Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
to the financial statements’ fairness and compliance with generally accepted accounting principles. Mark as wrong Mark as right assets These resources are owned by a company and have future economic value that can be...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
to the financial statements is usually a summary of the company’s significant accounting policies for the use of estimates, revenue recognition, inventories, property and equipment, goodwill and other intangible...
the asset’s book value An unfavorable settlement of a lawsuit against the company The retirement of bonds payable at a cost that is greater than the carrying value of the bonds Loss is also used to describe write-down...
allows a client to pay for a service one year after the service is completed, the amount received is assumed to consist of two parts: Interest for waiting one year to be paid The present value of the services provided...
accounting year will report the same amount of depreciation. The total amount of depreciation over the years of the asset’s useful life will be the asset’s cost minus any expected or assumed salvage value. In the...
for $40,000 (the balance after the January 31 entry); debit Loss of Sale of Fixed Assets $7,000; and credit Machines for $50,000. The $7,000 loss recorded on January 31 is the result of removing the machine’s book...
are the corporation’s creditors as evidenced by the liabilities.) Stockholders’ equity and liabilities are also seen as the claims to the corporation’s assets. However, the stockholders’ claim comes after the...
or the owner’s capital account at the end of each accounting year.) Contra-liability accounts such as Discount on Bonds Payable or Unamortized Bond Issue Costs. (These debit balances allow for the presentation of both...
preferred stock in addition to its common stock.] Generally, the holders of common stock: Elect the corporation’s board of directors Vote on mergers Participate in increases and decreases in the market value of the...
was acquired.) The depreciation entry is an estimate based on the asset’s historical cost, its estimated useful life, and its estimated salvage value. The depreciation entry is an allocation of the asset’s cost, it...
stock is issued its market value is likely to change in the opposite direction of inflation. The higher the rate of inflation, the less valuable are the fixed dividend amounts. If the inflation rate declines, the value...
that an asset is acquired. Further, the amount recorded will not be increased for inflation or improvements in market value. (An exception is the change in market value of a short-term investment in the capital stock of...
to approximately $2,000 in 6 years (6 X 12 = 72; or 72/12 = 6). If the $2,000 continues to earn 12% each year, six years later the investment will be worth $4,000. If the investment continues to earn 12% per year,...
for the amount received Get this journal entry to balance. If a debit amount is needed (because the cash received was less than the equipment’s book value), record a debit to Loss on Disposal of Equipment. If a credit...
cost of goods sold is 70% of sales. Next, compute the sales value of the merchandise sold since the last time an inventory amount was known. Let’s assume that the sales amounted to $100,000. Given the sales value of...
Franchises Trademarks, brand names, logos, etc. Domain names Goodwill Often the market value of a company’s intangible assets is far greater than the market value of the company’s tangible assets such as its...
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 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...
-in-process, finished goods, manufacturing and packaging supplies Office supplies Prepaid expenses, such as insurance premiums which have not yet expired Advance payments on future purchases Join PRO to Track Progress...
and distribute to its stockholders, the following corporation information should be considered: Present cash balance Cash needed to finance the business operations (growth, inflation, etc.) Cash needed to finance future...
in each accounting period and report interest payable for any unpaid but incurred interest up to the end of the accounting period. Future interest is not recorded as a liability. The bank must report interest income (or...
Where is a contract with a customer reported on the balance sheet? A contract to perform future services for a customer is not reported on the balance sheet of the company that will be providing the services. For...
will have full access to the job cost sheets without having access to other information in the general ledger. Since companies are integrating accounting records with their other information into one database, I...
withholdings Examples of payments that will be expenses in a future accounting period(s): Payments for construction of a building that will be put into service next year Payments for an exhibit at next year’s trade...
, and/or Planned amounts that will be spent for future additions to property, plant and equipment When the depreciable assets that are included in capex are put into service, their costs will be depreciated over the...
are the future costs and the opportunity costs (neither of which are not in the general ledger and are probably unknown at the time a decision must be made). Join PRO to Track Progress Mark the Question as Read...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
What is a rolling budget? Definition of Rolling Budget A rolling budget often refers to a company’s operating budget which presents the future monthly budgets for the next 12 months. A rolling budget is also known as a...
and development for the future leaders of the company. A disadvantage of decentralization occurs if a subunit makes a decision that is good for the subunit’s financial results, but it results in less than optimal...
on specified future dates Reported as liabilities Interest is accrued as a current liability Principal that is due within one year of the balance sheet date is reported as a current liability (unless there is a bond...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
for the cost of $10,000 Credit the asset account Cash for the $4,000 that was paid Credit the liability account Notes Payable for $6,000 The liability account Notes Payable reports the principal amount owed at the...
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability A contingent liability is a potential liability (and a potential loss or potential expense). For a...
earnings. This explains why state laws likely require corporations to have a credit balance in Retained Earnings before declaring and paying dividends. Practically speaking, the corporation must also have sufficient...
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
space and other costs of holding/carrying inventory While inventory is critical to meet demand for the goods, but having too much of the wrong inventory items can result in cash flow problems that may jeopardize...
%)]. Since bonds are a form of debt, the existing stockholders’ ownership interest in the corporation will not be diluted. Therefore, the future gains from use of the bond proceeds (minus the bond interest payments)...
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