Subscriptions for $10. This approach would obviously match the annual cost to each of the 12 monthly periods benefiting from the subscription. However, this is not practical given the small amount involved. Thanks to...
Subscriptions for $10. This approach would obviously match the annual cost to each of the 12 monthly periods benefiting from the subscription. However, this is not practical given the small amount involved. Thanks to...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
for the amount received Get this journal entry to balance. If a debit amount is needed (because the cash received was less than the equipment’s book value), record a debit to Loss on Disposal of Equipment. If a credit...
, if a company receives $1,000 today and is able to invest the amount immediately at a rate of 10% per year, the company will have $1,100 after 365 days. If the time value of money is 10%, it also means that receiving...
purchased (or donated). If an item is not listed on the balance sheet as an asset, it will not be included in a corporation’s book value. (A corporation’s book value is the amount of stockholders’ equity reported...
What is an account payable? Definition of an Account Payable An account payable is an amount owed to a supplier or vendor for goods or services that were provided in advance of payment. However, some people use the term...
What is the debt to total assets ratio? Definition of Debt to Total Assets Ratio The debt to total assets ratio is an indicator of a company’s financial leverage. It tells you the percentage of a company’s total...
as a __________ Variance. 8. The standard cost of direct materials is the cost the manufacturer should have used to make the good output. True Right! False Wrong. 9. The variance that indicates the difference between...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
statements. One of the basic underlying principles in GAAP is the cost principle. This means that the inventories, the cost of goods sold, and the resulting net income must reflect the manufacturer’s actual historical...
is the net of the revenues that were missed minus the variable costs that were avoided. Calculating Opportunity Costs Since opportunity costs are the missed revenues associated with a missed opportunity you won’t find...
on December 31 was already in bankruptcy condition, the corporation must adjust its December 31 balance sheet by reducing its net receivables by $200,000 and reporting bad debts expense of $200,000 on its income...
for 15% of the dollars 70% of the items which account for 5% of the dollars 10. Which of the following is the most logical calculation of a company’s inventory turnover? Select... Annual cost of goods sold divided by...
. In essence, the cost of goods sold is being matched with the revenues from the goods sold, thereby achieving the matching principle of accounting. When the cost of goods sold is subtracted from net sales, the result is...
recent costs remain in inventory. Definition of Gross Profit Net sales – Cost of goods sold = gross profit? Difference between LIFO and FIFO If there were no changes in the cost of inventory items (purchased or...
proprietor working in her own business. For example, Jane works as a sole proprietor and her business reported a net income of $30,000 for the year. Since a sole proprietor does not receive a salary or wages, there is...
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...
than $1,000,000. The difference between the $1,000,000 of face value and the amount the bond market is willing to pay is the discount on bonds payable. The amount of the discount is a function of 1) the number of years...
What is an escrow payment? An escrow payment is an amount deposited with another party and it is to be released only for its specified purpose. The following is one example of an escrow payment. A borrower and lender...
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
, but the adjusted account balances will be reported on the financial statements. The adjusted trial balance (as well as the unadjusted trial balance) must have the total amount of the debit balances equal to the total...
to be included in the total accumulated depreciation amount that appears as a subtraction or negative amount in the Property, Plant and Equipment section. The cost and accumulated depreciation will continue to be...
offering a credit customer an early-payment discount of 2% for paying an invoice in 10 days instead of paying the full amount in 30 days. In this example the supplier is giving up 2% of the invoice amount in order to be...
Is advertising an asset or an expense? Definition of Advertising Expense Advertising is the amount a company incurs to promote its products, brands, and image via television, radio, magazines, Internet, etc. Since the...
.] Example of Interest Payable Let’s assume that on December 1 a company borrowed $100,000 at an annual interest rate of 12%. The company agrees to repay the principal amount of $100,000 plus 9 months of interest when...
investments with a maturity date that was 3 months or less at the time of purchase. In other words, there is very little risk of collecting the full amount being reported. Examples of Cash Equivalents Examples of cash...
card means that the bank (or other financial institution) is making a loan or providing credit to the cardholder. Usually the cardholder will receive a monthly statement showing the credit card transactions and must...
at a cost of $500,000. It is expected that the equipment will have no salvage value at the end of an estimated useful life of 10 years. For its financial statements the corporation will usually charge the same amount...
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...
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
What is the difference between the terms capitalize and depreciate? Definition of Capitalize In accounting, the term capitalize refers to adding an amount to the balance sheet as an asset (as opposed to immediately...
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
Retained Earnings is debited for the total amount of the dividend that will be paid and the current liability account Dividends Payable is credited for the same amount. (Some corporations will debit the temporary...
the classified balance sheet shows the total amount of the company’s current assets and the total amount of its current liabilities. A classified balance sheet is likely used by companies and is organized as follows:...
What is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
to describe the amount that it is subtracting from its sales revenue to report the amount of its gross profit or gross margin. Companies that provide services will use the term cost of services or cost of service...
amount due for the sales invoice and might even show a negative amount due from the customer. If your company mails statements to its customers, the customer should be able to see its double payment when reviewing the...
Is a prepaid expense recorded initially as an expense? Definition of Prepaid Expense A prepaid expense refers to an amount that a company has paid and a portion or all of it will be an expense in a later accounting...
. During December the retailer will have incurred the cost of the electricity it used during December. Under the accrual basis of accounting the retailer must report a current liability on December 31 for the amount owed...
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