Pamantasan ng Cabuyao

Katapatan Subd., Banay Banay, City of Cabuyao

Accounting Review III - Practical Accounting I (ACCTG100C) P1 - 24

HYPERINFLATION AND CURRENT COST
1. Roche Company reported the following assets at year-end:

Cash in bank 2,000,000

Accounts receivable 4,000,000
Advances to employees 200,000
Advances to suppliers 400,000
Inventory 1,500,000
Financial assets at fair value 500,000
Financial assets at amortized cost 2,500,000
Prepaid expense 100,000
Patent 1,000,000

In preparing financial statements in a hyperinflationary economy, what total amount should be reported as monetary
assets?
A. P6,200,000 C. P9,100,000
B. 6,600,000 D. 8,700,000

2. Lone Company reported the following liabilities at year-end:

Accounts payable 1,000,000

Accrued expenses 500,000
Unearned revenue 300,000
Advances from customers 1,200,000
Estimated warranty liability 200,000
Bonds payable 3,000,000
Finance lease liability 4,000,000
Deferred tax liability 400,000

In preparing financial statements in a hyperinflationary economy, what total amount should be reported as monetary
liabilities?
A. P4,500,000 C. P9,700,000
B. 8,500,000 D. 8,900,000

3. Niko Company was formed on January 1, 2012. Selected balances from historical cost statement of financial position on
December 31, 2018 were:

Land purchased on January 1, 2012 2,400,000

Investment in bonds purchased on January 1, 2015 and
measured at amortized cost 1,200,000
Long term debt issued on January 1, 2012 1,600,000

The general price index was 120 on January 1, 2012, 150 on January 1, 2015, and 300 on December 31, 2018. What
should be reported in the hyperinflationary statement of financial position on December 31, 2018?

Land Investment Long-term debt

A. P2,400,000 P1,200,000 P1,600,000
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

4. Aysus Company provided the following information during 2018:

Inventory, January 1 1,650,000

Purchases 4,000,000
Inventory, December 31 2,500,000

The relevant index number are 120 on January 1, 2014, 280 on December 31, 2018, and the average index numbers for
2013 is 110. What is the amount of cost of goods sold in a hyperinflationary income statement for 2018?
A. P6,300,000 C. P3,150,000
B. 7,300,000 D. 4,410,000
5. Mercy Company provided the following informations for the year ended December 31, 2018:

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, 2018 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. P1,800,000 gain C. P1,700,000 gain
B. 1,800,000 loss D. 1,700,000 loss

Use the following information for Questions 6 through 8:

On January 2, 2018, Henry Company purchased land for P5,000,000. On December 31, 2018, the land has a current cost
of P5,500,000. On December 31, 2019, the entity sold the land for P6,500,000. On such date, the current cost of the land
is P5,900,000.

6. What is the unrealized gain to be reported in the income statement for 2018?
A. P500,000 C. P250,000
B. 750,000 D. 0

7. What is the realized holding gain to be reported in the income statement for 2019?
A. P1,500,000 C. P900,000
B. 1,000,000 D. 400,000

8. What is the gain on sale of land to be reported in the income statement for 2019 under the current cost accounting?
A. P1,000,000 C. P600,000
B. 1,500,000 D. 900,000

Question 9 through Question 11 are based on the following:

Silent Company acquired equipment on January 1, 2018 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, 2018 and 225 on December 31, 2018.

9. What is the realized holding gain on the equipment to be reported in 2018?

A. P500,000 C. P300,000
B. 250,000 D. 0

10. What is the net current cost on December 31, 2018?

A. P6,000,000 C. P6,500,000
B. 6,250,000 D. 4,000,000

11. What is the unrealized holding gain on the equipment to be reported in 2018?
A. P1,250,000 C. P2,000,000
B. 2,500,000 D. 1,500,000

Use the following information for Questions 12 through 15:

Juno Company reported the following information for the current year:
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 and P72 on December 31.

12. What amount should be reported as current cost of inventory on December 31, 2018?
A. P1,080,000 C. P945,000
B. 975,000 D. 870,000

13. Under current cost accounting, what is the unrealized gain on inventory for 2018?
A. P135,000 C. P30,000
B. 105,000 D. 0
14. Under current cost accounting, what is the cost of goods sold for 2018?
A. P2,600,000 C. P2,375,000
B. 2,880,000 D. 2,320,000

15. Under cost accounting, what is the realized gain from inventory sold for 2018?
A. P225,000 C. P280,000
B. 505,000 D. 135,000

---END---

wep/acctng100c/hyperinflationandcurrentcost