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Can some please kindly explain this F2 question regarding current cost???

current cost

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#1 cpacpa2013

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Posted 18 September 2013 - 03:39 AM

Could current cost financial statements report holding gains for goods sold during the period and holding gains on inventory at the end of the period?

    Good Sold Inventory a.

Yes

Yes

b.

Yes

No

c.

No

No

d.

No

Yes

Explanation

Choice "a" is correct. Yes - Yes. Current cost financial statements report holding gains for goods sold during the period and holding gains on inventory at the end of the period. They also include holding gains and losses on all other accounts in the financial statements.

 

I am completely lost as in what is the point of the question asked? I know that current cost is the present time price, usually the replacement cost, which is the price to purchase a replacement asset. What does it have to do with gain or loss???



#2 rukiddenmeh

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Posted 24 September 2013 - 10:44 PM

I think the key word here is holding gains, which are generally defined as increases in the replacement cost of the assets held. Because we are using current cost financial statements here, which would reflect these changes, the answer would be yes for both goods sold and inventory (this would also be same case for all other accounts in the financial statements).

 

Hope this clarified!