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...
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...
This is the period of time that it will be economically feasible to use an asset. Useful life is used in computing depreciation on an asset, instead of using the physical life. For example, a computer might physically...
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
The fixed manufacturing costs (e.g., property tax, rent, and depreciation on factory) that have been assigned to (absorbed by) the products manufactured via a predetermined rate. Ideally, by the end of the accounting...
An expense reported on the income statement that did not require the use of cash during the period shown in the heading of the income statement. The typical example is depreciation expense. Also, the write-down of an...
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
Costs that have both a fixed and variable component. For example, the cost of operating an automobile includes some fixed costs that do not change with the number of miles driven (e.g., operating license, insurance,...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
An example of a variable cost is the cost of flour for a bakery that produces artisan breads. The greater the number of loaves produced, the greater the total cost of the flour used by the bakery. An example of a fixed...
the depreciation expense of an asset, the expected amount of the salvage value is not included. Example of Salvage Value Assume that a plant asset has a cost of $325,000 and is expected to have a salvage value of...
they occur. Examples of Manufacturing Overhead Some examples of manufacturing overhead costs include the following: depreciation, rent and property taxes on the manufacturing facilities depreciation on the manufacturing...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
. This estimated amount is used to calculate the asset’s depreciation expense and it is often assumed to be zero. The term residual value may have other uses as well. For example, it is used when discussing leased...
as depreciation expense over several years. Often improvements of less than $500 or $1,000 are considered immaterial and are expensed immediately. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
. The objective of depletion is to match the cost of the natural resources that were sold with the revenues from the natural resources that were sold. Conceptually, depletion is similar to the depreciation of property,...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
The change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...
Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
is fixed only within a reasonable or relevant range of activity.) Many manufacturing overhead costs are fixed and the amounts occur in large increments. Additional examples include depreciation on a company-owned...
are recorded as part of the cost of the van. The total cost of the van will then be charged to depreciation expense over the van’s useful life. Examples of Sales Tax If a company sells $100,000 of merchandise that is...
plant built for a cost of $1 billion will cost $10 billion at the end of a useful life of 25 years. By computing straight-line depreciation based on the historical cost, the income statement will report depreciation...
not change in total as the number of annual miles change. These include insurance, parking fees, and some depreciation. Some of the expenses are variable since the total amount will increase when more miles are driven...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
sales, while the operating expenses will include the cost of goods sold, selling, general and administrative expenses (SG&A), and perhaps impairment charges. Some of the SG&A expenses may appear as separate...
days. If the company pays the invoice within 10 days, the Furniture and Fixtures account will increase by $9,900 ($10,000 minus the discount of $100). The depreciation calculations will be based on the cost of $9,900....
names—for example, cost of goods sold, cost of services provided, depreciation, interest, salaries and wages….” You can read the concepts statements at www.FASB.org/st. Join PRO to Track Progress Mark the...
the accrual method of accounting. For instance, the monthly bookkeeping entries for depreciation, property taxes, utilities, fringe benefits and more will need to be estimates. Even the end-of-year financial statements...
. Fixed overhead costs are the indirect manufacturing costs that are not expected to change when the volume of activity changes. Some examples of fixed manufacturing overhead include the depreciation, property tax and...
activities. These indirect costs include repairs and maintenance, depreciation of the manufacturing equipment, utilities, salaries of manufacturing supervisors, etc. Join PRO to Track Progress Mark the Question as Read...
of the land. Example of Sale of Land Assume that the retailer had purchased the parcel of land 15 years earlier for $200,000 in order to add another retail store. The retailer now decides to sell the parcel for...
include: Billing for goods sold or services provided to clients Recording receipts from customers Verifying and recording invoices received from suppliers Paying suppliers Processing employees’ pay and the related...
of Conversion Costs An example of direct labor are the employees working on the assembly line of a manufacturer. Examples of manufacturing overhead include the utilities, indirect labor, repairs and maintenance,...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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