A company purchased machinery on 01-01-2015 for a sum of Rs. 60,000. The retail price index on that date was 150. What is the value of machinery according to the CPP method on 31st December 2015, when the price index was 200?

Correct option is C

The Current Purchasing Power (CPP) method adjusts the historical cost of an asset based on inflation using the price index formula:

Substituting the values:

Information Booster
· CPP method helps in adjusting financial statements for inflation effects.
· It maintains the real value of assets by updating them with price index changes.
· Used primarily in hyperinflationary economies.
· Reflects the actual purchasing power rather than historical cost.
· Inflation-adjusted financial statements provide more accurate information to investors.
· Different countries have specific guidelines for applying the CPP method.