Correct Answer: C

Explanation: FASB # 89 suggests that income from operations be reported on a current cost basis. The adjustment of depreciation expense and cost of goods sold to a current cost basis may be made by using current cost, exit value, capitalization of net cash flows, or by applying specific indexes to the historical cost. Specific price indexes are indexes compiled specifically for inventory or for plant and equipment. Specific indexes should not be confused with a general index such as the CPI-Urban which is normally used to adjust historical cost for the change in price level.

"Fair value accounting" is incorrect because current cost of goods would not be the same as fair value (selling price).
"General purchasing power accounting" and "Current cost/general purchasing power accounting" are incorrect because both deal with the calculation of purchasing power.

Today’s question: BEC

A parent corporation owned more than 90% of each class of the outstanding stock issued by a subsidiary corporation and decided to merge that subsidiary into itself. Under the Revised Model Business Corporation Act, which of the following actions must be taken?

A)   The subsidiary corporation's board of directors must pass a merger resolution.

B)   The subsidiary corporation's dissenting stockholders must be given an appraisal remedy.

C)   The parent corporation's stockholders must approve the merger.

D)   The parent corporation's dissenting stockholders must be given an appraisal remedy.

Correct Answer: B

Explanation: When a corporation owns 90% or more of the shares of a subsidiary corporation, the subsidiary may be merged into the parent corporation without the approval of the stockholders of either the parent corporation or the subsidiary corporation and without the approval of the subsidiary corporation's board of directors. This is called a short-form merger. In a short-form merger stockholders of the subsidiary corporation have dissenters' rights, but the stockholders of the parent corporation do not.

Today’s question: AUD

Which of the following procedures is least likely to be performed before the balance sheet date?

A)   Testing of internal control over cash

B)   Confirmation of receivables

C)   Search for unrecorded liabilities

D)   Observation of inventory