(a noncurrent or long-term asset). The total cost will then be depreciated over the building’s useful life. (On the other hand, interest to finance the company’s operations or to build equipment is not capitalized....
(a noncurrent or long-term asset). The total cost will then be depreciated over the building’s useful life. (On the other hand, interest to finance the company’s operations or to build equipment is not capitalized....
balances have the total of the debit balances equal to the total of the credit balances. This occurs because every transaction must have the debit amounts equal to the credit amounts. For example, if a company borrows...
: To have cash available for unforeseen events and for increases in its costs To reduce its long-term debt or repurchase shares of its common stock To increase inventory to expand, to purchase in larger quantities for...
a profitable division that no longer meets its long range goals. The proceeds from this disinvestment are then used to improve the company’s financial position by reducing its debt. Join PRO to Track Progress Mark the...
account will be credited (entering an amount on the right side of an account). As a result of double entry, the company’s general ledger accounts should always have the total amount of the debit amounts equal to the...
What is the advantage of using historical cost on the balance sheet for property, plant and equipment? Definition of Historical Cost Historical cost is the original cost of an asset including all the necessary costs to...
on the total organization (as opposed to focusing on specific funds within the organization) and reports the following: Revenues such as contributions, program fees, membership dues, grants, investment income, and...
point in dollars is calculated by dividing the total amount of fixed costs by the contribution margin __________. 4. The relative proportion of a company’s various products that were sold or were planned to be sold is...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
What would cause a decrease in accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the cumulative amount of depreciation taken since a depreciable asset was put into service. The...
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
Financial statements that reflect the total economic entity. For example, on a consolidated income statement a corporation having several subsidiaries would report the total of all of its companies’ sales that were...
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset. (As an asset is depreciated its book value declines.) This technique results in greater...
What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
to as journalizing. After journalizing a transaction, the process of recording those amounts in the appropriate general ledger accounts is known as posting. 7. What is the normal balance for an asset account? Select......
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
How do I calculate the amount of sales tax that is included in total receipts? Sales Tax Calculation To calculate the sales tax that is included in a company’s receipts, divide the total amount received (for the items...
the comparison of companies’ operating results for the following reasons: Some corporations are Subchapter S Corporations which do not report corporation income tax expense Some corporations are C Corporations which...
. False Right! 9. Is it true or false that the total amount of stockholders’ equity reported on the balance sheet is intended to show the fair market value of the corporation? True Wrong. False Right! 10. Comprehensive...
Depreciation for the car’s accumulated depreciation Credit the asset account containing the car’s cost Credit the account Gain on Sale of Vehicles for the amount necessary to have the total of the debit amounts...
balances). However, the debit balance amounts are entered in one column and the credit balance amounts are entered in another column. Each column is then summed to prove that the total of the debit balances is equal to...
What is reported as property, plant and equipment? Definition of Property, Plant and Equipment Property, plant and equipment is the long-term asset or noncurrent asset section of the balance sheet that reports the...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
as a percent of total assets. The vertical analysis of an income statement results in every income statement amount being restated as a percent of net sales. Example of Vertical Analysis of a Balance Sheet If a...
entered as a debit and at least one account will have an amount entered as a credit. Further, the total amounts entered as debits must be equal to the total amounts entered as credits. Meeting these requirements will...
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
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...
as the__________ price. 7. Asset turnover is calculated by dividing a division’s net__________ by its average amount of assets. 8. Goal __________ refers to a decentralized division taking an action that is best for...
Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order for the balance sheet to report the net realizable value of the company’s...
What is bad debts expense? Definition of Bad Debts Expense Bad debts expense is related to a company’s current asset accounts receivable. Bad debts expense is also referred to as uncollectible accounts expense or...
The part of a balance sheet with the heading stockholders’ equity or owner’s equity. The total amount of this section is the amount of reported assets minus the amount of reported liabilities.
A net debit balance for the total amount of owner’s equity. It is the result of the reported amount of liabilities exceeding the reported amount of assets.
of the year. Accumulated Depreciation is a matching principle. In each accounting period, part of the cost of certain assets (equipment, building, vehicle, etc.) will be moved from the balance sheet to depreciation...
of the accounts must have an amount entered as a credit The total amount entered as a debit must be equal to the amount entered as a credit Example #1. When a company borrows $5,000 from its bank, the company will...
A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
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