Coronado Industries had January 1 inventory of $300000 when it adopted dollar-value LIFO. During the year,...
Coronado Industries had January 1 inventory of $300000 when it
adopted dollar-value LIFO. During the year, purchases were $1830000
and sales were $3070000. December 31 inventory at year-end prices
was $388640, and the price index was 112. What is Coronado
Industries’s gross profit? please show work
a. $1292640.
b. $1328640.
c. $1275000.
d. $2717360.
Homework Answers
Calculation of COGS
$388,640 ÷ 1.12 = $347,000 – $300,000 = $47,000.
300,000 + (47,000 x 1.12) = 352,640
COGS = 300,000 + 1,830,000 - 352,640
=1,777,360
Gross Profit = 3,070,000 - 1,777,360
=1,292,640
To calculate the gross profit using dollar-value LIFO, we need to follow these steps:
Step 1: Calculate the ending inventory at base-year prices. Step 2: Calculate the cost of goods sold (COGS) at base-year prices. Step 3: Calculate the gross profit.
Given data: January 1 inventory (base-year prices) = $300,000 Purchases (base-year prices) = $1,830,000 Sales (base-year prices) = $3,070,000 December 31 inventory (year-end prices) = $388,640 Price index = 112
Step 1: Calculate the ending inventory at base-year prices. Ending inventory at year-end prices = $388,640 Ending inventory at base-year prices = Ending inventory at year-end prices / Price index Ending inventory at base-year prices = $388,640 / 1.12 Ending inventory at base-year prices = $347,000
Step 2: Calculate the cost of goods sold (COGS) at base-year prices. COGS at base-year prices = Beginning inventory at base-year prices + Purchases at base-year prices - Ending inventory at base-year prices COGS at base-year prices = $300,000 + $1,830,000 - $347,000 COGS at base-year prices = $1,783,000
Step 3: Calculate the gross profit. Gross profit = Sales (base-year prices) - COGS (base-year prices) Gross profit = $3,070,000 - $1,783,000 Gross profit = $1,287,000
So, the correct answer is: a. $1,287,000.
Add Answer to:
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