Inflation accounting is favored by modern financial analysts over the historical cost accounting as historical cost accounting suffers from the following disadvantage/s a. Understated depreciation and understated cost of sales lead to overstatement of profits, compounded by price inflation b. Understatement of assets will depress a company s share price and make it vulnerable to takeover c. All the given statements are the disadvantages of historical cost accounting that lead to favor inflation accounting. d. Overstated profits can lead to too much being distributed to shareholders, leaving insufficient amounts for investments.
Inflation accounting is favored by modern financial analysts over the historical cost accounting as historical cost accounting suffers from the following disadvantage/s a. Understated depreciation and understated cost of sales lead to overstatement of profits, compounded by price inflation b. Understatement of assets will depress a company s share price and make it vulnerable to takeover c. All the given statements are the disadvantages of historical cost accounting that lead to favor inflation accounting. d. Overstated profits can lead to too much being distributed to shareholders, leaving insufficient amounts for investments.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter6: Accounting Quality
Section: Chapter Questions
Problem 2QE
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Inflation accounting is favored by modern financial analysts over the historical cost accounting as historical cost accounting suffers from the following disadvantage/s
a.
Understated depreciation and understated cost of sales lead to overstatement of profits, compounded by price inflation
b.
Understatement of assets will depress a company s share price and make it vulnerable to takeover
c.
All the given statements are the disadvantages of historical cost accounting that lead to favor inflation accounting.
d.
Overstated profits can lead to too much being distributed to shareholders, leaving insufficient amounts for investments.
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