The following information for Dorado Corporation relates to the three-month peri
ID: 2542249 • Letter: T
Question
The following information for Dorado Corporation relates to the three-month period ending September 30.
Dorado expects to purchase 190,000 units of inventory in the fourth quarter of the current calendar year at a cost of $33 per unit, and to have on hand 61,000 units of inventory at year-end. Dorado uses the last-in, first-out (LIFO) method to account for inventory costs.
a. Determine the cost of goods sold and gross profit amounts Dorado should record for the three months ending September 30.
b. Prepare journal entries to reflect these amounts.
b1. Record the entry for sales revenue.
b2. Record the entry for cost of good sold.
Units Price per Unit Sales 465,000 $ 44 Beginning inventory 43,000 26 Purchases 440,000 32 Ending inventory 18,000 ?Explanation / Answer
a) In LIFO method, goods purchased last are sold first. Therefore the sale of 465,000 units will include 440,000 units from units purchase in the three months at the cost of $32 per unit and remaining 25,000 units (465,000 units-440,000 units) will be from beginning inventory at the cost of $26 per unit.
Cost of goods sold = (440,000 units*$32)+(25,000 units*$26)
= $14,080,000+$650,000 = $14,730,000
Ending Inventory = 18,000 units*$26 per unit = $468,000
b) Journal Entries (Amount in $)
** It is assumed that sales are made on account.
No. Account Titles and Explanation Debit Credit b1) Accounts Receivable** (465,000 units*$44 per unit) 20,460,000 Sales Revenue 20,460,000 (To record the goods sold on account) b2) Cost of goods sold 14,730,000 Inventory 14,730,000 (To record the cost of goods sold)Related Questions
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