DR. FE R.

OCHOTORENA HYPERINFLATION & CURRENT COST ACCOUNTING

HYPERINFLATION
1. The following liabilities are reported in the Statement of Financial Position:
Accounts payable 1,000,000 Unearned revenue 300,000
Accrued expenses 500,000 Advances from customers 1,200,000
Bonds payable 3,000,000 Estimated warranty liability 200,000
Finance lease liability 4,000,000 Deferred tax liability 400,000
REQUIRED: Compute for the total monetary liabilities.
2. The following assets are reported in the Statement of Financial Position at year end :
Cash in bank 2,000,000 Patents 1,000,000
Accounts receivable 4,000,000 Advances to employees 200,000
Inventory 1,500,000 Advances to suppliers 400,000
FA @FVTPL 500,000 Prepaid expenses 100,000
REQUIRED: Compute for the total monetary assets.
3. ABC Co. was formed on January 1, 2008. The following balances from historical cost statement
of financial position on December 31, 2014.
Land (purchased on January 1, 2008) 1,000,000
Investment in bonds (purchased on 1/2/2011 and measured at amortized cost 1,500,000
Long term debt (issued 1/1/2008) 2,000,000
The general price index was 120 on 1/1/2008, 150 on 1/1/2011 and 300 on 12/31/2014.
REQUIRED: Compute the restated amounts of the above assets for purposes of hyperinflationary SFP.
4. The statement of financial position on 12/31/2014 of XYZ Co. which is operating in a
hyperinflationary economy reported the following:
Historical
Property, plant and equipment P 900,000
Inventory 2,700,000
Cash 350,000
Share capital issued 12/31/2010 400,000
Noncurrent liabilities 500,000
Current liabilities 700,000
Retained earnings 2,350,000
The general price index had moved on December 31 of each year as follows 2010-100, 2011-
130, 2012-150, 2013-240 and 2014 -300. The property, plant and equipment were purchased
on 12/31/12. The non-current liabilities were loans raised on 12/31/13.
REQUIRED: Compute the total assets, total liabilities and equity in accordance with PAS29.
5. XYZ reported the following assets in the statement of financial position at year end:
Demand bank deposit 3,000,000 Inventory 2,500,000
Net long-term receivables 2,000,000 Loans to employees 300,000
Patent and trademark 1,000,000 Deferred tax asset 1,500,000
REQUIRED: Compute the total monetary assets
6. The following balances were excerpted from the December 31, 2014 trial balance:
Cash 400,000 Accounts payable 600,000
Accounts receivable 800,000 Bonds payable 4,000,000
Allowance for doubtful accounts 50,000 Depreciation-Building 300,000
Land 1,800,000 Inventory-12/31/14 1,200,000
Building 7,500,000 (average basis)
Accumulated Depreciation 3,000,000 Sales 6,000,000
Purchases 4,800,000
During 2014, the average price index is 240 and the index one December 31, 2014 is 360. The
land was purchased on 12/31/2008 when the index was 90. The building was completed on
December 31, 2009 when the index was 100. The bonds were issued on 1/2/2008 when the
index was 120.
REQUIRED. Restate the account balances in a statement of financial position of the entity operating in
a hyperinflationary economy.

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DR. FE R. OCHOTORENA HYPERINFLATION & CURRENT COST ACCOUNTING

7. DEF Company provided the following historical income statement data for 2014.
Sales 5,000,000
Inventory, 1/1 350,000
Purchases 2,500,000
Inventory – 12/31 500,000
Expenses 2,000,000
Depreciation 2,000,000
Sales are earned and expenses are incurred evenly throughout the year. Inventory was acquired
during the last week of each year. Depreciable assets have a five-year life and were acquired on
1/1/2011. The index numbers are 125 on 1/1/2011, 140 on 1/1/2014, and 360 on 12/31/2014.
REQUIRED: Compute for net income or net loss for the year ended12/31/2014 restated for general
price change.
8. The following information on 12/31/2014 for GHI company were as follows:
Cash 2,000,000 Share capital 4,000,000
Trade and other receivables 2,600,000 Revaluation surplus 400,000
Property, plant and equipment 4,600,000 Retained earnings 3,000,000
Trade and other payables 1,800,000
The general price index numbers are 112 on 1/1/2011 which is the date of incorporation, 125 on
12/31/13, and 280 on 12/31/14. The property, plant and equipment were acquired on
1/1/2011 but were revalued on 12/31/2013.
REQUIRED: Compute for the total assets, liabilities and equity on December 31, 2014 adjusted for
general price change.
9. JKL provided the following accounts on December 31, 2014 based on historical cost:
Cash 100,000 Equipment 500,000
Accounts Receivable 1,200,000 Accu. Depreciation-Equip (250,000)
Inventory(most recent acquisition) 800,000 Accounts payable 600,000
Land 400,000 Share capital-issued 1/1/09 2,000,000
Building 1,000,000 Retained earnings 950,000
Accumulated depreciation-Building ( 200,000)
Date Acquired Index Number
Land January 1,2009 100
Building January 1, 2009 100
Equipment January 1, 2011 125
End of reporting period December 31, 2014 260
Average index during 2014 240
REQUIRED: Compute for total assets, liabilities, and equity on December 31, 2014 restated for general
price change.
10. MNO provided the following information for 2014:
Non-monetary assets – January 1 880,000
Sales 3,000,000
Purchases 1,200,000
Expenses 900,000
Income Tax 600,000
Cash dividend paid on 12/31/14 200,000
The sales, purchases, expenses, and income tax accrued evenly during the year. The index
numbers are 110 on January 1 and 140 on December 31.
REQUIRED: Compute the gain or loss on purchasing power for 2014.

