An entity’s functional currency is the currency of a hyperinflationary economy.

The entity’s financial

position at December 31, 2014 restated in accordance with PAS 29 Financial Reporting in
Hyperinflationary Economies is presented below:
Monetary assets P200,000

Land – Property, Plant, and Equipment 300,000

Total assets P500,000

Monetary Liabilities P150,000

Equity 350,000

P500,000

The entity’s only transaction in 2015 involved earning revenue of P80,000 for a service provided
to a customer on December 31, 2015. The customer settled in cash on December 31, 2015.
Inflation for the year ended December 31, 2015 is 80 percent.

The entity’s profit for the year ended December 31, 2015 is:
a. P80,000
b. P40,000
c. P144,000
d. P104,000

ANSWER: B
Revenue P80,000

Net loss on net monetary position:

Net monetary items 12/31/14 as restated

(200,000-150,000) x 180% P90,000

Change in net monetary items (sales) 80,000

Net monetary items 12/31/15 as restated 170,000

Net monetary items 12/31/15

(200,000-150,000) + 80,000 (130,000) (40,000)

Profit for the year 40,000