is placed into service, the account Construction Work-in-Progress will be credited for its balance (the accumulated costs) and will be recorded with a debit in the appropriate property, plant and equipment account....
is placed into service, the account Construction Work-in-Progress will be credited for its balance (the accumulated costs) and will be recorded with a debit in the appropriate property, plant and equipment account....
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
Why isn't land depreciated? Definition of Land The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed to...
What is the meaning of systematic and rational allocation? Definition of Systematic and Rational Allocation Systematic and rational allocation is typically included in the definition of depreciation. In this context, it...
What is accumulated other comprehensive income? Definition of Accumulated Other Comprehensive Income Accumulated other comprehensive income is a separate line within the stockholders’ equity section of the balance...
of a noncash expense is depreciation. To illustrate, let’s assume that a company purchased equipment two years ago for a cash payment of $200,000. The company determined that the equipment had a useful life of 10...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
What are phantom profits? The terms phantom profits or illusory profits are often used in the context of inventory (but can also pertain to depreciation) during periods of rising costs. The amount of phantom or illusory...
entries. 12. The accountant's word to indicate that an entry will be recorded on the left side of an account is __________. Debit Right! Credit Wrong. 13. A contra-asset account such as Accumulated Depreciation...
with debit balances. EXPENSES ESSEPENX Unscramble EXPENSES ESSENXEP Unscramble 13. Accounts _______________ is a balance sheet account with a debit balance. RECEIVABLE IELVEEACRB Unscramble RECEIVABLE RECVEALBIE...
How do you calculate an asset's salvage value? Definition of Asset Salvage Value In accounting, an asset’s salvage value is the estimated amount that a company will receive at the end of a plant asset’s useful...
computed using replacement costs. This smaller amount of costs charged to the income statement means reporting greater profit. The difference in the profit is said to be illusory. In the case of plant assets used during...
of property, plant, and equipment. Depreciation of the Building and Equipment is a Fixed Cost The depreciation expense associated with a company’s buildings and machinery is considered to be a fixed cost or a fixed...
of Indirect Costs For example, the depreciation of a company’s manufacturing building is an indirect cost of the following: The manufacturing departments within the building The products that are manufactured in the...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods...
of Depreciate The term depreciate refers to systematically moving part of the cost of a plant asset from the balance sheet to depreciation expense on the income statement. Example of Capitalize and Depreciate Assume a...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
Wrong. Direct labor is a specific, separate component of the manufacturing cost of a product. Indirect Labor Right! Indirect manufacturing labor is part of manufacturing overhead. Other examples of manufacturing...
? An Increase In Accounts Receivable Wrong. An Increase In Inventory Wrong. A Decrease In Accounts Payable Wrong. Depreciation Expense Right! 18. What is usually presented first in the notes to the financial statements?...
life of the cell phones could be 10 years). Also assume that the company has purchased 100 smart phones at a total cost of $120,000. The company also estimates that the phones will have no salvage value at the end of...
of cash flows. Let’s use the following amounts to illustrate this situation. A company’s income statement for a recent year reported revenues of $2,000,000 and expenses of $2,075,000 for a net loss of $75,000. The...
One of the amounts used in determining the amount of interest to be capitalized when a company self-constructs certain long-term assets.
be used instead of the more common terms of salvage value, disposal value, or residual value when calculating the depreciation of an asset used in the business. In this situation, scrap value is the expected or...
and maintenance expenses on a church that was constructed 15 years ago. However, the current depreciation expense on the church is not an out-of-pocket cost. The current period’s depreciation is also referred to as a...
If cash and a note are exchanged for a plant asset, is the amount of the note used in the depreciation calculation? A plant asset’s cost is depreciated, unless the asset is land. Cost is defined as the cash or cash...
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
Approximate amounts. Accountants use estimates for depreciation expense, warranty expense, bad debts expense, monthly accruals for utilities, bonuses, income taxes, etc. Also see change in accounting estimate.
Sorting and reporting expenses by the nature of the expense such as salaries, wages, rent, utilities, supplies, depreciation, advertising, and so on.
Usually refers to manufacturing overhead costs such as factory supplies, factory depreciation, indirect factory labor, etc. To learn more, see Explanation of Manufacturing Overhead.
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...
A phrase used in depreciation and amortization to indicate that the expense is being allocated on a logical basis (because a cause and effect relationship does not exist).
The actual cost incurred for manufacturing costs that does not change as production volume changes. Examples include the property tax, rent, and depreciation of the factory building and equipment, and the salaries of the...
Assets associated with depreciation. Examples include buildings, equipment, furniture, fixtures, trucks, automobiles, etc.
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