Springer Anderson Gymnastics prepared its annual financial statements dated Dece

Question

Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows Sales Revenue Cost of Goods Sold $134,000 Beginning Inventory Purchases $ 13,500 88,000 Goods Available for Sale Ending Inventory (FIFO cost) 101,500 23,800 Cost of Goods Sold 77,700 Gross Profit Operating Expenses 56,300 29,500 26,800 8,040 Income from Operations Income Tax Expense (30%) Net Income $ 18,760 Assume that you have been asked to restate the financial statements to incorporate LCM. You have developed the following data relating to the ending inventory Market Value Purchase Cost Item Quantity Per Unit Total 2,150 700 C 3,200 D 2,150 $2.70 $ 5,805 2,450 5,440 10,105 3.50 1.70 4.70 per Unit $3.70 1.70 0.85 2.70 $23,800

Explanation / Answer

SPRINGER ANDERSON

**calculation of ending inventory

2)

SPRINGER ANDERSON

INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31 Sales revenue 134000 cost of goods sold Beginning inventory 13500 Purchase 88000 cost of goods available for sale 101500 ENding inventory (15520) cost of goods sold 85980 Gross margin 48020 operating expense (29500) Income from operations 18520 Income tax expense [18520*.30 ] (5556) Net Income 12964

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