What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
Financial Statements Video Training Part 2 Balance sheet: accounts receivable, estimated allowance for doubtful accounts, inventory cost flows (FIFO & LIFO) Must-Watch Video Learn How to Advance Your Accounting and...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
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...
of depreciation, while the “declining balance” refers to the asset’s book value or carrying value at the beginning of the accounting period. Since book value is an asset’s cost minus its accumulated...
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.
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
Under the accrual basis of accounting, the account Rent Expense will report the cost of occupying space during the time interval indicated in the heading of the income statement, whether or not the rent was paid within...
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...
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...
Where is treasury stock reported on the balance sheet? Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders’ Equity section of the balance sheet....
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...
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...
Goodwill is a long-term (or noncurrent) asset categorized as an intangible asset. Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the...
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...
What is the FISH inventory method? FISH is the acronym for first-in, still-here. FISH is an attempt to bring humor to the fact that some items have been sitting in inventory for years. Unlike FIFO and LIFO, which are...
What is depreciation? Definition of Depreciation In accounting, depreciation is the assigning or allocating of the cost of a plant asset (other than land) to expense in the accounting periods that are within the...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
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...
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...
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...
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.
. 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...
Wrong. Direct labor is a specific, separate component of the manufacturing cost of a product. Indirect Labor Right! Indirect manufacturing labor is part of manufacturing overhead. Other examples of manufacturing...
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...
What is the difference between depreciation expense and accumulated depreciation? Definition of Depreciation Expense Depreciation expense is the amount of depreciation that is reported on the income statement. In other...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
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,...
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...
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...
What is a capital expenditure versus a revenue expenditure? Definition of Capital Expenditure A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset...
on the balance sheet are the company’s resources such as cash, accounts receivable, inventory, investments, land, buildings, equipment, some intangible assets . Generally assets are reported at their cost or a lower...
incurred, the products have overabsorbed the overhead costs. At the end of the accounting year, the amount of the overapplied, overassigned, or overabsorbed overhead is often credited to the cost of goods sold. The...
by reading our Nonmanufacturing Overhead (Explanation). 1. Selling expenses should be allocated to the cost of goods sold for external financial reporting. True Wrong. False Right! 2. According to U.S. accounting...
the depreciation expense of an asset, the expected amount of the salvage value is not included. Example of Salvage Value Assume that a plant asset has a cost of $325,000 and is expected to have a salvage value of...
is less than the asset’s book value, the difference is recorded as a loss. Example of a Gain on the Sale of an Asset On March 31, a company sells its old delivery van for $4,000. The van’s original cost was $45,000...
. If the vehicle is sold, both the vehicle’s cost and its accumulated depreciation at the date of the sale will be removed from the accounts. If the amount received is greater than the book value, a gain will be...
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