F2 - Financial Reporting and Changing Prices

Question 1

Financial statements prepared under which method includes adjustments for both specific price changes and general price level changes?

Answer 1

Current cost/Constant dollars

Question 2

Under what method are specific price indexes used to restate financial statements items?

Answer 2

Current cost accounting

Question 3

During a period of inflation, an account balance remains constant. When supplemental statements are being prepared, a purchasing power gain is reported if the account is a:

Answer 3

Monetary liability (such as a mortgage)

Question 4

What are the 4 methods of measuring prices and effects of price changes?

Answer 4

1) Historic Cost/Nominal Dollars (HCND)
2) Historic Cost/Constant Dollars (HCCD)
3) Current Cost/Nominal Dollars (CCND)
4) Current Cost/Constant Dollars (CCCD)