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In a period of rising general price levels, Pollard Corp. discloses income on a current cost basis in accordance with FASB Standards. Which of the following contributes to Pollard's purchasing power loss on net monetary items? A Refundable deposits with suppliers. B Equity investment in unconsolidated subsidiaries. C Warranty obligations. D Wages payable.

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Final answer:

Refundable deposits with suppliers and wages payable contribute to Pollard Corp's purchasing power loss on net monetary items during a period of inflation since their value will decline in real terms as general price levels rise.

Step-by-step explanation:

During times of inflation, the real value of monetary items declines, leading to a loss of purchasing power. In the context of Pollard Corp, which discloses income on a current cost basis in line with FASB Standards, the loss of purchasing power on net monetary items would be most directly contributed to by items which are monetary in nature and likely to be affected by inflation. Among the options provided:

Refundable deposits with suppliers are monetary and would decline in value with inflation, contributing to purchasing power loss.

Equity investments in unconsolidated subsidiaries are non-monetary assets and typically adjust in value with inflation, so they would not directly contribute to purchasing power losses on net monetary items.

Warranty obligations may be monetary, but they represent future expenses that could also escalate with inflation, so they are not clear net monetary items in this context.

Wages payable is a clear monetary liability that will reduce in real terms due to inflation, contributing to the purchasing power loss.

Therefore, 'A Refundable deposits with suppliers' and 'D Wages payable' are the items that would contribute to Pollard's purchasing power loss on net monetary items during a period of rising general price levels.

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