Additional Information:The index of general price changes rose steadily from 200 on 1 January 2021 to220 on 31 December 2022.(ii) Inventory shown in the statement of financial position of 31 December 2021 wasacquired when the price level index was 200.(iii) Equipment shown in the statement of financial position of 31 December 2021 wasacquired when the price level index was 200.(iv) Revenues and expenses during the year ended 31 December 2022 occurred at anaverage price level index of 215.(v) Inventory shown in the statement of financial position at 31 December 2022 wasacquired at price level of 220.Required:(1) Prepare Current Purchasing Power (CPP) financial statements for Steven Ltd forthe year ended 31 December 2022.(2) Critically evaluate historical cost accounting system. (Current Purchasing Power Accounting, A Normative Accounting Theory)Financial statements in historical cost of Steven Ltd are shown as follows:Statement of financial performance for year ended 31 December 2022Sales1,650,000Less Cost of goods sold1,285,000Gross profit365,000LessOperating expenses156,000201,60045,600163,400Statement of financial position at the end of financial year31-Dec31-Dec20212022150,000175,000165,000870,0001,360,000170,000450,000740,0001,360,000DepreciationNet profitAssetsCurrent assetsCashAccounts receivableInventoryNon-current assetsEquipment(netdepreciation)Total assetsLiabilitiesCurrent liabilitiesAccounts payableShareholders' equityShare capitalRetained profitTotal liabilities and equityof+317,000350,000210,000824,400 +1,701,400348,000450,000903,4001,701,400K

Current Purchasing Power (CPP).: It refers to convert the historical values/ measured of the items…

) The index of general price changes rose steadily from 200 on 1 January 2021 to 220 on 31 December 2022. i) Inventory shown in the statement of financial position of 31 December 2021 was acquired when the price level index was 200. ii) Equipment shown in the statement of financial position of 31 December 2021 was acquired when the price level index was 200. iv) Revenues and expenses during the year ended 31 December 2022 occurred at an average price level index of 215. v) Inventory shown in the statement of financial position at 31 December 2022 was acquired at price level of 220

) The index of general price changes rose steadily from 200 on 1 January 2021 to 220 on 31 December 2022. i) Inventory shown in the statement of financial position of 31 December 2021 was acquired when the price level index was 200. ii) Equipment shown in the statement of financial position of 31 December 2021 was acquired when the price level index was 200. iv) Revenues and expenses during the year ended 31 December 2022 occurred at an average price level index of 215. v) Inventory shown in the statement of financial position at 31 December 2022 was acquired at price level of 220

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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