What is a contingent liability? Definition of Contingent Liability A contingent liability is a potential liability that may or may not become an actual liability. Whether the contingent liability becomes an actual...
What is a contingent liability? Definition of Contingent Liability A contingent liability is a potential liability that may or may not become an actual liability. Whether the contingent liability becomes an actual...
at a fixed rate until the bonds mature many years into the future. If the bonds’ interest rate is less than the market rates when the bonds are offered, the bonds will sell at a discount. If the bonds’ interest rate...
or maturity amount at a specified date some years in the future. The agreement containing the details of the bonds payable is known as the bond indenture. U. S. corporations issue bonds instead of common stock for...
the company’s management to understand the financial impact of its past and future decisions. The distinction between accountant and bookkeeper keeps changing as accounting software and other software evolves. For...
to as financial leverage. Using debt financing allows the existing stockholders to maintain their percentage of ownership, since no new stock is being issued. However, the additional debt adds risk and may result in...
, a current liability. Future interest is not reported on the balance sheet.) Any principal that is to be paid within 12 months of the balance sheet date is reported as a current liability. The remaining amount of...
the future benefit of the cost Examples of Expense Some of the expenses that will be reported on a retailer’s income statement for the month of August include: Cost of goods sold for the August sales. (The date that...
sheet date, and 2) any accrued interest that is owed as of the balance sheet date. (Future interest is not reported as a liability until the accounting periods in which the interest has accrued.) A long-term...
What is the entry when a contract is signed? Accounting Entry When Signing a Contract Merely signing a contract does not by itself require a journal entry. In other words, signing a contract for a future transaction does...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
for Doubtful Accounts is a contra account to __________ __________. 4. Inventory is often reported at the lower of __________ or net __________ value. 5. The cost of insurance premiums that have been paid but have not...
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...
show a net realizable value (or cash realizable value, or carrying value) of $__________. 32. Max Corp’s journal entry to write off Jay Corporation’s accounts receivable will include a debit to __________. Select......
details. The $50,000 is a lump sum payment. Sometimes the term lump sum payment merely indicates a single payment. For example, the maturity value of a bond might be referred to as a lump sum payment in order to...
, unsold items in inventory. If the same items have been sitting in inventory for years, there are potential accounting issues. For example, the value of the items may be less than their costs due to obsolescence or...
A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
a delivery truck with a cost of $100,000 and it is expected to be used for 5 years. If we also assume that the truck will have no salvage value, the company will record depreciation expense of $100,000 over the five...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
An accounting guideline where the U.S. dollar is assumed to be constant (no change in purchasing power) over time. This allows an accountant to add one dollar from a transaction in 2010 to one dollar in 2024 and to show...
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
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...
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.
are referred to as __________. Select... expenses losses 3. Advertising costs and research and development costs are usually __________. Select... deferred to a future period expensed when they occur 4. What is the...
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...
of inventory should include all costs necessary to acquire the items and to get them ready for sale. When inventory items are acquired or produced at varying costs, the company will need to make an assumption on how to...
by smaller depreciation expense and greater taxable income in the later years of the asset’s life. Therefore, a corporation with consistent taxable income will be able to defer some income taxes until the later years...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
and/or revenues that have already been recorded in the general ledger accounts. The reason is that some of the recorded amounts will actually be used up and/or earned in a future accounting period. An example...
was the $400 repair bill + $3,000 of opportunity cost described above + the opportunity cost consisting of future lost profits from lost customers.) Now let’s modify the story. Suppose the machine that was idled by...
. The company will then have to pay the endorsers/payees the amounts on the checks plus any fees their banks charged for handling the NSF checks. The payees may require the company to pay for future transactions...
The Why behind the exam questions. Meet with Your Instructor If you are unable obtain a deep understanding, see your instructor for additional help. In the process, you may be helping your instructor become more...
What is a depreciable asset? Definition of Depreciable Asset A depreciable asset has the following characteristics: A tangible asset (other than land) Has a useful life of more than a year Is used in the business The...
, to reduce rent, etc. To satisfy stockholders who prefer appreciation in the value of the corporation’s common stock instead of receiving cash dividends that require current income tax payments Join PRO to Track...
, but we expect to have the item in stock within 5 working days.” A recently organized, regular U.S. corporation will be issuing 100,000 new shares of stock for $100 per share. All of the shares being issued are common...
What to do with the balance in Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account that is used with the balance in Accounts...
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