Activity 3.1.

Direction: Provide what is asked. Show your solution.

1. The following items were among those that appeared on Rubi Co.’s books at the end of 20x1:
Merchandise inventory P 600,000
Loans to Employees 20,000

What amount should Rubi classify as monetary assets in preparing constant peso financial statements? _________

2. The following assets were among those that appeared on Baird Co.’s books at the end of the year:

Demand bank deposits P 650,000

Net long-term receivables 400,000
Patents and trademarks 150,000

In preparing constant peso financial statements, how much should Baird classify as monetary assets? ___________

The next two items are based on the following information:

The following schedule lists the general price-level index at the end of each of the five indicated years:

20x5 100
20x6 110
20x7 115
20x8 120
20x9 140

3. In December 20x8, the Meetu Corporation purchased land for P 300,000. The land was held until December 20x9, when it
was sold for P 400,000. The historical cost/constant peso statement of profit or loss for the year ended December 31, 20x9,
should include how much gain or loss on this sale? ________________

4. On January 1, 20x6, the Silver Company purchased equipment for P 300,000. The equipment was being depreciated over an
estimated life of 10 years on the straight-line method, with no estimated residual value. On December 31, 20x9, the equipment
was sold for P 200,000. The historical cost/constant peso statement of profit or loss prepared for the year ended December
31, 20x9, should include how much gain or loss from this sale? _________________

5. The Chalk Company reported sales of P 2,000,000 in 20x6 and P 3,000,000 in 20x7 made evenly throughout each year. The
consumer price index during 20x5 remained constant at 100, and at the end of 20x6 and 20x7 it was 102 and 2014,
respectively. What should Chalk report as sales for 20x7 restated for general price-level changes? _____________

6. Lewis Company was formed on January 1, 20x6. Selected balances from the historical cost balance sheet at December 31,
20x7 were as follows:

Land (purchased in 20x6) P 120,000

Investment in nonconvertible bonds (purchased in 20x6, and expected to be held to maturity) 60,000
Long-term debt 80,000

The average Consumer Price Index was 100 for 20x6, and 110 for 20x7. In a constant peso balance sheet (adjusted for
changing prices) at December 31, 20x7, these selected account balances should be shown at
Land _______________ Investment _____________ Long-term Debt ____________________

7. On January 1, 20x8, Nutley Corporation had monetary assets of P 2,000,000 and monetary liabilities of P 1,000,000. During
20x8, Nutley’s monetary inflows and outflows were relatively constant and equal so that it ended the year with net monetary
assets of P 1,000,000. Assume that the Consumer Price Index was 200 on January 1, 20x8, and 220 on December 31, 20x8.
In end of year constant pesos, what is Nutley’s purchasing power gain or loss on net monetary items for 20x8?
______________

8. At both the beginning and end of the year, Lang Co.’s monetary assets exceeded monetary liabilities by P 3,000,000. On
January 1, the general price level was P 125. On December 31, the general price level was P 150. How much was Lang’s
purchasing power loss on net monetary items during the year? ______________