PAS 29 – HYPERINFLATIONARY ECONOMY 1. All of the following would indicate that hyperinflation exists, except a. The general population regards monetary amounts in terms of relatively stable foreign currency b. The cumulative inflation rate over three years is approaching, or exceeds 100% c. Inflation rates have exceeded interest rates in three successive years d. The general population prefers to keep its wealth in nonmonetary assets 2. Which of the following would indicate that hyperinflation exists? a. Sales on credit are at lower prices than cash sales b. Inflation is approaching, or exceeds, 20% per year c. Monetary items do not increase in value d. People prefer to keep their wealth in nonmonetary assets or a stable foreign currency 3. The financial statements of an entity that reports in the currency of a hyperinflationary economy shall be stated in terms of a. Historical Cost b. Current Cost c. Fair Value d. Measuring unit current at the end of reporting period 4. In a hyperinflationary economy, amounts not expressed in the measuring unit current at the end of the reporting period are restated by applying the a. General Price Index b. Specific Price Index c. Both the General Price Index and Specific Price Index d. Either the General Price Index or Specific Price Index 5. In a hyperinflationary economy, monetary items a. Are not restated because they are already expressed in terms of the measuring unit current at the end of the reporting period b. Are not restated because they do not represent money held and items to be received or paid in money c. Are restated applying the General Price Index d. Are restated applying the Specific Price Index 6. An entity that wishes to present information about the effect of changing prices in a hyperinflationary economy should report this information in a. The body of the financial statements b. The notes to the financial statements c. Supplementary information to the financial statements d. Management’s report to shareholders 7. Financial statements that are expressed assuming a stable monetary unit are a. Constant Peso financial statements b. Nominal Peso financial statements c. Current Cost financial statements d. Fair Value financial statements 8. Which of the following is classified as nonmonetary? a. Allowance for doubtful accounts b. Accumulated depreciation - equipment c. Unamortized premium on bonds payable d. Advances to unconsolidated subsidiaries 9. Which of the following is classified as nonmonetary? a. Obligations under warranties b. Accrued expenses c. Unamortized discount on bonds payable d. Refundable deposits
10. All of the following are monetary items, except a. Trade payables b. Trade receivables c. Administration costs paid in cash d. Loan repayable at par value 11. During a period of inflation in which a liability account balance remains constant, which of the following occurs? a. A purchasing power loss if the item is a nonmonetary liability b. A purchasing power gain if the item is a nonmonetary liability c. A purchasing power loss if the item is a monetary liability d. A purchasing power gain if the item is a monetary liability 12. During the period of deflation, an account balance remains constant. With respect to this account, a purchasing power gain will be recognized if the account is a a. Monetary Liability b. Monetary Asset c. Nonmonetary Liability d. Nonmonetary Asset 13. The gain or loss on the net monetary position in a hyperinflationary economy shall be included in a. Profit or loss and separately disclosed b. Retained earnings c. Equity d. Other Comprehensive Income 14. Wacky Company reported the following assets at year-end: Cash in bank Accounts receivable Advances to employees Advances to suppliers Inventory Financial assets at fair value Financial assets at amortized cost Prepaid expense Patent
2,000,000 4,000,000 200,000 400,000 1,500,000 500,000 2,500,000 100,000 1,000,000
In preparing financial statements in a hyperinflationary economy, what total amount should be reported as monetary assets? a. 6,200,000 b. 6,600,000 c. 9,100,000 d. 8,700,000 15. Wearisome Company reported the following liabilities at year-end: Accounts payable Accrued expenses Unearned revenue Advances from customers Estimated warranty liability Bonds payable Finance Lease Liability Deferred tax liability
1,000,000 500,000 300,000 1,200,000 200,000 3,000,000 4,000,000 400,000
In preparing financial statements in a hyperinflationary economy, what total amount should be reported as monetary liabilities? a. 4,500,000 b. 8,500,000 c. 9,700,000 d. 8,900,000 16. Wholesome Company was formed on January 1, 2009. Selected balances from historical cost statement of financial position on December 31, 2015 were: Land (purchased on January 1, 2009) 2,400,000 Investment in bonds (purchased on January 1, 2012 and measured at amortized cost 1,200,000 Long term debt (issued on January 1, 2009) 1,600,000
