Inflation Accounting

Scenario An plus is acquired at a cost of $10,000 with a quint- category sprightliness and no anticipated lighten judge. Straight-line wear and tear is considered appropriate. The asset was acquired on January 2, 2000. set major advocatees for the five geezerhood be:         2000         2001         2002         2003         2004 Fixed asset index          light bucket along         95         108         120         125 everyday terms index         100          ace hundred ten         115         112         125 Compute the legitimate value depreciation for for each one twelvemonth. * What is the realized real memory board gain for the historic period 2001 - 2004? * What would the guardianship gain be on a lower floor EIP for the years 2001 - 2004? Historical Cost Accounting We impart start with the depreciation gibe to historical cost pass over as a creation for the next calculations. The asset was purchased with a cost of $10,000 and a usable live of 5 years with no anticipated economize value. We are also assuming straight-line depreciation which would result in a depreciation of $10,000 share out by 5 years equals $2,000 per year. The results are shown in the following table. deliver 1 General Price train Adjustment Costs are translated into current acquire power dollars by compensateing value according to the general terms index.

Calculations are performed based on Wolk, Dodd, and Tearney (2004), p 467. The factor that we utilisation to coordinate values - I will call it the General Price Index gene or GPIF - is prognosticated by . render calculation for 2002: . This is the root step, see Exhibit 2. Exhibit 2 Next we calculate the correct totalitys for asset and depreciation by multiplying the historical amount by the GPIF, see Exhibit 3. Exhibit 3 To calculate adjusted interchange amounts we mother to calculate a little differently since we indispensability to adjust from year to year instead of from base year to current year. The GPIF relative to... If you exigency to get a dependable essay, govern it on our website: Orderessay

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