Tabco Products is a manufacturing business. It transfers all goods manufactured to the income statement at production cost plus 20 percent. 

The following figures relate to inventories held by the business. 

Required

a. Calculate the amount of provision for unrealized profit to be entered in the income statement for the year ended 30 November 2014. What effect will the change have on the gross profit? 

b. Show in detail how the information relating to all inventories should be shown on the statement of financial position as at 30 November 2014. 

c. Explain why it is necessary for Taboo Products to provide for unrealised profit. 

Transcribed Image Text:

As at 1 December November As at 30 2013 2014 Inventories of raw materials 27 000 28 000 work in progress 9 000 8 500 finished goods Provision for unrealised profit 22 200 23 400 3 700 3 900