Inflation Accounting

Scenario An asset is acquired at a cost of $10,000 with a five-year sprightliness and no pass judgment salvage value. Straight-line wear and tear is considered appropriate. The asset was acquired on January 2, 2000. set major advocatees for the five geezerhood be:         2000         2001         2002         2003         2004 primed(p) asset index          light speed         95         108          cxx         125 General price index         100          cx         115         112         125 Compute the legitimate value wear and tear for for each one year. * What is the realized real retentivity hit for the geezerhood 2001 - 2004? * What would the holding gain be under EIP for the years 2001 - 2004? Historical Cost Accounting We bequeath start with the depreciation acc ording to historical cost report as a basis for the next calculations. The asset was purchased with a cost of $10,000 and a useful live of 5 years with no anticipated salvage value. We are also presumptuous straight-line depreciation which would effect in a depreciation of $10,000 shared out by 5 years equals $2,000 per year. The results are shown in the following table. indicate 1 General Price Level Adjustment cost are translated into current purchasing power dollars by compensateing set according to the general price index.

Calculations are performed based on Wolk, Dodd, and Tearney (2004), p 467. The factor that we use to coord inate values - I will call it the General Pr! ice Index doer or GPIF - is faced by . render calculation for 2002: . This is the prime(prenominal) step, see Exhibit 2. Exhibit 2 Next we solve the correct hearts for asset and depreciation by multiplying the historical amount by the GPIF, see Exhibit 3. Exhibit 3 To calculate adjusted cash amounts we mother to calculate a slight differently since we need to adjust from year to year or else of from base year to current year. The GPIF relative to... If you want to specify a full essay, govern it on our website: BestEssayCheap.com

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