3e6ce-1f3d-4ce5-98c4-da009a0829f2%2Fc152ce58-86fa-4f12-9146-4eb2a912060a%2Fw4apxma_processed.png&w=3840&q=75)
Transcribed Image Text: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
$ 142,000
Cost of Goods Sold
Beginning Inventory
$ 15,500
Purchases
92,000
Goods Available for Sale
107,500
Ending Inventory
23,245
Cost of Goods Sold
84,255
Gross Profit
57,745
Operating Expenses
31,500
Income from Operations
Income Tax Expense (40%)
26,245
10,498
Net Income
$ 15,747
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
Replacement
Cost per
Quantity
1,550
Item
Per Unit
Total
Unit
A
$ 3.10
$ 4,805
$ 4.10
2,975
7,560
B
700
4.25
2.10
3,600
2.10
1.05
D
1,550
5.10
7,905
3.10
$ 23,245
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.
Complete this question by entering your answers in the tabs below.
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.
SPRINGER ANDERSON GYMNASTICS
Income Statement (LCM/NRV basis)
For the Year Ended December 31
Sales Revenue
$
142,000
Cost of Goods Sold:
Beginning Inventory
$
15,500
Purchases
92,000
Goods Available for Sale
107,500
Ending Inventory
23,245
Cost of Goods Sold
84,255
Gross Profit
Operating Expenses
Income from Operations
Income Tax Expense
Net Income
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