Question

The following information for Dorado Corporation relates to the three-month period ending September 30.

		Units		Price per Unit
Sales		445,000		$	40
Beginning inventory		39,000			22
Purchases		420,000			28
Ending inventory		14,000			?

Dorado expects to purchase 170,000 units of inventory in the fourth quarter of the current calendar year at a cost of $29 per unit, and to have on hand 53,000 units of inventory at year-end. Dorado uses the last-in, first-out (LIFO) method to account for inventory costs.

1. Determine the cost of goods sold and gross profit amounts Dorado should record for the three months ending September 30.

2. Prepare journal entries to reflect these amounts.

Answer 1

A BC 1 a) 2 Cost of goods sold using LIFO 3 420000*28 4 25000*22 5 Actual cost of goods sold $11,760,000 $550,000 $12,310,000 6 $17,800,000 7 Sales revenue (445000*40) 8 Less cost of goods sold 9 420000*28 10 LIFO liquidation : 25000*29 11 Cost of goods sold adjusted 12 Gross Profit 13 $11,760,000 $725,000 $12,485,000 $5,315,000

A с D 1 b) 2 Date Particulars Debit($) Credit($) 3. 1) 17800000 4 5 6 Cash Sales revenue 17800000 12485000 Cost goods sold Inventory Excess of replacement cost over historical cost of LIFO liquidation 12310000 175000