a new sole proprietorship business. At this point, the owner’s equity is a positive $100,000. During the first year of operations, the business’s expenses exceeded revenues by $108,000 and there were no draws or...
a new sole proprietorship business. At this point, the owner’s equity is a positive $100,000. During the first year of operations, the business’s expenses exceeded revenues by $108,000 and there were no draws or...
Why do we charge depreciation? Definition of Depreciation Accountants charge (to expense) Have a significant cost Will be useful for more than a year Will not be useful indefinitely Since the asset land is assumed to be...
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...
What is a plant asset? What is a Plant Asset A plant asset is an asset with a useful life of more than one year that is used in producing revenues in a business’s operations. Plant assets are also known as fixed...
Why do manufacturers use standard costs? One reason for a manufacturer to use standard costs is to plan carefully what its costs will be for the upcoming budgeting year and to then compare the actual costs with those...
be referred to as a deferred charge. Example of a Deferred Asset Assume that an electric utility spent $300,000 for a project before it had to be abandoned. The state regulators ruled that the utility may recover the...
for each year of employment times the employee’s average monthly salary or wages during a three-year period prior to retirement. A hypothetical calculation for an employee retiring at age 65 might be 1% X 30 years of...
Receivable. The accrued interest receivable is a current asset since the $300 is expected to be collected within one year of the balance sheet date. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
What is cycle counting? Cycle counting refers to physically counting a portion of the inventory items on many days throughout the year instead of counting all of the items on a single day near the end of the year. For...
capacity is 1,860 machine hours per year. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your...
What is a noncurrent asset? Definition of Noncurrent Asset A noncurrent asset is an asset that is not expected to turn to cash within one year of date shown on a company’s balance sheet. (This assumes that the company...
Based on the above general ledger account balances, the company’s net purchases for the year were $238,000 ($250,000 – $3,000 – $9,000). Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn...
statement of cash flows statement of stockholders’ equity Where Dividends Appear on the Financial Statements The dividends declared and paid by a corporation in the most recent year will be reported on these financial...
Which accounts are debited in the closing entries? Definition of Closing Entries Closing entries occur at the end of an accounting year to transfer the balances in the temporary accounts to a permanent or real account....
What is a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
of semiannual interest payments that are part of a bond payable is an example of an ordinary annuity. A 10-year bond with a face value of $10 million and a stated interest rate of 6% will include an ordinary annuity...
What is the entry for a loan to an employee? Definition of Loan to Employee A loan to an employee is money advanced by the company to assist the employee. If the employee is expected to repay the loan within one year of...
market value is $2,000,000. Unless there are improvements to the building, there will be no depreciation expense after the 30th year. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
Where does revenue received in advance go on a balance sheet? Definition of Revenue Received in Advance Under the accrual basis of accounting, revenues received in advance of being earned are reported as a liability. If...
Also referred to as a subsequent event. An event occurring after the date of the balance sheet, but prior to the date that the balance sheet is actually released. For example, a balance sheet dated December 31 might be...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
an accounting year it reports the owner’s capital account and the owner’s drawing account. owner's equity This section of a sole proprietor’s balance sheet reports the difference in the amount of a...
for each hour worked in excess of 40 hours per week. Mark as wrong Mark as right independent contractor This term is used to describe a nonemployee who performs a task for a company. (The company must furnish a Form...
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...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
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...
“What if?” What if the selling price is increased by $1 per unit? What if the volume is decreased by 4,000 units? What if the fixed expenses are increased by $8,000 per year? Mark the Cheat Sheet as Complete...
and purchase returns and allowances equals __________ __________. 4. The cost of goods sold is the net purchases plus or minus the change in __________ from the beginning to the end of the period. 5. Goods in transit at...
by reading our Accounting Principles (Explanation). 1. The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline? Cost Wrong. The cost...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
will be shipped during the budget year. If the annual budget is not changed when more or less than 50,000 items are shipped, it is referred to as a static budget. A summary of the department’s static budget based on...
as current if it is expected to turn to cash within one year or within the operating _________, whichever is longer. CYCLE CECYL Unscramble CYCLE YECLC Unscramble 4. The total amount of current assets divided by the...
and the investment earns a consistent 10% per year compounded annually. The following table illustrates how the single deposit of $100,000 will grow as a result of the compounding at 10% per year. (The amounts are...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
a total cost of $1,500,000. Sue is using financial leverage to own/control $1,500,000 of property with only $500,000 of her own money. Let’s also assume that the interest on Sue’s loan is $50,000 per year and...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
The amount of free cash flow divided by the weighted average number of common shares of stock outstanding during the year.
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
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