The Following Procedures Are Required to Apply the Current Purchasing

question 7

Multiple Choice

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. 1.Determine the movement in net monetary assets from the beginning of the year compared with the end of the year.
2) Reconcile opening and closing net monetary assets with the reasons for the changes.
3) 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.
4) The difference between the adjusted and unadjusted amount total in the reconciliation is the loss on purchasing power.
5) 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) 150/135
• B) 135/150
• C) 150/120
• D) 135/120

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Definitions:

Fact Sheet

A concise presentation of key information, data, and statistics on a specific subject, often arranged for quick reference.

Prejudice

Preconceived opinion not based on reason or actual experience, often directed towards people or groups.

Outgroup

A social group with which an individual does not identify, often seen as different from or in competition with one's own ingroup.

Cohesive Group

A group in which members exhibit strong bonds, loyalty, and mutual support, often leading to higher group effectiveness.