PERTEMUAN 8
1. According to the Philips approach to accounting for inflation,
a. A gearing adjustment was used to reflect the extent to which the company
benefits from financing the purchase of capital assets by long term debt rather
than by equity.
b. Net realizable value was used to value assets, but replacement values were
not used.
c. Target costs were used for inventory rather than standard costs.
d. Physical assets were adjusted to current values, but there was no gain or loss
from holding net financial assets.
2. Which of the following countries have not experienced hyperinflation
a. Russia
b. Brazil
c. Mexico
d. United Kingdom
3. The effect of inflation on nonmonetary assets is reflected in the
I. Income statement
II. Balance sheet
a. Only I
b. Only II
c. Both I and II
d. Neither I or II
4. In high inflation economies financial liabilities are
a. Poor choices for MNEs to have on the balance sheet
b. Good choices for MNEs to have on the balance sheet
c. Questioned by labor unions
d. Restrictive for MNEs
5. Inflation is
a. Only experienced in developing countries
b. Most likely in the midst of a country’s recession
c. Never going to take place in a developed country
d. A worldwide phenomenon
6. General purchasing power accounting
a. Is required for U.S. companies if the inflation rate exceeds 10 percent three
years in a row.
b. Is designed to report accounts in units of the same purchasing power.
c. Assumes that the general level of inflation is irrelevant.
d. Is not permitted in British accounting.
7. Current value accounting
a. Is required for Dutch companies.
b. Takes into consideration that the prices of specific assets have changed.
c. Assumes that the purchasing power of money has gone up.
d. Is required by the FASB to be used in highly inflationary countries.
8. Assume that Costa Plc buys a machine in 2003 for $200,000 when the general price
index is 150. At the end of 2006, the index has risen to 210 and the current cost of
the machine is $300,000. What would be the unrealized holding gain in constant
purchasing power terms?
a. $100,000
b. $220,000
c. $120,000
d. $ 80,000
e. $ 20,000
f. $280,000
9. Assume that Costa Plc buys a machine in 2003 for $200,000 when the general price
index is 150. At the end of 2006, the index has risen to 210 and the current cost of
the machine is $300,000. What is the unrealized holding gain in current cost terms?
a. $100,000
b. $220,000
c. $120,000
d. $ 80,000
e. $ 20,000
f. $280,000
10. Assume that Costa Plc buys a machine in 2003 for $200,000 when the general price
index is 150. At the end of 2006, the index has risen to 210 and the current cost of
the machine is $300,000. What is the current cost gain or loss net of inflation?
a. $100,000
b. $220,000
c. $120,000
d. $ 80,000
e. $ 20,000