Question

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

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

Units Price per Unit
Sales 515,000 $ 54
Beginning inventory 53,000 36
Purchases 490,000 42
Ending inventory 28,000 ?

Dorado expects to purchase 240,000 units of inventory in the fourth quarter of the current calendar year at a cost of $43 per unit, and to have on hand 81,000 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.

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Answer #1

Using LIFO mthod: Here units are sold first which are purchased last or latest purchases are sold first.

Cost of goods sold = (490000 units * $42) + (25000 units * $36)
= $21,480,000

Sales = (515000 units * $54) = $27,810,000

Gross Profit = Sales - Cost of Goods Sold
= $27,810,000 - $21,480,000
= $6,330,000

Journal entries are as follows:-

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