[Anonymous]

Becker Question –

In its financial statements, Hila Co. discloses

supplemental information on the effects of changing

prices. Hila computed the increase in current cost of

inventory as follows:

Increase in current cost (nominal dollars) $15,000

Increase in current cost (constant dollars) $12,000

What amount should Hila disclose as the inflation

component of the increase in current cost of inventories?

a. $3,000

b. $12,000

c. $15,000

d. $27,000

Can anyone help me with a better explanation?

[Anonymous]

the question asks for the inflation part.

“nominal” is always adjusted for inflation

“constant” is always historical cost

therefore, the increase is the difference.

one of the ways to determine constant to nominal is by: constant x current dollar/base dollar = nominal dollars

[Author]

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