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Smart company prepared it annual financial statements dated December 31 2010

Smart company prepared it annual financial statements dated December 31 2010
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Smart company prepared it’s annual financial statements dated December 31 2010. The company applies the Fifo inventory costing methof; however the company neglected to apply LCM to the ending inventory. The preliminary 2010 income statement follows: Sales Revenue $280,000 Cost of Goods Sold Beginning Inventory $31,000 Purchases $184,000 Goods available for sale $215,000 Ending Inventory (Fifo Cost) 46,500 Cost of Goods Sold $168,500 Gross Profit $111,500 Operating Expense $62,000 Pretax Income $49,500 Income Tax Expense (30%) $14,850 Net Income $34,650 Assume that you have been asked to restate the 2010 financial statements to incorporate LCM. You have developed the following data relating to the 2010 ending inventory: Acquisition Cost Acquistion Cost Current Replacement Unit Cost (Market) Item Quantity Unit Total $4 A 3050 $3 $9150 3.5 B 1500 5 $7500 3.5 C 7100 1,5 $10650 4 D 3200 6 $19200 Total = $46,500 NOTE: This question is NOT our property; we are only suggesting solution of this question.

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