Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market [LO 7-4] Mondetta Clothing 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: Net Sales $ 430,000 Cost of Goods Sold Beginning Inventory $ 47,500 Purchases 278,000 Goods Available for Sale 325,500 Ending Inventory (FIFO cost) 84,000 Cost of Goods Sold 241,500 Gross Profit 188,500 Operating Expenses 95,500 Income from Operations 93,000 Income Tax Expense (40%) 37,200 Net Income $ 55,800 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: Acquisition Cost Market Value per Unit Item Quantity Per Unit Total A 3,500 $ 5.00 $ 17,500 $ 6.50 B 1,750 7.00 12,250 3.50 C 7,500 3.50 26,250 6.50 D 3,500 8.00 28,000 5.00 $ 84,000 Required: 1. Restate the income statement to reflect LCM valuation of the ending inventory. Apply LCM on an item-by-item basis. 2. Compare the LCM effect on each amount that was changed in requirement 1. (Decreases should be indicated by a minus sign.)