Deck 7: Current Purchasing Power Accounting

Question 1

The purpose of CPP is to:

A)Maintain the capital of the firm in terms of purchasing power
B)Give a realistic valuation for profit in the current period
C)Provide comparability across different companies
D)Reflect the movement in value of different assets

Answer 1

A

Question 2

A unit of money is an artificial construct.

Answer 2

True

Question 3

Which of the following is NOT an advantage of current purchasing power accounting?

A)All necessary units are restated in terms of a common measuring unit
B)It distinguishes between gains or losses on monetary liabilities or assets and 'real' gains or losses through trading activities
C)It requires only a simple objective adjustment to HC accounts
D)It is clear what CPP units are since they are the same as monetary units

Answer 3

D

Question 4

When,in general,prices are rising it is better to delay purchasing fixed assets.

Question 5

Current purchasing power calculations do not alter the basis of valuation.

Question 6

Current purchasing power calculations use specific indices for different classes of asset.

Question 7

Under the static view,assets in the balance sheet should be valued at:

A)Historic cost
B)Replacement cost
C)Opportunity cost
D)Net realisable value

Question 8

We placed (at December 31)in 20X1 €100 in an investment that has paid out €115 on December 31,20x4.Inflation has been 4% per annum.How much better off are we?

A)€7
B)€3
C)€5
D)- €5

Question 9

Which of the following is NOT a monetary item?

A)Cash
B)Inventory
C)Debtors
D)Creditors

Question 10

Current purchasing power accounting is an acceptable approach in the USA.