Venuti Entity (VE) began operations on January 1, 20X7, when its owner contributed $2,000,000. During 20X7, VE used $500,000 cash to invest in equity instruments and paid $1,000,000 for a plot of land. The remaining cash was left in a bank account throughout the year. AE did not enter into any other transactions. The investments in equity instruments earned a 20% return during the year.
In 20X7 the general price level rose in the primary economic environment in which VE operates by 60% (i.e., the general price index rose from 100 to 160 in 20X7), meeting the definition as a hyperinflationary economy.
What is the effect of hyperinflation on AE's assets at December 31, 20X7?

Question

Quizplus · Accepted Answer

The Answer of Venuti Entity (VE) began operations on January 1, 20X7, when its owner contributed $2,000,000. During 20X7, VE used $500,000 cash to invest in equity instruments and paid $1,000,000 for a plot of land. The remaining cash was left in a bank account throughout the year. AE did not enter into any other transactions. The investments in equity instruments earned a 20% return during the year.
In 20X7 the general price level rose in the primary economic environment in which VE operates by 60% (i.e., the general price index rose from 100 to 160 in 20X7), meeting the definition as a hyperinflationary economy.
What is the effect of hyperinflation on AE's assets at December 31, 20X7?

Venuti Entity (VE) Began Operations on January 1, 20X7, When