Vasquez Paper Company has provided you with the following information regarding their inventory of paper for June

Question:

Vasquez Paper Company has provided you with the following information regarding their inventory of paper for June and July. Vasquez uses a perpetual inventory system.

______________________ __________June 30 July 31

Paper Inventory (in tonnes)……………..4,500………………6,200

Cost per tone………………………........…….$560……………….$680

NRV per tone………………………...........…$650……………….$615

Instructions

(a) Calculate the cost, the net realizable value, and the amount to be reported on the balance sheet for Vasquez Paper Company's inventory at (1) June 30 and (2) July 31.

(b) Prepare any journal entries required to record the LCNRV of the paper inventory at (1) June 30 and (2) July 31.

(c) Assume that during the month of August the company did not purchase any additional paper inventory and that on August 31 it had 5,000 tonnes in inventory and the NRV per tonne was $720. Is an adjusting entry required at August 31? Explain. If so, prepare the adjusting entry.

(d) What is Vasquez Paper Company required to disclose in its notes to the financial statements with regard to LCNRV?

TAKING IT FURTHER

Why is it important to report inventory at the LCNRV on the balance sheet?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...