turned over 10 times during the year, or approximately every 36 days (360 or 365 days per year divided by the turnover of 10). Whether the accounts receivable turnover ratio of 10 is good or bad depends on the...
turned over 10 times during the year, or approximately every 36 days (360 or 365 days per year divided by the turnover of 10). Whether the accounts receivable turnover ratio of 10 is good or bad depends on the...
amount per share of common stock. The par value is also referred to as the corporation’s legal capital. On the other hand, if a corporation issues preferred stock, this stock’s par value is meaningful since its...
as an annual amount per unit or as a percentage of an item’s cost. The calculation of the cost to store inventory should be the incremental annual costs or the company’s opportunity costs. In other words, if a...
on the income statement of a retailer or manufacturer. The cost flow (FIFO, LIFO, etc.) will have an effect on the amount. cost of goods sold (or) cost of sales This is usually the largest expense on the income...
is credited to this account and then amortized with a credit to interest expense over the life of the bonds. Mark as wrong Mark as right straight-line amortization This is a common method for systematically moving bond...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
must report all of the amounts owed for work performed up to midnight of June 30. The expenses reported on the income statements for the month and year-to-date ended on June 30 must include all the payroll related...
Business X for $5 million based on Business X’s annual net income X 10. The fair value of Business X’s identifiable assets was $4 million and its liabilities were $1 million. Therefore, Company A is paying $5...
the liability) Debit the current asset Cash for $20,000 Credit the income statement account Revenues from Machine Construction for $25,000 Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
– $25,000) is divided by the 5 years of useful life to arrive at the straight-line depreciation expense of $60,000 for a full year or $5,000 per month ($300,000/60 months). Accountants and income tax regulations...
financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return. Example of Straight-Line Depreciation To illustrate...
asset) and credit Interest Revenue (or Income). Example of Accrued Interest Let’s assume that on December 16, a company borrows $20,000 from its bank at an annual interest rate of 6%. The first interest payment is due...
: $60,000 Year 3: $80,000 Year 4: $100,000 Year 5: $70,000 The payback period is 3.4 years ($20,000 + $60,000 + $80,000 = $160,000 in the first three years + $40,000 of the $100,000 occurring in Year 4). Note that the...
Which financial statement tells the value of a business? None of the financial statements will report the value of a business. The main financial statements (balance sheet, income statement, statement of cash flows,...
the following expenses: selling, general, administrative, interest, and income tax. Definition of Gross Profit Margin Gross profit margin is also referred to as the gross profit percentage or gross margin ratio. In that...
Prepaid Expenses for $100. The 12 monthly adjusting entries will: Report $100 expense on each of the monthly income statements Reduce Prepaid Expenses by $100 so the balance sheet will report the amount that has not...
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...
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...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
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...
A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2024, the employee’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare...
Inventory and will be the first costs to be included in the cost of goods sold on the income statement. Therefore, under the FIFO cost flow assumption the most recent costs will remain in Inventory to be reported on the...
of $100,000 minus Discount on Receivable of $30,600). As WSC earns the $30,600 of interest over the next two years, it will credit Interest Income and debit Discount on Receivable. Join PRO to Track Progress Mark the...
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
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...
What is turnover? Definition of Turnover In accounting, the term turnover can have more than one meaning. In some countries turnover is used in place of sales. Turnover also pertains to certain financial ratios that...
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...
Why are average balance sheet amounts used in calculating the turnover ratios? In the calculation of a turnover ratio, the numerator is an amount from an annual income statement, while the denominator is a balance sheet...
) 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...
the warranty period. That expected cost is recorded as a liability on its balance sheet and as an expense on its income statement. Note that the expected future cost to repair or replace is matched with the sales...
% minus the company’s normal gross profit percentage. (This should be available from the previous year’s income statements. Multiply the cost of goods sold percentage times the sales since December 31. The result is...
period in order to report the amount of its ending inventory for its balance sheet and the cost of goods sold for its income statement. Computing the Inventory Amount Under the Periodic Inventory Method At the end of an...
statements Being eligible for a U.S. income tax benefit Having less inventory holding costs Being confronted with the total cost of holding items in inventory Join PRO to Track Progress Mark the Question as Read...
that the amount will be collected, the landlord should report: Rent Revenue (or Rental Income) during the period of time that the space was occupied but the rent was not received from the tenant, and A current asset...
be an increase to the net profit. If the business is a regular corporation, net profit may mean after income tax expense. Example of Net Profit Assume that a sole proprietorship business had the following information...
in the product cost will be part of the cost of goods sold that is reported on the income statement. The remaining $5,000 of rent for nonmanufacturing functions is expensed each month without being allocated to the...
has not earned any of the contract amount and therefore does not have a right or a receivable to the $20,000 as of December 31. Similarly, Company Jay’s income statement for December and its December 31 owner’s...
), and Income statement accounts (revenues, expenses, gains, losses) Under the double entry system of accounting and bookkeeping, every business transaction will affect two (or more) general ledger accounts. In addition,...
income statement. This is achieved with techniques such as the allocation of manufacturing overhead costs and through the use of process costing, operations costing, and job-order costing systems. Cost accounting...
many income statements in the form of depreciation expense and/or as part of a manufacturer’s cost of goods sold. The total capex amount that was spent in a recent accounting period is reported in the statement...
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