What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
because U.S. accounting principles and income tax regulations require manufacturers to follow full absorption costing. This means that the cost of manufactured goods must include the costs of the direct materials,...
of an income statement that reports expenses in excess of revenues. The FASB’s Statement of Financial Accounting Concepts No. 6 (December 1985) discusses expenses and losses in paragraphs 80-89. You can access this...
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
. As the amount of prepaid insurance expires, the expired portion is moved from the current asset account Prepaid Insurance to the income statement account Insurance Expense. This is usually done at the end of each...
for Allocating Manufacturing Overhead to Products US GAAP and US income tax regulations require manufacturers to assign variable and fixed manufacturing costs to the products they manufacture so that the units in...
Why does a company debit Purchases instead of Inventory? Definition of Purchases and Inventory When a company uses the periodic inventory system the amount of the company’s inventory is determined by a physical count...
.) This rent does not get assigned or allocated to the units produced. Instead, the entire rent of the nonmanufacturing facilities is immediately expensed in the accounting period when the building is rented. Example of...
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
by $21, and the $21 will be reported on its income statement as the cost of goods sold.] In the case of a manufacturer, assume one of its product’s required the following costs: direct materials of $6, direct labor of...
of the previous month until the 15th of the current month, we needed to estimate the expense for the second half of the month. For example, when I was preparing his company’s November 30th balance sheet and its...
in the factory. In addition to the manufacturing costs, there are selling, general and administrative (SG&A) expenses and perhaps interest expense. Generally, accountants do not consider these expenses to be product...
Insurance Expense. Since adjusting entries involve a balance sheet account and an income statement account, it is wise to monitor the balances in both Prepaid Insurance and Insurance Expense throughout the year. The...
) is the difference between the number of shares issued and the number of shares outstanding. Since the treasury shares result in fewer shares outstanding, there may be a slight increase in the corporation’s earnings...
’ equity section of the balance sheet. The weighted-average number of shares of common stock outstanding during the year is used to compute the corporation’s earnings per share often shown at the bottom of the...
are not part of the seller’s sales or revenues. This means the amount of sales taxes that were collected by the retailer will not be reported on its income statement. Instead, the sales taxes collected are reported on...
IRTGSATH Unscramble STRAIGHT RHTIGTAS Unscramble 4. ______________ Depreciation is the balance sheet account. ACCUMULATED UUTDMEACLCA Unscramble ACCUMULATED UMCTDEACLUA Unscramble 5. This type of depreciation results in...
cycle is longer than one year, the length of the operating cycle is used in place of the one-year time period. Examples of Current Assets Assets that are reported as current assets on a company’s balance sheet...
the bonds’ stated interest rate was greater than the market interest rate. The amount of the premium is recorded in a separate bond-related liability account. Over the life of the bonds the premium amount will be...
over that life. Other intangible assets have an unlimited life and are not amortized. However, their reported cost is reviewed annually. If there is an impairment loss, the amount on the balance sheet is reduced and the...
and sold, are included in the cost of goods sold on the income statement Examples of Raw Materials The direct materials for a bakery’s products will likely be flour, sugar, eggs, milk, vegetable oil, spices, and other...
the financial statements to be more attractive and easier to read especially when the amounts for each of two or three years must be shown. Example of Rounding Amounts on Financial Statements Imagine looking at a...
Subscription Expense and will credit Cash (or Accounts Payable). If the amount of the subscription is significant, the company should debit the cost of the subscription to the current asset account Prepaid Expenses and...
) and the income statement will report supplies expense of $7,500 (1,500 units at $5). Assume that a company purchases a delivery truck to be used in its business. Initially the truck’s cost will be recorded in the...
will be closed at the end of each year. However, the account’s debit balance is closed directly to the owner’s capital account. (The owner’s draws are not reported as an expense on the company’s income...
to Cash and a $3,000 credit to the liability account Customer Deposits or Unearned Revenues. With no downpayment or advance payment in December, there is no entry recorded.) The $20,000 contract is not reported as an...
, the entry to record the stock dividend will be a debit of $250,000 to Retained Earnings and a credit to a paid-in capital account such as Common Stock. It is important to note that dividends are not expenses and...
to Interest Expense, which is reported on the monthly income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at...
, there is no annual wage limit or cap for the Medicare tax. In fact, there is also an Additional Medicare Tax that applies to high income employees. An Employer Must Match its Employees’ FICA Taxes In addition to the...
relatively soon, accountants will usually skip recording the asset. Here are three examples of how the expense might be reported on the company’s income statement. Example 1. A service company purchases $900 of...
is required to make regular deposits into the bond sinking fund, which is likely managed by an independent trustee. The combination of the required deposits plus the income and gains from the sinking fund’s...
and its cost of goods sold. In the U.S. the common cost flow assumptions are FIFO, LIFO, and average. A company’s cost of inventory is related to the company’s cost of goods sold that is reported on the company’s...
on the automakers’ balance sheets at the time that the cars are sold. The other part of the journal entry is to debit Warranty Expense and report it on the income statement. Definition of an Estimated Liability An...
. As a result, there will be one-half month of depreciation in that month. The same is true for the disposal of an asset. There will be one-half month of depreciation in the month of the disposal. The...
Financial Statements Video Training Part 6 Balance sheet: current liabilities (notes payable, accounts payable, accrued expenses, customer deposits) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
for FUTA per year per employee will be $42 ($7,000 x 0.006). If an employee earns $5,000 during a calendar year, the employer’s cost for that employee will be $30 ($5,000 x 0.006). Accounting for FUTA Tax In the...
What is book value? Definition of Book Value In accounting, book value refers to the amounts contained in the company’s general ledger accounts (or books). It is important to realize that the book value is not the same...
What is EBITDA? EBITDA is the acronym for earnings before interest, taxes, depreciation and amortization. Take our Financial Ratios Exam. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
and the buyer will record the transaction at $730. There will not be a general ledger account entitled Trade Discount. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
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