of property, plant, and equipment. Depreciation of the Building and Equipment is a Fixed Cost The depreciation expense associated with a company’s buildings and machinery is considered to be a fixed cost or a fixed...
of property, plant, and equipment. Depreciation of the Building and Equipment is a Fixed Cost The depreciation expense associated with a company’s buildings and machinery is considered to be a fixed cost or a fixed...
. The equipment’s cost was $100,000 and its accumulated depreciation as of its recent balance sheet date was $40,000. This means that up to the balance sheet date $40,000 of the asset’s cost had been reported as...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods...
of the sale. In order to know the asset’s book value at the time of the sale, the depreciation expense for the asset must be recorded right up to the date that the asset is sold. If the cash received is greater than...
of Depreciate The term depreciate refers to systematically moving part of the cost of a plant asset from the balance sheet to depreciation expense on the income statement. Example of Capitalize and Depreciate Assume a...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
and all of the liabilities as of the end of the month. Another adjusting entry records the depreciation of assets used in the business. Every month the company must prepare an adjusting entry that debits Depreciation...
. However, the cash flows are NOT discounted. 4. A company used the net present value method for evaluating a project. The project requires an immediate cash outlay of $450,000. The company discounted the cash flows by...
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...
the book value, the difference is a loss on the sale or disposal.) To have the book value at the time of the sale, the asset’s depreciation must be recorded up to the date of the sale. Example of Proceeds and Gain on...
sheet account that is reported under the heading of Property, Plant and Equipment. The asset’s cost (except for the cost of land) will then be allocated to depreciation expense over the useful life of the asset. The...
let’s follow the indirect method of preparing the operating activities section of the statement of cash flows. We begin with the net income for the year, which was a negative $75,000. Next we add the depreciation...
. Examples of Journal Entries Even with computerized accounting systems some general journal entries are necessary. Common general journal entries are the adjusting entries. For example, prior to issuing the company’s...
life of the cell phones could be 10 years). Also assume that the company has purchased 100 smart phones at a total cost of $120,000. The company also estimates that the phones will have no salvage value at the end of...
of depreciation. The entry debits Depreciation Expense for $3,000 and credits Accumulated Depreciation for $3,000 each and every month. A company may also have recurring journal entries in which the accounts are...
be used instead of the more common terms of salvage value, disposal value, or residual value when calculating the depreciation of an asset used in the business. In this situation, scrap value is the expected or...
and maintenance expenses on a church that was constructed 15 years ago. However, the current depreciation expense on the church is not an out-of-pocket cost. The current period’s depreciation is also referred to as a...
are commonly referred to as the company’s fixed assets or plant assets. Generally, the property, plant and equipment assets are reported at their cost followed by a deduction for the accumulated depreciation that...
as property, plant and equipment (PPE) after deducting accumulated depreciation. Since net sales occurred throughout the year, you should divide the net sales by the average amount of net PPE during the year of the net...
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.
. The journal entry to record depreciation is recorded in the __________ journal. 4. The entries recorded in the general journal are also posted to accounts in the __________ __________. 5. A listing of the names and...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
include this type of account. EXPENSE PENESXE Unscramble EXPENSE EXPEENS Unscramble 7. A common adjusting entry pertaining to plant assets is the recording of ______________. DEPRECIATION ODAPNTIERIEC Unscramble...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
What are the various types of adjusting entries? Types of Adjusting Entries Adjusting entries, which are required in order to have a company’s financial statements comply with the accrual method of accounting, are...
.) and the other costs of the manufacturing facility (depreciation, property tax, maintenance, heat, and insurance) are indirect product costs since these costs must be allocated to the product. These indirect product...
__________________. REVENUES SVNUEERE Unscramble REVENUES VRSEUENE Unscramble 7. The credit amount in the depreciation entry is recorded in ______________ Depreciation. ACCUMULATED ALUCCUATDME Unscramble ACCUMULATED...
for that account classification. For example, Accumulated Depreciation is a contra asset account that is associated with asset accounts for buildings, equipment, vehicles, etc. The asset accounts have debit balances,...
Sorting and reporting expenses by the nature of the expense such as salaries, wages, rent, utilities, supplies, depreciation, advertising, and so on.
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
Approximate amounts. Accountants use estimates for depreciation expense, warranty expense, bad debts expense, monthly accruals for utilities, bonuses, income taxes, etc. Also see change in accounting estimate.
A phrase used in depreciation and amortization to indicate that the expense is being allocated on a logical basis (because a cause and effect relationship does not exist).
What is EBITDA? EBITDA is the acronym for earnings before interest, taxes, depreciation and amortization. Take our Financial Ratios Exam. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
Assets associated with depreciation. Examples include buildings, equipment, furniture, fixtures, trucks, automobiles, etc.
Usually refers to manufacturing overhead costs such as factory supplies, factory depreciation, indirect factory labor, etc. To learn more, see Explanation of Manufacturing Overhead.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
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