What are the required financial statements? The required financial statements for U.S. business corporations are: Statement of income. This financial statement is also known as the statement of operations, statement of...
What are the required financial statements? The required financial statements for U.S. business corporations are: Statement of income. This financial statement is also known as the statement of operations, statement of...
minus its accumulated depreciation of $99,000. Hence, the machine’s book value is $1,000 (which is equal to the estimated salvage value). This means that there is no depreciation expense in the current year, and the...
of the manufacturing overhead costs are fixed in total (manufacturing rent, depreciation, managers’ salaries, repairs, etc.), the per unit cost of a product depends on the number of units manufactured during a given...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
Tax For the calendar year 2023 (January 1 through December 31, 2023) the maximum amount of an employee’s earnings that is subject to the Social Security payroll tax is $160,200. An Employer Must Match Its Employees’...
What is liquidity? Definition of Liquidity Liquidity is a company’s ability to convert its assets to cash in order to pay its liabilities when they are due. Current Assets Generally, the assets that are expected to...
in the use of accounting software and electronic worksheets. Generally, an accounting clerk will have a high school diploma and some may have a 2-year associate’s degree in accounting. The accounting clerks are likely...
as an ordinary annuity or an annuity in arrears. Example of Arrears Assume a corporation has 10,000 shares of 6% $100 cumulative preferred stock. Since the corporation has a limited amount of cash available, the board...
Assume that a corporation had the following amounts for the most recent year: Net income after tax of $500,000 Interest expense of $200,000 Income tax expense of $300,000 Given these assumptions, the corporation’s...
as an expense for the period (year, month, etc.) shown in the income statement’s heading. Definition of Accumulated Depreciation Accumulated depreciation reports the total amount of depreciation that has been reported...
that a manufacturer has only one product and 80,000 units were manufactured and sold during a recent year. The selling price was $10 per unit. The variable expenses were $4 per unit (consisting of manufacturing costs of...
of $48,000 per year, the person’s semimonthly gross pay will be $2,000 ($48,000/24 pay periods). A person with an annual gross salary of $48,000 who is paid biweekly will have a biweekly gross pay of $1,846...
year. Examples of the Columns Often Appearing on the Statement The statement usually has the following columns into which the amounts will be sorted: Common stock issued – number of shares Common stock issued –...
to the financial statements of the parties to a noncancelable contract. Examples of No Entry When Signing a Contract Assume that an electric utility signs a noncancelable contract with a coal company to purchase 100...
are traded on a stock exchange, the earnings per share must appear on the face of its income statement. Example of Earnings per Share Assume a corporation has only one class of common stock outstanding and has no...
How is a short term bank loan recorded? Definition of Short Term Bank Loan When a company borrows money from its bank and agrees to repay the loan amount within a year, the company will record the loan by increasing its...
that a company has steady demand of 12,000 units per year for one of its products. The company purchases the product from its supplier at a cost of $100 each. The company’s incremental cost to process an order is $144...
to interest expense will be reported immediately after the par value of the bonds in the liabilities section of the balance sheet. Generally, if the bonds are not maturing within one year of the balance sheet date, the...
a company was during a time interval (period of time), such as a year, quarter, month, 52 weeks, etc. Costs that occurred but are not yet expensed on the income statement are typically referred to as deferred costs,...
% minus the company’s normal gross profit percentage. (This should be available from the previous year’s income statements. Multiply the cost of goods sold percentage times the sales since December 31. The result is...
must report all of the amounts owed for work performed up to midnight of June 30. The expenses reported on the income statements for the month and year-to-date ended on June 30 must include all the payroll related...
receivable that will be collected. Example of Allowance for Doubtful Accounts Assume a company has $230,000 of accounts receivable at the end of its accounting year. Its Allowance for Doubtful Accounts (before any...
as a reduction in the company’s Cash account and an increase in an asset account such as Advance to Employees or Other Receivables: Advances. (If the amount is expected to be repaid within one year, this account will...
. receives $24,000 on December 31, 2023 in exchange for promising to provide the client with services for the year January 1 through December 31, 2024. As of December 31, 2023 the entire $24,000 is unearned. Therefore,...
of machine hours. Example of Fixed Overhead Absorbed Assume that TOPCO has budgeted next year’s fixed manufacturing overhead costs to be $2,000,000 (consisting of depreciation on its equipment, salaries of the...
assets is $323,000 Total amount of current liabilities is $310,000 Therefore, the company’s working capital on June 30 was $13,000. If one year earlier the company had current assets of $210,000 and current...
Why are revenues credited? Why Revenues are Credited Revenues cause owner’s equity to increase. Since the normal balance for owner’s equity is a credit balance, revenues must be recorded as a credit. At the end of...
Accounting If a company’s employees are paid weekly based on hours worked, the payroll processing is likely done during the first few days following the work week. If the company’s accounting periods are calendar...
ledger accounts. At any point you can go to an account such as Salaries Expense for Sales Staff and see the year to date amount of such an expense. With the use of accounting software, an enormous quantity of...
to be $800,000 for the new year. The company produces similar products and it expects to use 20,000 machine hours. Based on this information, the company’s plant-wide overhead rate will be $40 per machine hour. If...
and the variable SG&A expenses. The contribution margin can also be expressed as a percentage of net sales. In that case it is often described as the contribution margin ratio. Information for Examples Let’s...
some accountants use the term provision to describe the current year expense/increase in an account balance, others use provision to mean the balance in an account balance. Join PRO to Track Progress Mark the...
on the independent variable. Let’s illustrate this by looking at the cost of property insurance. The cost of insuring the factory building is a fixed cost when the independent variable is the number of units...
year is reported under investment activities on the statement of cash flows. Definition of Revenue Expenditure A revenue expenditure is an amount that is spent for an expense that will be matched immediately with the...
issued, the amortization of the premium will involve the account Interest Expense or Bond Interest Expense. Since the bonds mature in 20 years, the $60,000 of premium on bonds payable will mean an annual amortization of...
and a stated interest rate of 6% per year. This means that the bond issuer is obliged to pay the following amounts: $30,000 of interest every six months until the bond matures ($1,000,000 X 6% X 6/12) $1,000,000 at...
’ equity section of the balance sheet. The weighted-average number of shares of common stock outstanding during the year is used to compute the corporation’s earnings per share often shown at the bottom of the...
point in sales dollars, let’s assume that a company has fixed expenses of $100,000 per year. The variable expenses are estimated to be 80% of the net sales. This means that the contribution margin ratio is 20% of net...
low. There can also be differences within the same industry. For example, one computer company might assemble and ship computers within hours of receiving the order via its website. Its inventory turnover will be off...
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