The following information for Dorado Corporation relates to the three-month peri
ID: 2433241 • Letter: T
Question
The following information for Dorado Corporation relates to the three-month period ending September 30.
Dorado expects to purchase 250,000 units of inventory in the fourth quarter of the current calendar year at a cost of $45 per unit, and to have on hand 85,000 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.
Units Price per Unit Sales 525,000 $ 56 Beginning inventory 55,000 38 Purchases 500,000 44 Ending inventory 30,000 ?Explanation / Answer
Under the last in first out method, Cost of goods sold consists of the latest purchases and the ending inventory consists of the earliest purchases.
Units sold of 525,000 consists of 500,000 units from purchases and 25,000 units from beginning inventory.
Cost of goods sold = (500,000*44) + (25,000*38)
= 22,000,000 + 950,000
= 22,950,000
Ending inventory = 30,000 uniits * 38 per unit = 1,140,000
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