Some examples of intangible assets include copyrights, patents, goodwill, trade names, trademarks, mail lists, etc. These assets will be reported at cost (or lower) on the balance sheet after property, plant and...
Some examples of intangible assets include copyrights, patents, goodwill, trade names, trademarks, mail lists, etc. These assets will be reported at cost (or lower) on the balance sheet after property, plant and...
This account is a contra long-term asset account which is credited for the depreciation associated with land improvements. As an asset account, the accumulated depreciation account balance does not close at the end of...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
This is a contra long-term asset account which is credited for the depreciation associated with Buildings. Since it is a balance sheet account, the accumulated depreciation account balance does not close at the end of...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
Are repairs to office equipment an expense? Repairing and maintaining office equipment is an immediate expense. This is true even if the repair cost is a very large amount. If a large expenditure is made to improve...
. A $2,000 invoice from a supplier for goods has terms of 1/10, n/30. If $100 of the goods were returned to the seller, the amount to be remitted within the discount period is $__________ $1,881 [$1,900 - (0.01...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
is helpful in determining the two components of a mixed cost (also known as semivariable cost): The amount that is fixed or constant The variable rate (the rate by which the total cost changes when there is one...
Vs. the actual hours it took and multiplies the difference in hours by the standard cost per direct labor hour. Here’s an example with amounts. Let’s assume the standard for direct labor is 3 hours per unit of...
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
. 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...
for the manufacturer’s cash to be used to: pay for the raw materials needed in its products pay for the labor and overhead costs needed to convert the raw materials into products hold the finished products in...
interest rate for similar bonds. Example of Premium on Bonds Payable Assume that a corporation prepares to issue bonds having a maturity value of $10,000,000 and a stated interest rate of 6%. However, when the 6% bonds...
What is the break-even formula? Break-even Point in Units of Product The formula for determining the break-even point in units of product sold is: total fixed expenses divided by the contribution margin per unit. For...
to cash in 10 to 40 days. However, inventory may require several months to be sold and the money collected. Hence, inventory is not considered to be a “quick asset.” To assist in evaluating a company’s liquidity,...
or Uncollectible Account Expense. Example of Allowance for Doubtful Accounts Assume that a company has 500 customers purchasing on credit and they owe the company the $1,000,000 debit balance in Accounts Receivable....
the life of the bonds. Example of Discount on Bonds Payable Assume that a corporation prepares to issue bonds having a maturity amount of $10,000,000 and a stated interest rate of 6% (per year). However, when the bonds...
that a manufacturer has only one product and 80,000 units were manufactured and sold during a recent year. The selling price was $10 per unit. The variable expenses were $4 per unit (consisting of manufacturing costs of...
others, if a greater proportion of the lower contribution margin items are sold, the company will need to sell more units, thereby increasing the company’s break-even point. Join PRO to Track Progress Mark the...
of accounting. Example of Book Depreciation Let’s assume that equipment used in a business has a cost of $500,000 and is expected to be used for 10 years. If the company assumes no salvage value at the end of the 10...
. If a store sells its old delivery truck for cash, and the cash amount is more than its book value, a __________ is reported on the income statement. 4. An asset’s book value or carrying value is the the asset’s...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
. The most common responsibility centers are the numerous departments within a company. Examples of Responsibility Centers Responsibility centers are often categorized by the degree of authority and responsibility given...
What is book value? Definition of Book Value In accounting, book value refers to the amounts contained in the company’s general ledger accounts (or books). It is important to realize that the book value is not the same...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
What is GAAP? Definition of GAAP GAAP is the acronym for generally accepted accounting principles. GAAP consists of the following: Basic underlying accounting principles, assumptions, and concepts such as the cost...
(such as years). Instead, the depreciation is expressed and calculated based on the asset’s usage. Under the units-of-activity method of depreciation, the asset’s cost (less any salvage value) is allocated to the...
What is insurance expense? Definition of Insurance Expense Under the accrual basis of accounting, insurance expense is the cost of insurance that has been incurred, has expired, or has been used up during the current...
by the employer, the amount is based on each employee’s wages, salary, commissions, etc. Often the FUTA tax ends up being 0.6% (6% minus a credit of 5.4%) of the first $7,000 per year of each employee’s wages,...
A cost and/or volume of activity that is outside of an expected range.
See cost-volume-profit (CVP).
the insured company will be paid the cost of the inventory lost minus the amount of the insurance policy deductible. Example of Recording Insurance Claim for Inventory Loss Assume that a company received $105,000 from...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
Why isn't a key employee reported as an asset on the balance sheet? While an employee could be an organization’s most valuable asset, accountants record past transactions that can be measured. Since an employee...
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