Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
will result in a larger loss on the owner’s cash Examples of Financial Leverage Mary uses $500,000 of her cash to purchase 40 acres of land with a total cost of $500,000. Mary is not using financial leverage. Sue uses...
truck at the vendor’s dock). Since the goods in transit are now owned by AVCO, the cost of $5,000 must be reported on AVCO’s December 31 balance sheet as the current asset inventory and the current liability...
foregone by carrying out another alternative is the__________ cost. 5. A division’s profit minus a charge for its assets or capital employed is its __________ income. 6. The per unit selling price and purchase price...
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
What is the difference between cost and expense? Definition of Cost A cost might be an expense or it might be an asset. Definition of Expense An expense is a cost that has expired or was necessary in order to earn...
In the context of inventory this means that the inventory should be reported at the lower of its cost or its net realizable value (NRV). The rule is associated with the conservatism guideline or principle. Net realizable...
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
What is the weakness of traditional cost allocations? Traditional cost allocations are often based on volume such as number of products manufactured, number of direct labor hours, number of production machine hours,...
What does stepped cost mean? Stepped cost refers to the behavior of the total cost of an activity at various levels of the activity. When a stepped cost is plotted on a graph (with the total cost represented by the...
The method of accounting for treasury stock whereby the cost of the stock that is repurchased by the issuing corporation is recorded and is reported in the contra stockholders’ equity account Treasury Stock.
What is the difference between a cost and an expense? Definitions of Cost and Expense Some people use cost interchangeably with expense. However, we use the term cost to mean the amount spent to purchase an item, a...
Are direct costs fixed and indirect costs variable? Direct Costs vs. Indirect Costs The terms direct costs and indirect costs could be referring to a product, a department, a machine, geographic market, etc. (which are...
What is obsolete inventory? Definition of Obsolete Inventory Obsolete inventory refers to products that a company had purchased or produced which cannot be sold. The obsolete items may be the result of one or more of the...
service department is responsible for its costs. Hence, the service departments are separate cost centers. The costs incurred by the service departments are considered to be indirect manufacturing costs that ultimately...
has a debit balance of $40,000 for the cost of the goods on hand at a balance sheet date, but the net realizable value is only $37,000, the Allowance account will be adjusted to show a credit balance of $3,000. Join PRO...
variable costs and expenses equals the __________ __________. 4. A cost that is part fixed and part variable is referred to as a semivariable or __________ cost. 5. Which of the following would be considered to be the...
of a Contra Account Assume that a company’s Equipment has a debit balance of $450,000. The related account Accumulated Depreciation of Equipment has a credit balance of $190,000. Therefore, the carrying amount or book...
How much of the contribution margin is profit on units sold in excess of the break-even point? After the break-even point is reached, the entire contribution margin on the next units sold will be profit…provided the...
the DDB depreciation expense for the full year 2024 to be $22,000 ($110,000 of BV times the 20% DDB depreciation rate). 5. On January 1, 2024 RepairServ began using equipment that had a cost of $110,000. At the end of...
a liability as of December 31? Select... Yes No 8. Who should pay the shipping costs? Select... Buyer Supplier 9. When goods are purchased using credit, we say that the goods were purchased on credit or were purchased...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
entire cost being depreciated during the years that the asset is used in the business. Any amount received that is in excess of the asset’s book value will be reported as a gain at the time it is sold. Join PRO to...
and Accounts Receivable. Select... True False 46. When goods are sold with credit terms of net 30 days, the seller is typically transferring ownership of the goods to the buyer 30 days prior to collecting the money from...
years of use. units of production method (or) units of activity method Under this depreciation method a plant asset’s cost is allocated based on the asset’s activity instead of its years of use. Mark as wrong Mark...
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...
What is the major weakness of the traditional method of allocating factory overhead? Definition of Traditional Method Allocating Factory Overhead The traditional method of allocating factory overhead (manufacturing...
and the buyer will have a purchase of goods and an account payable. Since the seller owns the goods while they are in transit, the seller is responsible for the goods and the cost of transporting the goods until they...
What is sales mix? Definition of Sales Mix Sales mix is the relative proportion or ratio of a business’s products that are sold. Sales mix is important because a company’s products usually have different degrees of...
What accounting entry is made when a company receives an order for its goods or services? Definition of Accounting Entry When an Order is Received At the time when a company receives a customer’s order (without...
an allocated amount of manufacturing overhead. normal costing This product costing method uses the actual cost of direct materials and direct labor, but uses an allocated amount of manufacturing overhead. Mark as wrong...
What is a bond? There are several business definitions for bond. A bond could be a formal debt instrument issued by a corporation or government and purchased by investors. This is the meaning when we say that a public...
or unfavorable for the company’s cash balance Example Where Inventory Increased An increase in a company’s inventory indicates that the company has purchased more goods than it has sold. Since the purchase of...
as a result of having sold goods on credit. Through the use of the aging method, the company sees that $18,000 of the receivables are 100 days past due. Upon further checking, the company believes that $10,000 of these...
Discount The company selling the product (and the buyer of the product) will record the transaction at the amount after the trade discount is subtracted. For example, when goods with list prices totaling $1,000 are sold...
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