Current Cost Accounting
Current Cost Accounting
Simple company purchased land on January 1, 2018 for P500,000 cash. On December 31, 2018, the land has a
current replacement cost of P600,000.
On December 31, 2019, the land has a current replacement cost of P750,.000.
The entity sold the land for P1,000,000 cash on December 31, 2020. On this date , the current replacement cost of
the land is P800,000.
1. What is unrealized holding gain to be reported in 2018?
a. 600,000
b. 500,000
c. 100,000
d. 0
2. What is unrealized holding gain to be reported in 2019?
a. 250,000
b. 150,000
c. 100,000
d. 0
3. What is the realized holding gain to be reported in 2020?
a. 300,000
b. 250,000
c. 50,000
d. 0
4. What is gain on sale of land to be reported in 2020?
a. 500,000
b. 250,000
c. 200,000
d. 150,000
Question 1 answer C
For non-depreciable asset or land, unrealized holding gain or loss is the difference between the current cost and
historical cost of the asset unsold at the end of the year.
Question 2 answer B
For non-depreciable asset, realized holding gain or loss is the difference between current cost at the same time of
sale and historical cost of the asset sold.
Question 4 answer C
Problem 2
Depreciation is computed using the straight line method. The estimated useful life of the equipment in 5 year with
no residual value.
1. What is the amount of depreciation that should be reported in the current cost income statement for
2018?
a. 1,500,000
b. 1,250,000
c. 1,000,000
d. 2,500,000
a. 500,000
b. 250,000
c. 300,000
d. 0
a. 1,250,000
b. 2,500,000
c. 2,000,000
d. 1,500,000
Question 1 answer B
Total 12,500,000
Question 2 answer B
For depreciable asset, realized holding gain or loss is the difference between depreciation based on average
current cost and depreciation based on historical cost.
Question 3 answer C
For depreciable asset, unrealized holding gain or loss is the difference between net current cost and carrying
amount of the asset.
Problem 3
Weaver Company reported the following property, plant and equipment on December 31,2018:
Year Acquired Percent depreciated Historical cost Current cost
2016 30 1,000,000 1,400,000
2017 20 300,000 380,000
2018 10 400,000 440,000
The entity calculated depreciation at 10% straight line. There were no disposals of property.
A full year depreciation was charged in the year of acquisition and no depreciation in the year of disposal.
What total amount should be reported as net current cost of the property, plant and equipment on December
31,2018?
a. 1,160,000
b. 1,300,000
c. 1,680,000
d. 1,820,000
Solution 3 answer C
1,680,000
Problem 4
The current cost per unit of inventory was P58 on January 1, 2018 and P72 on December 31,2018.
1. In the income statement for 2018 restated to current cost, what amount should be reported as cost of
goods sold?
a. 5,040,000
b. 4,550,000
c. 4,410,000
d. 4,060,000
2. In the income statement for 2018 restated to current cost, what amount should be reported as realized
holding gain?
a. 980,000
b. 430,000
c. 920,000
d. 560,000
3. Under current cost accounting , what amount should be reported as inventory on December 31,2018?
a. 2,600,000
b. 2,880,000
c. 2,520,000
d. 2,320,000
4. What amount should be reported as unrealized holding gain on December 31, 2018?
a. 560,000
b. 360,000
c.180,000
d. 80,000
Solution 4
Question 1 answer B
Total 130
Question 2 answer B
Question 4 answer B
Problem 5
Dwane Company disclosed supplemental information on the effects of changing prices. The entity
computed the following increase in current cost of inventory:
What amount should be disclosed as the inflation component of the increase in current cost?
a. 2,700,000
b. 1,500,000
c. 1,200,000
d. 300,000
Solution 5 answer D
The increase in current cost nominal peso is the total increase including increase caused by inflation.
The increase in current cost constant peso is the total increase after eliminating the increase caused by inflation.
Theories
a. Excess of cost of goods sold at average current cost over cost of goods sold at historical cost.
b. Excess of cost of goods sold at historical cost over cost of goods sold at average current cost.
c. Excess of cost of goods sold at current cost over cost of goods sold at historical cost.
d. Excess of cost of goods sold at historical cost over cost of goods sold at current cost.
Answer: a. Excess of cost of goods sold at average current cost over cost of goods sold at historical cost.
a. Excess of ending inventory at average current cost over ending inventory at historical cost.
b. Excess of ending inventory at historical cost over ending inventory at average current cost.
c. Excess of ending inventory at current cost over ending inventory at historical cost.
d. Excess of ending inventory at historical cost over ending inventory at average current cost.
Answer: c. Excess of ending inventory at current cost over ending inventory at historical cost
a. Current cost
b. Average current cost
c. Historical cost
d. Carrying amount
Answer: a. Excess of depreciation on average current cost over depreciation on historical cost.
Answer: a. Excess of net current cost of asset over the carrying amount.
7. The realized holding gain for nondepreciable asset is equal to
Answer: b. Excess of current cost at the date of sale over historical cost.
a. General price level gains or losses are recognized on net monetary items.
b. Amounts are always stated in common purchasing power unit of measurement.
c. All items in the statement of financial position are different from historical cost.
d. Holding gains are recognized.
10. An entity prepared financial statements on a current cost basis. How should the entity compute cost of
goods sold on a current cost basis?
a. Number of units sold times average current cost of units during the year.
b. Number of units sold times current cost of units at year- end.
c. Number of units sold times current cost of units at the beginning of the year.
d. Beginning inventory at current cost plus cost of goods purchased less ending inventory at current cost.
Answer: a. Number of units sold times average current cost of units during the year.
11. Current cost financial statements should report holding gains during the period for which of the following?
a. Goods sold
b. Inventory
c. Goods sold and inventory
d. Neither good sold nor inventory