CMU

Enrichment Learning Activity

Name: Eugene EJ C. Ramirez Date: March 31, 2022

Year and Section: 3rd - BSMA Instructor Prof. Jefferson Cruz
:
Module #: 1 Topic: REPORING IN HYPERINFLATIONARY
ECONOMIES

Directions:

Use the following information for the next seven questions:

SOBRIQUET NICKNAME Co. operates in a hyperinflationary economy. Its unrestated financial statements are provided
below:

SOBRIQUET NICKNAME Co.

Statement of financial position

As of December 31, 20x2

  20x2 20x1

ASSETS

Cash 80,000 60,000

Accounts receivable 160,000 120,000

Allowance for doubtful accounts (40,000) (20,000)

Inventory (at cost) 200,000 160,000

Land (at cost) 400,000 400,000

Building (at cost) 2,000,000 2,000,000

Accumulated depreciation (800,000) (600,000)

Total assets 2,000,000 2,120,000

LIABILITIES AND EQUITY

Accounts payable 80,000 188,000

Loan payable 400,000 320,000

Total liabilities 480,000 508,000

Share capital 1,200,000 1,200,000

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Enrichment Learning Activity

Retained earnings 320,000 412,000

Total equity 1,520,000 1,612,000

Total liabilities and equity 2,000,000 2,120,000

SOBRIQUET NICKNAME Co.

Statement of profit or loss and other comprehensive income

For the year ended December 31, 20x2

Sales 1,600,000

Cost of sales:

Inventory, January 1 160,000

Purchases 1,200,000

Total goods available for sale 1,360,000

Inventory, December 31 (200,000) (1,160,000)

Gross income 440,000

Depreciation expense (200,000)

Distribution costs (140,000)

Bad debts expense (20,000)

Finance cost (40,000)

Profit before tax 40,000

Income tax expense (12,000)

Profit for the year 28,000

Other comprehensive income -

Total comprehensive income for the year 28,000

Additional information:

 The land and building were acquired on April 1, 20x0.

 The share capital was issued on March 1, 20x0.

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Enrichment Learning Activity

 Sales, purchases, and expenses (except interest expense) were incurred evenly during the year.
 Interest expense was recognized and paid on December 31, 20x2.
 Dividends of ₱120,000 were declared and paid on December 31, 20x2.
 Selected values of general price indices (CPI) are shown below:
March 1, 20x0……………………………………………...100
April 1, 20x0………………………………………………..100
Average for 20x1…………………………………………..110
December 31, 20x1…………………..………….…………120
Average for 20x2…………………………………………..125
December 31, 20x2………………………………………….140
1. How much is the restated total assets in the 20x1 comparative statement of financial position?
20x1 Restated
Cash 70,000
AR 140,000
Allowance for doubt. Acc. (23,333)
Inventory (at cost) 203,636
Land (at cost) 560,000
Building (at cost) 2,800,000
Accu. Dep. (840,000)
TOTAL ASSETS: 2,910,303

2. How much is the restated total liabilities in the 20x1 comparative statement of financial position?
20x1
Accounts Payable 219,333
Loans Payable 373,333
TOTAL LIABILITIES: 592,667

3. How much is the restated total assets in the 20x2 statement of financial position?
20x2 Restated
Cash 80,000
AR 160,000
Allowance for doubt. Acc. (40,000)
Inventory (at cost) 244,000
Land (at cost) 560,000
Building (at cost) 2,800,000
Accu. Dep. (1,120,000)
TOTAL ASSETS: 2,644,000

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Enrichment Learning Activity

4. How much is the restated total liabilities in the 20x2 statement of financial position?
20x2
Accounts Payable 80,000
Loans Payable 400,000
TOTAL LIABILITIES: 480,000

5. How much is the restated profit?

Restated
Sales 1,792,000
Cost of sales:
Inv. Jan, 1 203,636
Purchases 1,344,000
Total goods available for sale 1,547,636
Inv. Dec, 31 (244,000) (1,323,636)
Gross income 468,364
Dep. Expense (280,000)
Distribution costs (156,800)
Bad debts expense ( 20,000)
Finance Cost (40,000)
Gain on net monetary position 28,240
Profit before tax (196)
Income tax expense (13,440)
Profit for the year (13,636)
Other Comprehensive income -
Total comprehensive income for the yr. (13,636)

6. How much is the gain (loss) on net monetary position (purchasing power gain or loss)?

Gain on net monetary position 28,240

7. How much is the restated retained earnings on December 31, 20x2?

20x2

Retained Earnings 504,000

SY2021-2022 1st Term Homework

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Enrichment Learning Activity

The next two items are based on the following information:

Rice Wholesaling Corp. accounts for inventory on a FIFO basis. There were 8,000 units in inventory on January 1, 20x3.
Costs were incurred and goods purchased as follows during 20x3:

20x3 Historical costs Units purchased Units sold

1st qtr. 410,000 7,000 7,500

2nd qtr. 550,000 8,500 7,300

3rd qtr. 425,000 6,500 8,200

4th qtr. 630,000 9,000 7,000

Totals 2,015,000 31,000 30,000

Rice estimates that the current cost per unit of inventory was ₱57 at January 1, 20x3, and ₱71 at December 31, 20x3.

8. How much is the December 31, 20x3 inventory restated to current cost?

Beginning inventory – units 8,000

Units purchased 31,000
Total goods available for sale – units 39,000
Units sold 30,000
Ending inventory in units 9,000
Current cost per unit 71
Ending inventory - current cost 639,000

9. How much is the 20x3 cost of goods sold restated to current cost?

Units sold 30,000

Average current cost [(71 + 57) ÷ 2] 64
Cost of sales - current cost 1,920,000

SY2021-2022 1st Term Homework

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Enrichment Learning Activity

10. Fair Value, Inc., paid ₱1,200,000 in December 20x7 for certain of its inventory. In December 20x8, one half of the
inventory was sold for ₱1,000,000 when the replacement cost of the original inventory was ₱1,400,000. Ignoring
income taxes, what amount should be shown as the total gain resulting from the above facts in a current value
accounting income statement for 20x8?

Sales 1,000,000
Historical cost of portion sold (1,200,000 x 1/2) (600,000)
Realized gain 400,000
Current cost of unsold portion (1,400,000 x 1/2) 700,000
Historical cost of portion unsold (1,200,000 x 1/2) (600,000)
Unrealized gain 100,000
Total gain 500,000

SY2021-2022 1st Term Homework