The general price index was 120 on January 1, 2009, 150 on January 1, 2012, and 300 on December 31, 2015. What should be reported in the hyperinflationary statement of financial position on December 31, 2015? Land Investment Long-term Debt a. 2,400,000 1,200,000 1,600,000 b. 6,000,000 2,400,000 4,000,000 c. 6,000,000 2,400,000 1,600,000 d. 6,000,000 1,200,000 1,600,000 17. Wishful Company provided the following information during 2015: Inventory – January 1 Purchases Inventory – December 31
1,600,000 4,000,000 2,500,000
The relevant index numbers are 120 on January 1, 2015, 280 on December 31, 2015, and the average index number for 2014 is 110. What is the cost of goods sold in a hyperinflationary income statement for 2015? a. 6,300,000 b. 7,300,000 c. 3,150,000 d. 4,410,000 18. Yearn Company provided the following information for the year ended December 31, 2015. Net monetary assets – January 1 800,000 Sales 5,000,000 Purchases 3,000,000 Expenses 1,000,000 Income tax 600,000 Cash dividend paid on December 31, 2015 200,000 The sales, purchases, expenses and income tax accrued evenly during the year. Selected general price index numbers are 100 on January 1 and 300 on December 31. What is the gain or loss on purchasing power during the year? a. 1,800,000 gain b. 1,800,000 loss c. 1,700,000 gain d. 1,700,000 loss CURRENT COST ACCOUNTING 19. In current cost financial statements a. General price level gains or losses are recognized on net monetary items b. Amounts are always stated in common purchasing power unit of measurement c. All items in the statement of financial position are different from historical cost d. Holding gains are recognized 20. An entity adjusted its historical cost income statement by applying specific price index to its depreciation and cost of goods sold. The adjusted income statement is prepared according to a. Fair value accounting b. Purchasing power accounting c. Current cost accounting d. Nominal Peso accounting 21. An entity prepares financial statements on a current cost basis. How should the entity compute cost of goods sold on a current cost basis? a. Number of units sold times average current cost of units during the year b. Number of units sold times current cost of units at year end c. Number of units sold times current cost of units at the beginning of the year d. Beginning inventory at current cost plus cost of goods purchased less ending inventory at current cost 22. Could current cost financial statements report holding gains for which of the following? a. Goods sold during the year b. Inventory at year-end c. Both goods sold during the period and inventory at year-end d. Neither goods sold during the period nor inventory at year-end
23. During a period of inflation, the specific price of land increased at a lower rate than the general price index. The accounting method that would measure the land at the highest amount is a. Historical cost/Nominal peso b. Current cost/Nominal peso c. Current cost/Constant peso d. Historical cost/Constant peso 24. On January 1, 2015, Yeoman Company purchased land for P5,000,000. On December 31, 2015, the land has a current cost of P5,500,000. On December 31, 2016, the entity sold the land for P6,500,000. On such date, the current cost of the land is P5,900,000. 24.1 What is the realized holding gain to be reported in the income statement for 2016? a. 1,500,000 b. 1,000,000 c. 900,000 d. 400,000 24.2 What is the gain on sale of land to be reported in the income statement for 2016 under current cost accounting? a. 1,000,000 b. 1,500,000 c. 600,000 d. 900,000 25. Yonder Company acquired an equipment on January 1, 2015 for P5,000,000. Depreciation is computed using the straight line method. The estimated useful life of the equipment is 5 years with no residual value. A specific price index applicable to the equipment was 150 on January 1, 2015 and 225 on December 31, 2015. 25.1 What is the realized holding gain on the equipment to be reported in 2015? a. 500,000 b. 250,000 c. 300,000 d. 0 25.2 What is the unrealized holding gain on the equipment to be reported in 2015? a. 1,250,000 b. 2,500,000 c. 2,000,000 d. 1,500,000 26. Youngish Company reported the following information with respect to cost of goods sold for 2015: Units Historical Cost Inventory – January 1 10,000 530,000 Purchases 45,000 2,790,000 Goods available for sale 55,000 3,320,000 Inventory – December 31 (15,000) ( 945,000) Cost of goods sold 40,000 2,375,000 The current cost per unit was P58 on January 1, 2015 and P72 on December 31, 2015. 26.1 What amount should be reported as current cost of inventory on December 31, 2015? a. 1,080,000 b. 975,000 c. 945,000 d. 870,000 26.2 On the income statement for 2015 restated to current cost, what amount should be reported as unrealized gain on inventory? a. 135,000 b. 105,000 c. 30,000 d. 0 26.3 Under current cost accounting, what is the cost of goods sold for 2015? a. 2,600,000 b. 2,880,000 c. 2,375,000 d. 2,320,000 26.4 Under current cost accounting, what is the realized gain from inventory sold? a. 225,000 b. 505,000 c. 280,000 d. 135,000
