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Homework answers / question archive / The following information for Dorado Corporation relates to the three-month period ending September 30

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

Finance

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

 

  Units Price per UnitSales 520,000 $55 Beginning inventory 54,000  37 Purchases 495,000  43 Ending inventory 29,000  ? 

 

Dorado expects to purchase 245,000 units of inventory in the fourth quarter of the current calendar year at a cost of $44 per unit, and to have on hand 83,000 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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1) Computation of Cost of Goods Sold and Gross Profit amounts Dorado should record for the three months ending September 30:

Cost of goods sold (Using LIFO) :

495000 @ 43 = 21,285,000
25000 @ 37 = 925,000
Actual Cost of goods sold = 22,210,000

Sales Revenue (520000*55) = 28,600,000
Less: Cost of goods sold:
495000 @ 43 = 21,285,000
LIFO liquidation adjusted : 25000 @ 44 = 1,100,000
Cost of goods sold adjusted   = 22,385,000
Gross Profit = 6,215,000

 

2) 

Journal Entries:

Transactions

Account Titles and Explanation

Debit ($)

Credit ($)
1 Cash or Accounts Receivable 28,600,000  
  Sales Revenue   28,600,000
  (To record the sales revenue)    
2 Cost of goods sold 22,385,000  
  Inventory   22,210,000
  Excess of replacement cost over the historical cost of LIFO liquidation   175,000

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