Reference no: EM132769542

Problem 1: During a period of deflation, an entity would have the greatest gain in general purchasing power by holding

a. Cash

b. Property, plant and equipment

c. Accounts payable

d. Mortgage payable

Problem 2: Which of the following observation regarding the amounts reported in financial statements that have been adjusted for general price level changes is valid?

a. The amount obtained by adjusting an asset's cost for general price level change usually approximates the current fair value.

b. The amount adjusted foe general price level change is not departure from historical cost,

c. When an inventory increases and prices are rising, FIFO inventory accounting has the same effect on financial statements as amounts adjusted for general price level changes.

d. When inventory remains constant and prices are rising, average cost inventory accounting has the same effect on financial statements as amount adjusted for the general price level changes.