than the current cost of the productive capacity being used up each year. Similarly, if a retailer’s cost of items in inventory is increasing at an annual rate of 10%, the cost of goods sold reported on the income...
than the current cost of the productive capacity being used up each year. Similarly, if a retailer’s cost of items in inventory is increasing at an annual rate of 10%, the cost of goods sold reported on the income...
report what the costs should have been (the standard cost). This means that the debit or credit balance in the Materials Usage Variance account must be included in the external financial statements. If the standard...
production quantity, the cost to order is replaced by the costs related to __________ __________ a machine for a production run. 7. MRP is the acronym for materials __________planning. 8. Since the EOQ is the square...
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...
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...
__________–__________, __________–__________. 7. LIFO means __________ – __________, __________ – __________. 8. The cost flow assumption where the most recent costs are matched first with current period sales...
What is the difference between cost and expense? Definition of Cost A cost might be an expense or it might be an asset. Definition of Expense An expense is a cost that has expired or was necessary in order to earn...
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...
Are commissions a cost of goods sold account or an expense? Definition of Commissions Commissions are compensation for obtaining sales. Hence, sales commissions are a selling expense and will be recorded in general...
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
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...
In the context of inventory this means that the inventory should be reported at the lower of its cost or its net realizable value (NRV). The rule is associated with the conservatism guideline or principle. Net realizable...
... Inventory Purchases Sales 17. The cost of inventory and the cost of goods sold should include which of these costs? Select... Freight-in Freight-out 18. The account Freight-out can be used under which inventory...
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
The method of accounting for treasury stock whereby the cost of the stock that is repurchased by the issuing corporation is recorded and is reported in the contra stockholders’ equity account Treasury Stock.
The allocation of common costs based on the sales value of the products that emerge. For example, a company develops a large parcel of land at a cost of $5 million dollars. Individual lots will be sold for $100,000 to...
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
Operating expenses are the costs of a company’s main operations that have been used up during the period indicated on the income statement. For example, a retailer’s operating expenses consist of its cost of...
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
Occurring twice per month. For example, if salaried personnel are paid on the 15th and the last day of the month, we would say they are paid semimonthly. People paid semimonthly will receive 24 paychecks during a year....
The amount an employee “clears” on her or his payroll check. It is also the “net” amount: the gross salary or wages minus the witholdings/deductions for payroll taxes and voluntary deductions for...
The amount of interest expense incurred during the time interval shown in the heading of the income statement that pertains to a company’s bonds payable. Bond interest expense also includes the amortization of the...
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
A percentage of an hourly wage rate (or salary) that represents the employer’s additional costs of employee benefits such as paid vacation days, paid sick days, insurance (health, dental, life, worker...
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
Compensation for employees that is in addition to salaries and wages. Examples include paid absences (vacation, sick, holiday), insurances (health, dental, vision, life), pensions, profit sharing contributions, employer...
Rates based on a department’s direct and indirect overhead costs and some measure of the department’s activity, such as the department’s machine hours. Departmental rates are more accurate than...
-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...
a bank receives from a depositor. Since the bank is not earning this money, the amount is recorded by the bank with a debit to Cash and a credit to Customer Deposits. Example of Customer Deposit Let’s assume that Ace...
shipment. Assume that XYZ Distributors Inc (XYZ) sells only the Premier brand of water heaters. XYZ receives an order for 40 of the water heaters from a condominium developer located 30 miles away. XYZ then places an...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
as part of the asset’s cost Example of Capitalized Interest Assume that a company is constructing an addition to its present manufacturing building. Its bank is lending the company $320,000 at an annual interest rate...
of direct and indirect manufacturing employees. If for the month of January the direct labor is $40,000, then $2,000 of the worker comp cost should be included as direct labor. If indirect labor for January is $60,000...
What is the rationale for not reporting plant assets at their liquidation value? I will assume that the plant assets‘ liquidation values are higher than the present carrying values when answering your question. Plant...
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