Relevance and Consistency Assignment

2) Relevance and consistency. (4) Relevance and understandability. Answered above Problem 1-Accounting concepts–identification. (10 points) Presented below are a number of accounting procedures and practices in Ramirez Corp. For each of these items, list the assumption, principle, information characteristic, or modifying convention that is violated. Because the company's income is low this year, a switch from accelerated depreciation to straight-line depreciation is made this year. 1. 2. The president of Ramirez Corp. believes it is foolish to report financial information on a basis. Instead, the president believes that financial information should be disclosed only when significant new information is available related to the company's operations. yearly 3. Ramirez Corp. decides to establish a large loss and related liability this year because of the possibility that it may lose a pending patent infringement lawsuit. The possibility of loss is considered remote by its attorneys. 4. An officer of Ramirez Corp. purchased a new home computer for personal use with company money, charging miscellaneous expenses.

5. A machine, that cost $40,000, is reported at its current market value of $45,000. Problem -2 Adjusting and closing entries. (30 points) The following trial balance was taken from the books of Fisk Corporation on December 31, 2014. Account Credit Debit $ 9,000 40,000 10,000 Cash Accounts Receivable Notes Receivable Allowance for Doubtful Accounts $ 1,800 Inventory Prepaid Insurance Equipment Accumulated Depreciation–Equip. Accounts Payable Common Stock 44,000 4,800 110,000 15,000 10,800 44,000 55,000 280,000 Retained Earnings Sales Revenue Cost of Goods Sold Salaries and Wages Expense Rent Expense ls 20w 126,000 50,000 12,800 $406.600 $406,600 At year-end, the following items have not yet been recorded. Insurance expired during the year, $2,000. b. Estimated bad debts, 1% of gross sales. c. Depreciation on equipment, 10 % per year on original cost. d. Interest at 5% is receivable on the note for one full year. *e. Rent paid in advance at December 31, $5,400 (originally charged to expense). f. Accrued salaries and wages at December 31, $5,800. a. Instructions (a) Prepare the necessary adjusting entries. (b) Prepare adjusted trial balance (c) Prepare closing entries to the income summary account 5. .