. Select... increase decrease 7. The account Sales Discounts is likely to have a __________ balance. Select... debit credit 8. If a bank credits a company’s checking account for interest that the company has earned,...
. Select... increase decrease 7. The account Sales Discounts is likely to have a __________ balance. Select... debit credit 8. If a bank credits a company’s checking account for interest that the company has earned,...
of the debit balance in Accounts Receivable is unlikely to be collected. A less common example of a contra asset account is Discount on Notes Receivable. The credit balance in this account is amortized or allocated to...
suppliers $10,000 and the supplier gives the company a written promissory note to repay the amount in six months along with interest at 8% per year. The company will debit its current asset account Notes Receivable for...
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...
checking account, and 2) a credit of $30,000 to the company’s current liability account Notes Payable (or Loans Payable) for the amount of principal that it must repay to the bank. (If there is a difference between...
% ($120,000/$400,000). Definition of Operating Income A retailer’s operating income is its sales minus the cost of goods sold and all selling and administrative expenses (fixed and variable). Operating income is...
ratio, here are some additional accounting/financial ratios: Quick ratio Debt to equity ratio Accounts receivable turnover ratio Days’ sales in inventory Interest coverage ratio Gross margin ratio Return on...
costs will be referred to as period expenses since they will be reported on the income statement as selling, general and administrative (SG&A) or interest expenses. Example of Period Costs Selling expenses (such as...
or services and other activities that are part of a company's main operations. REVENUES SUNEEREV Unscramble REVENUES SEENVREU Unscramble 3. The residual interest in the assets of an entity after deducting...
will have the same accounts but different amounts due to the number of employees and/or the number of hours worked. Other examples of recurring entries with amounts that differ each period include sales, interest...
selling, general and administrative expenses of $45,000 interest expense of $5,000 The company’s net profit was $10,000. The calculation is $200,000 minus $140,000 = gross profit of $60,000 minus $45,000 of SG&A...
accounts: Liability accounts such as Accounts Payable, Notes Payable, Wages Payable, Interest Payable, Income Taxes Payable, Customer Deposits, Deferred Income Taxes, etc. Hence, a credit balance in Accounts Payable...
), in units, hours of services provided, etc. The basic calculation of the break-even point in sales dollars for a year is: fixed expenses (fixed manufacturing, fixed SG&A, fixed interest) for the year divided by the...
. These accountants do not include selling, administrative, or interest costs in their definition of the full cost of a product. Their view is consistent with the way that inventory and the cost of goods sold are...
per the books. Add To BANK Balance Wrong. The service charge already appears on the bank statement. Deduct From BANK Balance Wrong. The service charge is already deducted on the bank statement. 6. Interest credited to...
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...
basis for measuring profitability in a limited time period. ACCRUAL LAAURCC Unscramble ACCRUAL AUALCRC Unscramble 5. The expense associated with debt. INTEREST RENESITT Unscramble INTEREST ETRESITN Unscramble 6. At the...
examples of a bank credit memo appearing in a company’s bank account include: The bank adding interest that was earned for having money on deposit The bank having collected a note for the company A refund of a...
at the end of the year and the increase occurred at a uniform rate throughout the year. The corporation’s return on stockholders? equity was 10% ($100,000 divided by the average stockholders? equity of $1,000,000)....
What is accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation is the allocation of a plant asset‘s cost at a faster rate than straight-line depreciation. Compared to straight-line...
. The company depreciated the asset at the rate of $20,000 per year for five years. If the machine is used for three more years, the depreciation expense will be $0 in each of those three years. During those three years,...
Is a favorable variance always an indicator of efficiency in operation? In a standard costing system, some favorable variances are not indicators of efficiency in operations. For example, the materials price variance,...
variable is expressed as x and is referenced on a graph’s x-axis.) Hence the equation for the monthly electricity cost will be y = a + bx, which signifies that the total electricity cost (y) for a specific month is...
of manufacturing overhead costs also allows for the computation and application of several departmental overhead cost rates instead of having a single, plant-wide overhead rate. This is important when there are a...
of an Expense As a prepaid cost such as the $6,000 in the asset account Prepaid Insurance expires, the part that expires will be reported on the income statement as Insurance Expense. If the insurance cost is expiring...
. Once an asset is fully depreciated, there will be no additional depreciation expense. Example of a Fully Depreciated Asset Let’s assume that a company purchased a building more than 30 years ago at a cost of...
What is cash flow net of tax? I view cash flow net of tax as the amount of cash spent minus the income tax savings when the amount is deductible on the corporation’s income tax return. To illustrate this, let’s...
similar amounts. The following are common account titles: Cash, Accounts Receivable, Accounts Payable, Loans Payable, Sales, Advertising Expense, Rent Expense, Interest Expense, and perhaps hundreds more. When we use...
to employees for the overtime hours. To illustrate, let’s assume that a company pays “time-and-a-half” for hours worked that are greater than 40 hours during the work week. If an employee earns $9 an hour (the...
's useful life). When the units-of-activity method is used, the equipment's depreciation is expressed as an amount per document produced. (Years are not relevant.) To calculate the depreciation rate per...
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 Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
that is to be done in the following month. The deposit will be reported on CentCorp’s December financial statements as __________. Select... revenue a liability neither revenue nor a liability 16. A company has a loan...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
in the variable costs. Here’s the formula: Variable Cost Rate = Change in total costs divided by the change in the MHs. In our example, Variable Cost Rate = $40,000 ($140,000 minus $100,000) divided by 4,000 MHs...
against the company’s assets. However, liabilities can also be viewed as sources of the company’s assets. Examples of a Liability Examples of a liability include: accounts payable loans payable wages payable...
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
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