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Homework answers / question archive / Upon completion of the manufacturing process for a given product, work in process inventory decreases and finished goods inventory increases

Upon completion of the manufacturing process for a given product, work in process inventory decreases and finished goods inventory increases

Accounting

  1. Upon completion of the manufacturing process for a given product, work in process inventory decreases and finished goods inventory increases. True o False o

  2. Use the following information for questions 16 and 17: On January 1, 20X4, Bleeker Co. issued eight-year bonds with a face value of $2,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: Present value of 1 for 8 periods at 6% .627 Present value of 1 for 8 periods at 8% .540 Present value of 1 for 16 periods at 3% .623 Present value of 1 for 16 periods at 4% .534 Present value of annuity for 8 periods at 6% 6.210 Present value of annuity for 8 periods at 8% 5.747 Present value of annuity for 16 periods at 3% 12.561 Present value of annuity for 16 periods at 4% 11.652 16. Calculate the present value of the interest. 17. Calculate the issue price of the bonds.

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  1. TRUE:

    Explanation:

    When the products are manufactured, its raw material is moved to production; then, labor costs are incurred to mould or process the product upto a certain level. Since the products are only partially completed, all costs are posted to WIP. When the products are completed, the costs are moved from WIP to finished goods, with both accounts being part of the inventory.

    That is why on completion of manufacturing process for a given product WIP inventory decreases and Finished Goods inventory increases.

  2. 16. Interest rate per period = 6%/2 = 3%

    Interest per period = 3% of $2,000,000 = $60,000

    Yield per period = 8%/2 = 4%

    No of periods = 8 * 2 = 16 periods

    Present value of the interest = $60,000 * PVIFA (4%, 16) = $60,000 * 11.652 = $699,120

    17. Present value of the principal = $2,000,000 * PVIF (4%,16) = $2,000,000 * .534 = $1,068,000

    Issue price of the bonds = Present value of the principal + Present value of the interest = $1,068,000 + $699,120 = $1,767,120

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