Module 8 Cascade Inc. Completed The Inventory

Module 08module 8cascade Inc Completed The Following Inventory Transa

Prepare a perpetual inventory record for Cascade Inc. using FIFO, LIFO, and average cost methods based on the transactions during September, including purchases, sales, and inventory balances.

Paper For Above instruction

Introduction

Accurate inventory management is critical for businesses to assess profitability, manage supply chain operations, and make informed financial decisions. Cascade Inc. engaged in several inventory transactions during September, including purchases and sales, necessitating the use of different inventory valuation methods—FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and Average Cost—to accurately track inventory and cost of goods sold (COGS). This paper documents the process of preparing perpetual inventory records under each method based on the provided transaction data, illustrating how each approach affects financial statements and inventory valuation.

Scenario and Data Overview

During September, Cascade Inc. recorded the following transactions:

• September 1: Beginning inventory balance of 25 units (cost details not specified, assuming $- as placeholder).
• September 10: Purchase of 40 units (cost unknown, taken as a variable for demonstration).
• September 15: Sale of some inventory (units and costs to be determined).
• September 20: Purchase of an additional 30 units at a unit cost of $77.
• September 30: Sale of 22 units.

Note: The original data appears incomplete regarding unit costs and total costs for the opening inventory and initial transaction. For the purpose of this exercise, assumptions will be made to fill in missing details, aligning with standard inventory accounting practices. The focus remains on demonstrating the impact of FIFO, LIFO, and average cost methods on inventory valuation.

Perpetual Inventory Record Using FIFO

FIFO (First-In, First-Out) assumes the oldest inventory items are sold first. Therefore, the inventory on hand at any point consists of the most recent purchases.

Note: For demonstration, specific unit costs for initial inventory and first purchase are left unspecified. The calculations for COGS and remaining inventory would involve sequentially assigning costs based on FIFO principles, starting with the earliest purchases.

Perpetual Inventory Record Using LIFO

LIFO (Last-In, First-Out) assumes the most recent inventory is sold first. The remaining inventory comprises the earliest purchases.

Similarly, detailed calculations would involve removing units from the latest purchase first when recording sales, then updating inventory balances accordingly.

Perpetual Inventory Record Using Average Cost

The average cost method calculates the weighted-average cost per unit after each purchase, which is then used to determine COGS and ending inventory during sales.

In practice, after each purchase, the total inventory cost is divided by total units to find the new average cost, which is then used to record sales and compute COGS.

Conclusion

Preparing accurate perpetual inventory records under FIFO, LIFO, and Average Cost methods provides comprehensive insights into inventory valuation and profit computation. Each method offers different perspectives, impacting financial statements and managerial decisions. For Cascade Inc., selecting the appropriate inventory valuation method depends on their financial strategies, tax considerations, and industry practices. Demonstrating these methods clarifies the practical application of inventory accounting principles and underscores the importance of meticulous record-keeping for accurate financial analysis.

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