CURRENT COST ACCOUNTING

11. PQR reported the following in relation to land:
 The entity purchased land on January 1, 2014 for P500,000 cash. On December 31,
2014, the land has a current replacement cost of P600,000.
 On December 31, 2015, the land has a current replacement cost of P750,000.
 The entity sold the land for P1,000,000 cash on December 31, 2016. On this date, the
current replacement cost of the land is P800,000.
a. What is the unrealized holding gain to be reported in 2014?
b. What is the unrealized holding gain to be reported in 2015?
c. What is the realized holding gain to be reported in 2016?

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DR. FE R. OCHOTORENA HYPERINFLATION & CURRENT COST ACCOUNTING

d. What is the gain on sale of land to be reported in 2016?

12. STU acquired an equipment on 1/1/2014 for P5,000,000. Depreciation is computed using the
straight line method. The estimated useful life of the equipment is 5 years with no salvage
value. A specific price index applicable to the equipment was 150 on 1/1/2014 and 225 on
12/31/14.
a. What amount of depreciation should be reported in the historical cost income
statement for 2014?
b. What amount of depreciation should be reported in the current cost income
statement for 2014?
c. What is the realized holding gain on the equipment to be reported in 2014?
d. What is the unrealized holding gain on the equipment to be reported in 2014?

13. XYZ reported the following information with respect cost of goods sold for 2014:
Units Historical Cost
Inventory – January 1 10,000 P 530,000
Purchases 45,000 2,790,000
Available for sale 55,000 3,320,000
Inventory – December 31 (15,000) ( 945,000)
Cost of goods sold 40,000 2,375,000
The current cost per unit of inventory was P58 on January 1, 2014 and P72 on December 31,
2014.
a. In the statement of financial positon restated to current cost, what is the
inventory on December 31, 2014?
b. What is the unrealized holding gain on inventory for 2014?
c. In the income statement restated to current cost, what is the cost of goods sold
for 2014?
d. In the income statement restated to current cost, what is the realized holding gain
from the inventory sold in 2014?
14. FRO used FIFO. There were 8,000 units on January 1, 2014 costing P400,000.
Historical cost Units purchased Units sold
st
1 Quarter P410,000 7,000 7,500
2nd quarter 550,000 8,500 7,300
rd
3 Quarter 425,000 6,500 8,200
4th Quarter 630,000 9,000 7,000
The current cost per unit of inventory was P57 on January 1,2014 and P71 on December 31,
2014.
a. What is the December 31, 2014 inventory at current cost?
b. What is the unrealized gain on inventory for 2014?
c. In the income statement restated to current cost, what is the cost of goods sold
for 2014?
d. What is the realized holding gain on inventory for 2014?
15. GEO provided the following information with respect to cost of goods sold for 2014:
Historical cost Units
Inventory, January 1 P1, 060,000 20,000
Purchases 5,580,000 90,000
Available for sale 6,640,000 110,000
Inventory, December 31 (2,520,000) ( 40,000)
Cost of goods sold 4,120,000 70,000
The current cost per unit of inventory was P58 on January 1, 2014 and P72 on December 31, 2014.
a. What is the inventory on December 31, 2014 at current cost?
b. What is the unrealized holding gain on ending inventory for 2014?
c. In the income statement restated to current cost , what is the cost of goods sold
for 2014?
d. What is the holding gain on inventory sold in 2014?
16. At the beginning of current year, JRO purchased 50,000 units at P100 per unit. During the year,
the entity sold 40,000 units at P180 per unit. The entity paid P700,000 for operating expenses.
The current replacement cost of the inventory at year end is P150 per unit.
a. What is the realized holding gain on inventory sold for the current year?

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DR. FE R. OCHOTORENA HYPERINFLATION & CURRENT COST ACCOUNTING

b. What is the unrealized holding gain on inventory for the current year?
c. What is the net income under current cost accounting for the current year?
d. What is the net income under the historical cost accounting for the current year?
17. JRO reported the following property, plant and equipment on December 31, 2014:
Year Acquired Percent Depreciated Historical cost Current Cost
2012 30 1,000,000 1,400,000
2013 20 300,000 380,000
2014 10 400,000 440,000
The entity calculated depreciation at 10% straight line. A full year depreciation is charged in the
year of acquisition. There were no disposals of property, plant and equipment. In the
statement of financial position restated to current cost, what is the net current cost of the
property, plant and equipment?

18. On December 31, 2014, G & J Company owned the following two assets:
Equipment Inventory
Current cost 100,000 80,000
Recoverable amount 95,000 90,000
The entity voluntarily disclosed information about current cost on December 31,2014. In such a
disclosure, what total amount should be reported for the equipment and inventory?