, if the manufacturer’s production and sales have declined and it fails to cut fixed costs, the manufacturer could be worse off by increasing selling prices. It could even lead to a death spiral. Examples of Elastic...
, if the manufacturer’s production and sales have declined and it fails to cut fixed costs, the manufacturer could be worse off by increasing selling prices. It could even lead to a death spiral. Examples of Elastic...
What is a plant asset? What is a Plant Asset A plant asset is an asset with a useful life of more than one year that is used in producing revenues in a business’s operations. Plant assets are also known as fixed...
the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
income of exactly zero. Examples Causing a Break-even Point to Increase The break-even point will increase by any of the following: An increase in the amount of the company’s fixed costs/expenses An increase in...
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...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
A bank account balance that a corporation agrees to maintain with a current or potential lender. For example, a corporation may agree to keep $1 million in its checking account at a bank in exchange for the bank agreeing...
A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is...
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
A payroll tax paid solely by the employer and usually calculated as 0.6% times each employee’s first $7,000 of annual wages or salaries. (The tax rate is 6.0% but a credit of up to 5.4% is usually given for...
are likely to be paid a __________ instead of an hourly rate of pay. 4. The usual rate (net of state credits) for federal unemployment tax is__________% on the first $__________ of each employee’s annual wages. 5. A...
or discount on bonds payable that results in the same amount each period is the __________–__________ method of amortization. 8. Under the __________ interest rate method of amortizing bond discount, the amount of...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
MNPEYTEUMNOL Unscramble UNEMPLOYMENT EYMOUPEMNNLT Unscramble 4. The ________ unemployment tax is often a net rate of 0.6% of each employee's first $7,000 of annual wages. FEDERAL EDELRAF Unscramble FEDERAL ELREAFD...
done by using a predetermined annual overhead rate. Example of Applied Overhead Let’s assume that a company expects to have $800,000 of overhead costs in the upcoming year. It also expects that it will have its normal...
its employees with 120 hours of paid vacation in the year following the employees’ full-time employment. Let’s also assume that the company has only one full-time employee who began working at the company on January...
the employee “cleared”. How Gross Pay is Calculated Some employees’ gross pay is determined by multiplying the hours worked times the employee’s hourly pay rate. For instance, if an employee works 40 hours in...
of bonds payable. Instead of charging the $500,000 to expense in the year that the fees are paid, the corporation will defer the $500,000 to the contra liability account Bond Issue Costs. Then over the bonds’ life of...
, if a corporation’s incremental federal and state income tax rate is 30%, bond interest payments of $40,000 will reduce the income tax payments by $12,000 (30% of the $40,000 reduction in taxable income). If the bond...
and it is often used to compute the net present value of the cash flows in a proposed investment. It is also considered to be the minimum after-tax internal rate of return to be earned on new investments. For a...
What is the rule of 72? The rule of 72 is a simple formula that tells you the approximate amount of time or interest rate needed for an amount to double. The formula is Years X Rate per year = 72. Here’s how it works....
is the cash amount plus the note’s present value at time that the asset is purchased. To illustrate this, let’s assume that equipment is purchased by giving $50,000 of cash plus a promissory note of $100,000. If...
of vacation for each month worked. However, the vacation hours for the year accumulate. The total vacation hours earned as of December 31 will be paid to the employee on June 1 of the following year by using the...
of the U.S. Department of Labor. Therefore, the employer must pay an overtime amount for the 6 additional hours worked. The rule specifies that the overtime pay will be "at time and one-half the regular rate of pay...
Where does the interest paid on bank loans get reported on the statement of cash flows. Definition of Interest on Bank Loans The interest on bank loans is usually an expense of the accounting period in which the interest...
= $27,000 of depreciation. Continue until the accumulated depreciation reaches $90,000. Download our Units-of-Activity (Production) Method Form and Template. Double-Declining-Balance Method The straight-line...
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...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
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...
of items that were subject to its state’s sales tax may be liable for a use tax. Select... True False 21. The future interest on a loan payable should be part of the amount reported in the balance sheet liability...
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...
by reading our Payroll Accounting (Explanation). 1. The combination of the Social Security tax and the Medicare tax is referred to by the acronym __________ FICA (FICA is the acronym for Federal Insurance Contribution...
A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
value and internal rate of return. While the discounted cash flow models are the ideal, I would also want to forecast or project the impact on the company’s future financial statements. Therefore, I would also...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
The additional amount given to employees for the overtime hours. Usually this is the “half-time” in time and one-half. For example, if an employee’s hourly pay rate is $10 per hour and the employee...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
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