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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.
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 $44 per unit, and to have on hand 83,000 units of inventory at year-end. Dorado uses the last-in, first-out (LIFO) method to account for inventory costs.
- Determine the cost of goods sold and gross profit amounts Dorado should record for the three months ending September 30.
- Prepare journal entries to reflect these amounts.
Expert Solution
1) Computation of Cost of Goods Sold and Gross Profit amounts Dorado should record for the three months ending September 30:
Cost of goods sold (Using LIFO) :
495000 @ 43 = 21,285,000
25000 @ 37 = 925,000
Actual Cost of goods sold = 22,210,000
Sales Revenue (520000*55) = 28,600,000
Less: Cost of goods sold:
495000 @ 43 = 21,285,000
LIFO liquidation adjusted : 25000 @ 44 = 1,100,000
Cost of goods sold adjusted = 22,385,000
Gross Profit = 6,215,000
2)
Journal Entries:
|
Transactions |
Account Titles and Explanation |
Debit ($) |
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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