5. What is the gain or loss on purchasing power for 2021? (if LOSS, put a negative (-) sign before the numerical value) The following information pertains to BLACK PANTHER Company for the year ended December31, 2021:Net monetary assets880,000Sales3,900,000Purchases2,340,000Expense975,000Income tax585,000Cash dividends -paid Dec. 31, 2021200,000Selected general price index numbers for 2021 are:January 1110December 31280Average195

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5. What is the gain or loss on purchasing power for 2021? (if LOSS, put a negative (-) sign before the numerical value)

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Concept explainers

Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.

Question

5. What is the gain or loss on purchasing power for 2021? (if LOSS, put a negative (-) sign before the numerical value)

The following information pertains to BLACK PANTHER Company for the year ended December
31, 2021:
Net monetary assets
880,000
Sales
3,900,000
Purchases
2,340,000
Expense
975,000
Income tax
585,000
Cash dividends -paid Dec. 31, 2021
200,000
Selected general price index numbers for 2021 are:
January 1
110
December 31
280
Average
195

Definition Definition Value of one unit of currency in terms of goods and services. Purchasing power refers to the ability of money to purchase goods and services at a particular point of time. As price levels in the economy increase, the purchasing power of one unit of currency decreases and vice versa.

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