Question

Part II: Conceptual Framework and Accrual Accounting (15 points) 1. Presented below are three of accounting procedures and practices at Ramirez Corp. For each of trese items, match exactly one item (assumption, principle, quality, or modifying convention) that 15 violated from the list below. (It is acceptable to use the same item for multiple responses, but Please note that listing multiple items for one response will not receive partial credit.) (6 points) نه نه نه ده Economic entity assumption Going concern assumption Monetary unit assumption Periodicity assumption Historical cost principle Verifiability characteristic Consistency characteristic Fair value principle Understandability characteristic h. i. Because the company's income is low this year, a switch from LIFO inventory costing to FIFO inventory costing method is made this year. - ii. The owner of Ramirez Corp. purchased a new home computer for personal use with company money, charging miscellaneous expense. - iii. Land, that cost $400,000, is reported at its current market value of $450,000.

Answer 1

Answer to Question to 1
1. Company has switched its inventory valuation method from LIFO to FIFO, Thus violated CONSISTENCY CHARACTERISTIC
The concept of consistency means that accounting methods once adopted must be applied consistently in future. So changing its valuation method violates consistency characteristic.
2. the Owner purchased computer for personal use and charged it in company account, thus violated ECONOMIC ENTITY ASSUMPTION
the Economic entity assumption is an accounting principle that states that a business entity's finances should be kept separate from those of the Owner's personal accounts.
3. Land that cost $ 400000 reported at Market value of $450000, thus violated HISTORICAL COST PRINCIPLE
Historical cost concept states that the assets and liabilities of a business should be presented in accounting records at their historical cost.
Answer to Question to 2
Date	Particulars	Debit Amount (Rs.)	Credit Amount (Rs.)
01-08-2019	Bank A/c Dr.	72000
	To Rent Received		72000
	(being Rent Received)
31-12-2019	Rent Received A/c Dr.	42000
	To Unearned Rent		42000
	(Being unearned rent for 7 months adjusted)
Date	Particulars	Debit Amount (Rs.)	Credit Amount (Rs.)
May 1, 2019	Insurance Expense	24000
	To bank		24000
	(Being Insurance expense paid in advance for two year's)
December 31, 2019	Prepaid expense	16000
	To Insurance expense		16000
	(Being Insurance expense paid in advance for 16 months transferred to Prepaid insurance expense)