Accounting For Changing Prices

Front 1

What are the two approaches used to account for he effects of changes in prices in the F/S?

Back 1

- General price level accounting

- Current value accounting

Hint 1

2351.02

Front 2

What happens when Genereal Price-Level Accounting is used?

Back 2

Nonmonetary items are restated at the end of the current period based on an INDEX in effect when the item ORIGINATED.

Price level adjusted amount = (historical amount)(index rate)

Hint 2

2352.06

Front 3

What is the process to restate financials using the General Price-level Accounting?

Back 3

1) Monetary assest stay same.
2) Restate nonmonetary assets.
3) Prepare balance sheet forcing retained earnigs.
4) Determine net income via change in R/E.
5) Prepare income statement forcing price level gain/loss. Use average rate for rev/xps and corresponding rate for depreciation.

Hint 3

2352.09

Front 4

How is purchasing power gain/(loss) computed for PLAFS?

Back 4

- Restate monetary items at the begining of the period to current level.
- Add increases to monetary assets and decreases to monetary liabilities adjusted to current leves. Do inverse for decreases and liabilities.
- Determine if a purchasing gain (sum of all is less than YE net monetary items = gain and viceversa)

Hint 4

2352.12

Front 5

What are the primary measuring methods used in current value accounting?

Back 5

- Present Value of future C/F.
- NRV
- Current replacement cost.

Hint 5

2353.02