State what the term ‘work in progress’ means.
State the basis used to value work in progress.
Prepare the manufacturing account for watches for the year ended 31 December 2019.
Calculate the gross profit for the year ended 31 December 2019 from the sale of watches and clocks. Use the table below to show your calculations.
Prepare an extract from the income statement for the year ended 31 December 2019, showing gross profit, manufacturing profit and the adjustment for the provision for unrealised profit.
Explain the accounting treatment of the provision for unrealised profit in the income statement and the statement of financial position. Support your answer by referring to the accounting concepts.
Advise the directors on whether they should sell only clocks in the future. Justify your response using your calculations in (c) and (d).