assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory and sales slow and customers take more time to pay the amounts they owe, the company may not have the...
assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory and sales slow and customers take more time to pay the amounts they owe, the company may not have the...
by multiplying both the “2%” and the “20 days” by 18 (in order to get close to the 365 days in a year). The result is a per annum rate of approximately 36%. Another example involves a business charging its...
account. When the annual real estate taxes come due, the lender pays the real estate taxes by using the money in the borrower’s escrow account. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
. 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...
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
have increased in value, the depreciation and cost of goods sold reported on the income statement will be less than the value of the economic capacity being used up. As a result, the reported net income will be greater...
, unattractive, etc. New technologies that disrupt the way things are done Decline in overall demand for the items Arrival of unique competitors Consequences of Obsolete Inventory When inventory items become obsolete,...
interest rate for similar bonds. Example of Premium on Bonds Payable Assume that a corporation prepares to issue bonds having a maturity value of $10,000,000 and a stated interest rate of 6%. However, when the 6% bonds...
, the property, plant and equipment are reported at cost minus the accumulated depreciation (except land). If these assets have increased in value, the fair value is not reported because of the cost principle. Also,...
that the number of shares has changed and that the par value per share has changed (if the stock has a par value). However, a typical journal entry (one with a debit and a credit) is not needed since the total dollar...
. The accounting rule requires inventory to be reported at the lower of its cost or its net realizable value (NRV). The amount of the inventory write-down is reported on the current income statement. To illustrate,...
into service until the date of the balance sheet. The account Accumulated Depreciation is a contra asset account because it will have a credit balance. The credit balance is reported in the property, plant and equipment...
What is a valuation account? Definition of Valuation Account In accounting, a valuation account is usually a balance sheet account that is used in combination with another balance sheet account in order to report the...
Why does our company's balance sheet report its land at cost when it is so much more valuable? Accountants are guided by the cost principle. This requires accountants to report assets at their cost when...
these bonds will be paying the investors less than the market rate of interest ($300,000 semiannually instead of $305,000), the investors will pay less than $10,000,000 for the bonds. Assume the investors pay $9,800,000...
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 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...
Life insurance without a cash value.
See cash surrender value.
See net present value.
Present value.
An estimate of an asset’s market value
See net realizable value.
The par value of common and preferred stock.
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...
Financial Statements Video Training Part 4 Balance sheet: property, plant and equipment (accumulated depreciation, book value) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
of land. Depreciation attempts to match an asset’s cost (minus any expected salvage value) with the revenues that the asset will be generating over an estimated number of accounting periods. Example of Depreciation...
is sold for $5,000. If the truck had a cost of $40,000 and accumulated depreciation of $35,000 there will be no gain or loss reported on the income statement. The reason is the $5,000 received is equal to the $5,000 of...
of a peripheral activity, such as a retailer selling one of its old delivery trucks. A gain occurs when the cash amount (or its equivalent) received is greater than the asset’s carrying amount, which is also referred...
avoid the use of the payback reciprocal. Instead, you should compute the internal rate of return or the net present value because they will discount each of the actual cash amounts to reflect the time value of money....
realizable value (NRV) that is less than the cost of the inventory, it may choose to keep the original costs in its Inventory account and to reduce the reported amount of inventory through a contra inventory account...
in the property’s cost of $1,600,000. A real estate appraisal indicates that the land has a current value of $400,000 and the warehouse building has a current value of $1,200,000. The transaction will be recorded with...
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
will decide to also issue preferred stock. Usually the holders or owners of a corporation’s common stock elect the corporation’s directors, vote on significant matters, and enjoy increases in the value of their...
. There will be no depreciation expense recorded after the asset is fully depreciated. No entry is required until the asset is disposed of through retirement, sale, salvage, etc. To illustrate this, let’s assume that a...
cost, appraised value, and assessed value amounts range from $150,000 to $270,000. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
when a corporation’s 1) cash dividend per share of common stock is divided by 2) the earnings per share of common stock. Mark as wrong Mark as right book value of a corporation This value is equal to the amount of...
What is simple linear regression analysis? What is Simple Linear Regression Analysis Simple linear regression analysis is a statistical tool for quantifying the relationship between one independent variable (hence...
Is rent expense a period cost or a product cost? Definition of Rent Expense Rent expense is often a monthly amount paid by a company for use of a building. Typically, the rent is due on the first day of every month that...
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