The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
A product that emerges with other products in a common process; however, this product does not have a significant value. (If it had significant value, it would be a joint product.)
The stockholders’ equity account that reports the par or stated value of the issued shares of common stock. If the common stock does not have a par or stated value, this account will report the amount received when...
The stockholders’ equity account which reports the par value of the preferred shares of stock that have been issued. Amounts received that are greater than the par value are recorded in Paid-in Capital in Excess of...
Life insurance with a cash value (as opposed to term insurance, which does not have a cash value).
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
The products with significant value that emerge at a split-off point in a process. When a joint product has little value it is referred to as a by-product.
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
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...
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...
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...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
in the accounting period in which it expires or is used up. If the future benefit of a cost cannot be determined, it should be charged to expense immediately. Examples of the Matching Principle To illustrate the...
of the amount must be reported as 1) revenue in a future period, or 2) expense in a future period. The deferral adjusting entry makes certain that the correct amounts will be reported on a company’s balance sheets and...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
to direct a reader’s attention to the disclosures included in the notes to the financial statements. Commitments are likely legal binding agreements for future transactions. If no amount is currently payable, there is...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
A liability account with a credit balance associated with bonds payable that were issued at more than the face value or maturity value of the bonds. The premium on bonds payable is amortized to interest expense over the...
, when the invoice is to be paid, a detailed listing of the goods and/or services, the amount owed for each item, and the total amount of the invoice. Some common invoice payment terms are: Due upon receipt Net 30...
direct labor cost was $189,520 (18,400 hours at $10.30 per hour). This means a TOTAL (efficiency and rate) variance of $9,520. Some of that variance is due to the rate being $0.30 too much and some of that variance is...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The report that sorts a company’s accounts receivables into current,...
to be removed from inventory and matched with the sales revenues reported on the income statement. This means that the oldest costs remain in inventory. LIFO became popular due to inflation and the fact the U.S. income...
(or to its estimated salvage value). Example of Reporting a Fully Depreciated Asset on the Balance Sheet A fully depreciated asset that continues to be used is reported at its cost in the Property, Plant and Equipment...
What is a toxic asset? I would define a toxic asset as an investment whose value has dropped significantly and there is no market in which to sell the asset. To illustrate, let’s assume that at the peak of the real...
Can a fully depreciated asset be revalued? A fully depreciated asset cannot be revalued because of accounting’s cost principle. Definition of a Fully Depreciated Asset A fully depreciated asset is one that has...
of depreciation taken on the plant assets since they were put into service. accumulated depreciation This contra asset account reports the amount of depreciation taken on the plant assets since they were put into...
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...
of $2,500 every six months until the bond matures. If the current market interest rate for this type of bond is 6%, the current market value of the 5% bond will be less than $100,000. Assume that the market value for...
is not adjusted for inflation or for changes in the current value or replacement value of the asset. For buildings, equipment, fixtures, vehicles, and other long-lived tangible assets other than land, the asset’s...
(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...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
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...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of Financial Accounting introduces some of the basic accounting concepts and how they affect the income statement, balance sheet, and other financial statements.
with the depreciation expense on the income tax return. Select... True False 8. The balance in the account Accumulated Depreciation should be approximately the same as the balance in the account Depreciation Expense....
, the total market value of the shares would have been $5 million. After the 2-for-1 stock split, the corporation’s market value will also be $5 million (200,000 shares X $25 per share). This is the same for each...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
debts expense for its second week of operations will be $__________ $600 $600,000 times 0.001. 20. The amount of accounts receivable that you expect will be written off by the end of the company's second week of...
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