at the time of the signing. Of course, if cash or some other asset is exchanged at the time of the signing, it will have to be recorded. While a journal entry is not required at the time the contract is signed,...
at the time of the signing. Of course, if cash or some other asset is exchanged at the time of the signing, it will have to be recorded. While a journal entry is not required at the time the contract is signed,...
, the merchant will debit Cash for $105 and will credit Sales for $100 and will credit Sales Tax Payable for $5. Sales Tax Payable is a liability account. When the sales taxes are remitted to the state, the merchant will...
year is reported under investment activities on the statement of cash flows. Definition of Revenue Expenditure A revenue expenditure is an amount that is spent for an expense that will be matched immediately with the...
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...
pay rate is $20.50 which means the employee’s gross vacation pay will be $2,460 (120 hours X $20.50). The June 1 journal entry to record the vacation payment is: Debit Vacation Payable $2,400 (to eliminate the...
as an ordinary annuity or an annuity in arrears. Example of Arrears Assume a corporation has 10,000 shares of 6% $100 cumulative preferred stock. Since the corporation has a limited amount of cash available, the board...
for the year are less than the expenses and losses, the result is a net loss that reduces the normal credit balance in the Retained Earnings account.) The balance in the Retained Earnings account is also decreased when...
of the amount of the accounts receivable that will be turning to cash, since some customers may not pay the full amount owed to the company. The credit balance in the allowance account is an estimate amount in an...
. Each year, this stockholder must receive dividends on the preferred stock of $800 (8% X $100 = $8 per share X 100 shares) before the common stockholders are allowed to receive any cash dividends for the year. Unless...
the following year with zero balances.) Examples of Balance Sheet Accounts Examples of a corporation’s balance sheet accounts include Cash, Temporary Investments, Accounts Receivable, Allowance for Doubtful Accounts,...
and it is often used to compute the net present value of the cash flows in a proposed investment. It is also considered to be the minimum after-tax internal rate of return to be earned on new investments. For a...
. Example of Par Value Let’s assume that a share of common stock has a par value of $0.01 and is sold to an investor for $25. The corporation issuing the stock will debit Cash for $25.00 and will credit Common Stock...
ledger accounts will need to be adjusted with a credit to the Cash account and a debit to an account such as Bank Fees Expense. Therefore, as part of the bank statement reconciliation you need to show the bank service...
for a small fee that was immediately expensed. Since then Company X has been very effective in promoting this trademarked brand. Consumers now pay a premium price for this recognized and superior product. A competitor...
sheet unless they were acquired in a business transaction. The balance sheet should be read with the other financial statements (income statement, statement of comprehensive income, statement of cash flows, and the...
prepaid insurance, let’s assume that on November 20 a company pays an insurance premium of $2,400 for insurance protection during the six-month period of December 1 through May 31. On November 20, the payment is...
with a debit of $900 to Cash. Since every entry must have debits equal to credits, a credit of $900 will be recorded in the account Service Revenues. The credit entry in Service Revenues also means that owner’s equity...
and a credit to Cash.) The journal entry to close the drawing account at the end of the accounting year will credit Eve Jones, Drawing for $24,000 and will debit Eve Jones, Capital for $24,000. Join PRO to Track...
What is a purchase discount? Definition of Purchase Discount A purchase discount is a deduction that a company may receive if the supplier offers it and the company pays the supplier’s invoice within a specified period...
its bank and signs a promissory note due in six months. Local Retailer records $20,000 as a credit to its current liability account Notes Payable (and debits its Cash account). The bank records the $20,000 promissory...
or loss Other comprehensive income or detailed amounts Stock-based compensation Exercise of stock options Sale of common stock Repurchase of common stock Cash dividends declared Ending balances To see a statement of...
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,...
account Cash was $4,500. It planned on making a $1,000 deposit before the check cleared its bank account. Unfortunately, the $5,000 check was presented to the bank prior to the planned deposit. If the bank account...
the financial statements the gross wages that were earned by the employees (and incurred by the employer) during the accounting period. [Under the cash basis of accounting, the employer’s financial statements will...
that the full amount will be converted to cash. Reason Why the Direct Write Off Method is Not Preferred The accounting profession does not prefer the direct method for the following reasons: The accounts receivable are...
usually accept a fixed cash dividend that will be paid by the corporation before the common stockholders are paid a dividend. In exchange for this preferential treatment of dividends, the preferred stockholders...
%). It also indicates that a company without sufficient cash to pay within the early payment discount period will experience a huge opportunity cost. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
appearing first followed by the income statement accounts. Examples of General Ledger Accounts Some of the more common balance sheet accounts and how they are further arranged in the general ledger include: asset...
How do you compute the selling price of a bond? Definition of Selling Price of Bond The selling price (or the market value) of a bond is the present value of the future contractual cash amounts that are going to be...
rate is 5.1% and there was no accrued interest. As a result, the investors paid $99.5 million for the bonds. The corporation also incurred $1 million of bond issue costs which were paid from bonds’ proceeds. The entry...
sheet as part of the current asset cash. (A bank’s balance sheet lists the total amount of its customers’ checking account balances as a current liability.) As part of its internal controls, a company should...
focus on the incremental costs of carrying or holding inventory. The cost of carrying inventory will vary from company to company. For instance, if a company has a large cash balance with no attractive investment...
when the bill arrives in January The following are a few examples of payments that will never be an expense: A payment of $100,000 to purchase the land adjacent to a company Payments that are cash dividends to...
will be recorded by the issuing corporation as a debit to Discount on Bonds Payable, a debit to Cash for $9,800,000, and a credit to Bonds Payable for $10,000,000. Over the life of the bonds, the initial debit balance...
for the insurance premiums covering one year. The company will record the payment with a debit of $12,000 to Prepaid Insurance and a credit of $12,000 to Cash. On December 31, the company writes an adjusting entry to...
the company’s true amount of cash. Example of an Outstanding Check in the Bank Reconciliation In the bank reconciliation process, the total amount of outstanding checks is subtracted from the ending balance on the...
Allowance for Doubtful Accounts. The debit balance in Accounts Receivable minus the credit balance in Allowance for Doubtful Accounts will result in the estimated amount of the receivables that will be converted to...
include a highly-respected trade name, a valuable patent, a very effective management team and company culture. Example of Assets Examples of assets that are likely to be listed on a company’s balance sheet include:...
from the company’s present cash balance. Also assume that the company’s building materials, labor and overhead will amount to $400,000 during the three months of construction. The capitalized interest is based on...
and Deferred Revenues? Select... Asset Expense Liability Revenue 8. On December 20, Jay Corporation received $5,000 from a new customer as a down payment for services that Jay Corporation will provide in January. On...
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