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Prepare trading account by current cost accounting method and current purchasing power method.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 3RE: Refer to RE22-2. Assume the pretax cumulative effect adjustment is 50,000. Prepare the journal entry...

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Question

January 1, 2021- Purchase 1,000 units costing 1,500

January 31, 2021- Sold 800 units for 4,000 and replaced them with units costing2,800.

February 29, 2021- Sold 400 units for 2,000. Purchased 100 units costing 400.

March 31, 2021- Sold 400 units for 2,200 & purchased 200 units costing 1,000.

The following Price Indicies are gives:

2021

January 1 200

January 31. 220

February 29. 230

March 31. 240

Prepare trading account by current cost accounting method and current purchasing power method.

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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