Exam 5: Normative Theories of Accountingthe Case of Accounting for Changing Prices

Which of the following measurement models of accounting equate with the perspectives of maintaining the purchasing power of capital intact?

The following procedures are required to apply the Current Purchasing Power Accounting (CPPA)model in order to adjust the financial statements to reflect price-level adjusted financial statements. Determine the movement in net monetary assets from the beginning of the year compared with the end of the year. Reconcile opening and closing net monetary assets with the reasons for the changes. Determine when the movements in net monetary assets for each item took place,and then apply the appropriate price-level index to calculate current purchasing power adjusted amounts. The difference between the adjusted and unadjusted amount totals in the reconciliation is the loss of purchasing power. A price-adjusted Balance Sheet is then prepared,adjusting all the non-monetary assets with the end-of-year price index. In applying the CPPA model,where does the loss of purchasing power appear in the price-level adjusted financial statements?

Assume that an entity acquired 150 items of inventory at a cost of $90 each,and sold 100 of the items for $160 each when the replacement cost to the entity was $120 each.Also assume that the replacement cost of the 50 remaining items of inventory at year end was $130.What would be the realised holding gain on the inventory that was sold?

Which of the following best describes the basis of the accounting measurement model in use today?

Which of the following is not a feature of current cost accounting?

The following procedures are required to apply the Current Purchasing Power Accounting (CPPA)model in order to adjust the financial statements to reflect price-level adjusted financial statements. Determine the movement in net monetary assets from the beginning of the year compared with the end of the year. Reconcile opening and closing net monetary assets with the reasons for the changes. Determine when the movements in net monetary assets for each item took place and then apply the appropriate price-level index to calculate current purchasing power adjusted amounts. The difference between the adjusted and unadjusted amount total in the reconciliation is the loss on purchasing power. A price-adjusted Balance Sheet is then prepared,adjusting all the non-monetary assets with the end-of-year price index. In applying the CPPA model,if the price-level index was 120 at the beginning of the year,150 at end of the year,and averaged 135 during the year,what price-level index would be applied to sales that occurred uniformly during the year?

A limitation of Current Cost Accounting does not include:

Which of the following statements about holding gain (cost savings)in the CCA model is false?

How would the deprival value of an asset be determined?

The reasons the promotion of alternative accounting models to historical cost did not succeed include.

The following procedures are required to apply the Current Purchasing Power Accounting (CPPA)model in order to adjust the financial statements to reflect price-level adjusted financial statements. Determine the movement in net monetary assets from the beginning of the year compared with the end of the year. Reconcile opening and closing net monetary assets with the reasons for the changes. Determine when the movements in net monetary assets for each item took place,and then apply the appropriate price-level index to calculate current purchasing power adjusted amounts. The difference between the adjusted and unadjusted amount totals in the reconciliation is the loss of purchasing power. A price-adjusted Balance Sheet is then prepared,adjusting all the non-monetary assets with the end-of-year price index. In applying the CPPA model,which of the following is correct in preparing the price-level adjusted financial statements?

Which of the following is not a possible limitation with CPPA accounting?

Assume that an entity acquired 150 items of inventory at a cost of $90 each,and sold 100 of the items for $160 each when the replacement cost to the entity was $120 each.Also assume that the replacement cost of the 50 remaining items of inventory at year end was $130.Under the Edwards and Bell approach to current cost accounting,what portion of operating profit would be available for dividends?

Which of the following statements is correct under our current accounting standards?

The following procedures are required to apply the Current Purchasing Power Accounting (CPPA)model in order to adjust the financial statements to reflect price-level adjusted financial statements. Determine the movement in net monetary assets from the beginning of the year compared with the end of the year. Reconcile opening and closing net monetary assets with the reasons for the changes. Determine when the movements in net monetary assets for each item took place,and then apply the appropriate price-level index to calculate current purchasing power adjusted amounts. The difference between the adjusted and unadjusted amount totals in the reconciliation is the loss of purchasing power. A price-adjusted Balance Sheet is then prepared,adjusting all the non-monetary assets with the end-of-year price index. In applying the CPPA model,if the price level index was 120 at the beginning of the year,150 at end of the year,and averaged 135 during the year,which of the following price-level indexes would be incorrect?

What is not a valid criticism of historical cost accounting?

Which of the following is a unique characteristic of the CoCoA model in comparison with other alternative accounting models?

What is included in 'income' according to the Conceptual Framework?

Assume that there are three types of commodities (A,B and C)that are consumed at the following base-year quantities and prices,as shown in the table below: What is the price index at the end of 2008?

Which of the following is not a reason why alternative methods have not gained acceptance or been formally implemented?