on the balance sheet are the company’s resources such as cash, accounts receivable, inventory, investments, land, buildings, equipment, some intangible assets . Generally assets are reported at their cost or a lower...
on the balance sheet are the company’s resources such as cash, accounts receivable, inventory, investments, land, buildings, equipment, some intangible assets . Generally assets are reported at their cost or a lower...
of the balance sheet, reports assets at their original cost less accumulated depreciation. However, the current value of some of these assets may be much greater. Some intangible assets such as trade names, patents,...
to the products that require the activities. Example of Traditional Method of Cost Accounting Assume that a manufacturer has $2,000,000 of manufacturing overhead costs consisting of depreciation, electricity, insurance,...
of the physical space occupied by the inventory including rent, depreciation, utility costs, insurance, taxes, etc. Cost of handling the items. Cost of deterioration and obsolescence. Often the costs are computed for a...
. In response to this situation, manufacturers will use departmental overhead rates and perhaps activity based costing. Example of Plant-wide Overhead Rate Let’s assume that a company’s manufacturing overhead costs...
Why does the fixed cost per unit change? Definition of Fixed Cost per Unit Fixed costs such as rent, salaries, depreciation, etc. generally do not change in total within a reasonable range of volume or activity. On the...
causes of the overhead costs. Examples of Cost Allocations The following are only a few of the many cost allocations that occur in some companies or organizations: The cost of a manufacturing building is allocated to...
sales, the company is deciding whether to eliminate E. If E is eliminated, the compensation of E’s employees and other expenses directly associated with E (amounting to $400,000) will be eliminated. However, the...
example of a semivariable cost is the annual cost of operating a vehicle. Some of the vehicle’s total annual operating costs will be the same regardless of the miles driven. These fixed costs include depreciation,...
they are depreciated over their useful lives. The accumulated depreciation for these assets is also reported as part of the property, plant and equipment. The amount of capital expenditures for an accounting period is...
statements will report depreciation expense of $7,500 in each of the 12 years remaining on the lease. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
is placed into service, the account Construction Work-in-Progress will be credited for its balance (the accumulated costs) and will be recorded with a debit in the appropriate property, plant and equipment account....
have been reduced by the cumulative amount of depreciation taken over the years. Other factors contributing to a high market value might be a corporation’s earnings and dividends that are consistently growing...
, assigned, or applied to goods produced. Examples of Actual Overhead A few of the many overhead costs are: Electricity used to power the production equipment Natural gas to heat the production facilities Depreciation of...
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
Does paying an account payable affect net income? Definition of Paying Accounts Payable Under the accrual basis of accounting, expenses are recorded when they have occurred, not when they are paid. Therefore, if an...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings,...
Does collecting a customer's accounts receivable affect net income? Definition of Accounts Receivable Accounts receivable is a current asset that results when a company reports revenues from sales of products or the...
Why do purchases appear as expenses on an income statement? Definition of Purchases In the context of companies that sell merchandise, the term purchases refers to the purchases of goods that are intended to be sold to...
Does the income statement explain the change in the equity section of a balance sheet? The income statement could explain the change in the equity section of a balance sheet. However, there are likely to be some other...
Why Does Inventory Get Reported on Some Income Statements? Reporting of Inventory on Financial Statements Inventory is an asset and its ending balance is reported in the current asset section of a company’s balance...
Does sales commission get reported in the income statement? Definition of Sales Commissions Sales commissions are amounts earned by selling another company’s goods or services and paid by the company whose goods or...
Will every transaction affect an income statement account and a balance sheet account? Definition of Income Statement and Balance Sheet Accounts A company’s general ledger accounts are arranged into two categories...
What is the effect on the income statement when the allowance for uncollectible accounts is not established? Definition of Allowance for Uncollectible Accounts The Allowance for Uncollectible Accounts or Allowance for...
If inventory is understated at the end of the year, what is the effect on net income? Definition of Inventory is Understated If inventory is understated at the end of the year, it means that the amount of inventory being...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
taxable income, it likely means lower income tax expense. Example Comparing LIFO and FIFO ABC Store purchases a product and then sells them to its retail customers. ABC began on January 2 and purchased 1 unit of product...
corporations is the __________. AICPA Wrong. The AICPA is not a government agency. FASB Wrong. The FASB is not a government agency. IRS Wrong. This government agency is associated with income tax reporting. SEC Right!...
flow assumption from FIFO to the LIFO because they were experiencing rising costs. By flowing the recent higher costs into the cost of goods sold on the income statement and tax return (and keeping the older lower costs...
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...
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...
to the credits. Mark as wrong Mark as right adjusting entry This type of journal entry is recorded at the end of an accounting period in order to accrue and/or defer expenses and revenues. (Each will include a...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that...
a company’s financial statements. adjusting entry This type of journal entry is used to accrue or defer amounts prior to preparing a company’s financial statements. Mark as wrong Mark as right closing entries These...
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