Q1 Hyperinflation PDF

Under the stable monetary assumption, inflation is ignored.
True
According to PAS 29 – Financial Reporting in Hyperinflationary Economies,

hyperinflation and inflation are the same.False
An entity whose functional currency is that of a hyperinflationary economy does not

need to restate its items of property, plant and equipment that are measured under the
revaluation model if the revaluation was made during the current period. False
When an entity’s functional currency is the currency of a hyperinflationary economy,

monetary assets and monetary liabilities in the comparative financial statements are
restated. False
The exception to the stable monetary assumption is hyperinflation. True
Advances, prepayments and unearned items not collectible or payable in fixed or

determinable amount of cash are non-monetary items. True
During a period of hyperinflation, an increase in monetary assets held will most likely
result to a gain in net monetary position. False
PAS 29 – Financial Reporting in Hyperinflationary Economies, does not establish an

absolute rate at which hyperinflation is deemed to arise. True
General price level changes and the purchasing power of money have a direct
relationship, meaning if general price level increases, the purchasing power of money
also increases. F
Then there is inflation, it means that the purchasing power of money has increased. F
MC
The gain or loss on net monetary position is computed as
ANS.
The difference between the “net monetary items, end - historical” and “net monetary
items, end – restated.” This amount is recognized in profit or loss.
Which of the following is restated by multiplying indices under the constant peso
accounting?
Group of answer choices
Share Premium
Investment in Bonds
Petty Cash Fund
Retained Earnings
In case of hyperinflation, holding which of the following is more favorable to the entity?
Monetary liabilities
Money
Monetary assets
Any of these
A
When restating financial statements in accordance with PAS 29 – Financial Reporting in
Hyperinflationary Economies,
Both monetary and nonmonetary items are restated.
Only nonmonetary items are restated.
Only nonmonetary items, statement of financial position amounts not already

expressed in terms of the measuring unit current at the end of the reporting period, are
restated.
Only monetary items are restated.
Under constant peso accounting, items are restated using this formula:
Historical cost x (Current price index ÷ Historical price index).
Revalued amount x (Current price index ÷ Historical price index).
Historical cost x (Current price index ÷ Historical price index*). *However, if it is

impracticable to determine this amount, the average price index may be used.
Historical cost x (Current price index ÷ Average price index).
Which of the following statements is incorrect?
According to PAS 29, the determination of the absolute rate at which hyperinflation is deemed to arise is
a matter of judgment.
According to PAS 29, the financial statements of an entity whose functional currency is that of a
hyperinflationary economy shall restate its financial statements in terms of the measuring unit current
at the end of the reporting period only if those financial statements are prepared under the historical
cost basis.
Entities whose functional currency is that of a hyperinflationary economy shall disregard the concept of
stable monetary unit assumption.
Only nonmonetary items, statement of financial position amounts not already expressed in terms of the
measuring unit current at the end of the reporting period, are restated when using the constant peso
accounting.
Which of the following statements is true?
All items that cannot be classified as monetary items are nonmonetary items including “retained
earnings”.
Advances from customers, unearned rent, deferred revenues, and the like are considered nonmonetary
items under PAS 29.
Only financial assets and liabilities measured at fair value are considered monetary items.
Financial assets and liabilities are measured at amortized cost are nonmonetary items because amortize
cost fluctuates in response to changes in effective interest rates.
B
An entity is trying to determine which assets and which liabilities are monetary and nonmonetary.
Which of the following assets or liabilities are nonmonetary?
Taxes payable
Trade receivables
Prepaid assets
Accrued expenses and other payables
Which of the following is not one of the indicators of hyperinflation under PAS 29?
The cumulative inflation rate for the current year is approaching, or exceeds, 100%.
The general population prefers to keep its wealth in nonmonetary assets or in a relatively stable foreign
currency.
Interest rates, wages and prices are linked to a price index.
The general population regards monetary amounts not in terms of the local currency but in terms of a
relatively stable foreign currency.
A
These are money held and items to be received or paid in fixed or determinable amount of money.
Monetary items
Financial assets
Money matters
Monetary assets
The following items were among those that appeared on Ruby Co.’s books at the end of 2021:
Merchandise inventory
P 600,000
Loans to employees
20,000
What amount should Ruby Company classify as monetary assets in preparing constant peso financial
statements?
P20,000
P620,000
P600,000
P0
H Company operates under a hyperinflationary economy. H Company computed the increase in current
cost inventory as follows:
Increase in current cost (nominal pesos)
P 15,000
Increase in current cost (constant pesos)
12,000
What amount should H Company disclose as the inflation component of the increase in the current cost
of inventories?
P27,000
P3,000
P15,000
P12,000
The following schedule lists the general price – level index at the end of each of the five indicated years:
2025
100
2026
110
2027
115
2028
120
2029
140
On January 1, 2026, S Company purchased equipment for P300,000. The equipment was being
depreciated over an estimated life of 10 years on the straight – line method, with no estimated residual
value. On December 31, 2029, the equipment was sold for P200,000. The historical cost/constant peso
statement of profit or loss prepared for the year ended December 31, 2029 should include how much
gain or loss from this sale?
P16,000 gain
P10,600 loss
P20,000 gain
P52,000 loss
The following were among those that appeared on B Company’s books at the end of the year:
Demand bank deposits
P 650,000
Net long-term receivables
400,000
Patents and trademarks
150,000
In preparing constant peso financial statements, how much should B Company classify as monetary
assets?
1,050,000 -sagot ko lang shai
LAND 132,000
POWER LOSS 600,000

50,000 GAIN
29. 100K LOSS
30.

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Under the stable monetary assumption, inflation is ignored.

According to PAS 29 – Financial Reporting in Hyperinflationary Economies,

An entity whose functional currency is that of a hyperinflationary economy does not

When an entity’s functional currency is the currency of a hyperinflationary economy,

The exception to the stable monetary assumption is hyperinflation. True

Advances, prepayments and unearned items not collectible or payable in fixed or

PAS 29 – Financial Reporting in Hyperinflationary Economies, does not establish an

The gain or loss on net monetary position is computed as

Group of answer choices

Petty Cash Fund

Group of answer choices

Group of answer choices

Both monetary and nonmonetary items are restated.

Only nonmonetary items are restated.

Only nonmonetary items, statement of financial position amounts not already

Only monetary items are restated.

Historical cost x (Current price index ÷ Historical price index).

Revalued amount x (Current price index ÷ Historical price index).

Historical cost x (Current price index ÷ Historical price index*). *However, if it is

Historical cost x (Current price index ÷ Average price index).

Which of the following statements is incorrect?

Group of answer choices

Which of the following statements is true?

Group of answer choices

Group of answer choices

Accrued expenses and other payables

Group of answer choices

Interest rates, wages and prices are linked to a price index.

Group of answer choices

Group of answer choices

Increase in current cost (nominal pesos)

Increase in current cost (constant pesos)

Group of answer choices

Group of answer choices

Demand bank deposits

Net long-term receivables

Patents and trademarks

1,050,000 -sagot ko lang shai

POWER LOSS 600,000

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Historical cost x (Current price index ÷ Historical price index). However, if it is