FINANCIAL REPORTING & CHANGING PRICES

Question 1

What describes the proper accounting for losses when nonmonetary assets are exchanged for other nonmonetary assets?

Answer 1

A loss is recognized immediately, because assets received should not be valued at more than their cash equivalent price.

Question 2

When computing purchasing power gain or loss on net monetary items, which of the following accounts is classified as nonmonetary?

Answer 2

Accumulated depreciation of equipment

Question 3

During a period of inflation in which a liability account balance remains constant, which of the following occurs?

Answer 3

A purchasing power gain, if the item is a monetary liability

Question 4

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 4

Monetary Liability

Question 5

Denominated in dollars regardless of changes in specific prices or the general price level are fixed under

Answer 5

Monetary

Question 6

During a period of inflation,what will result in a loss of purchasing power

Answer 6

Holding Monetary Assests

Question 7

During a period of inflation, holding monetary liabilities will result in a _______ of purchasing power

Answer 7

Gain

Question 8

Dollars restated based on calculations of CPI ratios

Answer 8

Constant dollars

Question 9

Unadjusted for changes in purchasing power

Answer 9

Nominal dollars

Question 10

based on current cost without restatement for changes in the general purchasing power of the dollar

Answer 10

Current Cost/Nominal Dollar

Question 11

Uses a general price index to adjust historic cost; it retains the historic cost basis

Answer 11

Historic cost/Constant Dollars

Question 12

Is the basis for GAAP used in the primary financial statements

Answer 12

Historic cost/ Nominal dollars