Business X for $5 million based on Business X’s annual net income X 10. The fair value of Business X’s identifiable assets was $4 million and its liabilities were $1 million. Therefore, Company A is paying $5...
Business X for $5 million based on Business X’s annual net income X 10. The fair value of Business X’s identifiable assets was $4 million and its liabilities were $1 million. Therefore, Company A is paying $5...
Receivable of $120,000 and has a credit balance of $1,000 in Allowance for Doubtful Accounts. This indicates that the net realizable value of its accounts receivable is $119,000. When reviewing an aging of the accounts...
. If the company spends more for the direct materials, direct labor, and/or manufacturing overhead than should have been spent, the company will not meet its projected net income. In other words, analysis of...
that are recorded in income statement accounts. This allows the balance sheet account Owner’s Capital (or Retained Earnings) to avoid having all of the thousands or millions of revenue and expense transactions from...
The sole proprietorship of J. Lee will include the following capital accounts: J. Lee, Capital, which is increased by J. Lee’s investment into the business plus each accounting period’s net income, and which is...
Unscramble LIABILITY LIATIIBLY Unscramble 8. 2/10, net 30 allows for an early payment ___________. DISCOUNT UINOCDTS Unscramble DISCOUNT TISDCONU Unscramble 9. The ___________ of duties is one of the principles of...
of the unique services it provided nor does it know the market value. As a result, WSC discounts the future $100,000 by using the interest rate of 20% for two years to arrive at the present value of $69,400. WSC will...
Under accrual accounting, how are worker comp premiums handled? Worker comp insurance premiums should be charged to the areas where the related wages and salaries are charged. Let’s assume that the net cost of worker...
What is DCF? In accounting, DCF refers to discounted cash flows or to the discounted cash flow techniques such as net present value or internal rate of return. DCF is a preferred method for evaluating capital...
. The inventory turnover ratios are high because the stores feature the fast selling brands at low prices. Their strategy is that huge sales volumes with small profit margins will still result in adequate net income...
for $8. The credit memo will result in the following entry in SellerCorp’s accounting records: 1) a debit of $8 to Sales Returns and Allowances, and 2) a credit of $8 to Accounts Receivable. In other words, the credit...
sheet account Accounts Receivable. The combination of the credit balance in Allowance for Doubtful Accounts and the debit balance in Accounts Receivable is the net realizable value of the company’s accounts...
What is the book value of bonds payable? Definition of Book Value of Bonds Payable The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or...
in the balance sheet reporting Accounts Receivable (Net) of $82,000. 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...
What is the difference between gross margin and markup? Definition of Gross Margin Gross margin or gross profit is defined as net sales minus the cost of goods sold. However, some people intend for the term gross margin...
of goods sold. [Rather than simply showing the change in inventory as an adjustment to cost of goods, some income statements will show the calculation of Cost of Goods Sold as Beginning Inventory + Net Purchases = Goods...
Treasury stock – total cost Retained earnings Accumulated other comprehensive income or loss Total stockholders’ equity Examples of the Descriptions for the Rows or Lines Appearing on the Statement Some typical...
of the revenues will be available (after the variable expenses are covered) for the fixed expenses and net income. The contribution margin amount or ratio (ratio) can be presented for: The company as a whole A product...
the year. Therefore, the $25,000 increase in owner’s equity is likely the company’s net income earned for the year. The details for the $25,000 (revenues, expenses, gains, losses) will be reported on the company’s...
What are the ways to value inventory? Definition of Valuing Inventory Generally, the financial statements of a U.S. company must report its inventory at its historical cost (not at its selling prices). Inventories are to...
in the accounting periods in which the asset is being used. More Information on the Depreciation Entry It is important to understand the following: The depreciation entry will cause a decrease in the company’s net...
payable are required when a company borrows money from a bank or other lender. Notes payable may also be part of a transaction to acquire expensive equipment. In certain cases, a supplier will require a note payable...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
, another company in an industry where the credit terms are net 60 days will need a greater amount of working capital. Having an approved credit line with no borrowing allows a company to operate comfortably with a small...
for the sole proprietorship business does not include an expense for the owner working in the business. This means that the reported net income is the total return for the owner’s work and investment. Join PRO to...
rato. This ratio is computed by dividing a company’s net sales during a year by the average amount of the company’s total assets during the same year. In the case of financial ratios, a higher turnover ratio...
in the period in which they are earned even though the dependable customers will pay the company 30 days later. Example of Revenues On June 10, a company sells $4,000 of goods to one of its best customers with credit...
costs and fixed expenses ($18,000 + $12,000 + $1,000). Once the $31,000 has been covered, 70% of the revenues will flow to the company’s net income. Join PRO to Track Progress Mark the Question as Read Must-Watch...
What causes an increase in break-even point? Definition of Break-even Point The break-even point is the sales volume or sales revenue that is needed to cover the company’s expenses. In other words, it is the point...
be allocated to the resulting 90 lots in a meaningful way so that the developer can report the profit of selling two residential lots and the largest of the business lots. The basis for the allocation is likely to be...
methods: Indirect method (almost always used) Direct method (rarely used) The indirect method begins with the company’s net income based on the accrual method. That amount is then converted to the cash from operating...
income statement. Since the costs of products may be higher when they are reordered/purchased, the order in which their costs are removed from inventory will have an impact on the inventory valuation and the amount...
or to the proprietor’s capital account at the end of each accounting year.) Contra-revenue accounts including Sales Discounts, Sales Returns, etc. (The debit balances in these accounts allow for the reporting of both...
, the company’s Marketing Consultants Expense will be the account that is understated by $20,000. As a result of the $20,000 understatement, the company’s income statement will report too little of SG&A expenses,...
are closed at the end of the accounting year, the net amount will ultimately end up in a balance sheet equity account such as the proprietor’s capital account or the corporation’s retained earnings account....
amount, since reducing inventory has a positive effect on the company’s cash balance.) Additional Information The change in the inventory is reported as an adjustment to the company’s net income in the cash from...
are not allocated to the products, the company must have its selling prices and sales revenues sufficiently large to cover both the product costs and the period expenses to have a positive amount of net income. Join PRO...
: $60,000 Year 3: $80,000 Year 4: $100,000 Year 5: $70,000 The payback period is 3.4 years ($20,000 + $60,000 + $80,000 = $160,000 in the first three years + $40,000 of the $100,000 occurring in Year 4). Note that the...
have increased in value, the depreciation and cost of goods sold reported on the income statement will be less than the value of the economic capacity being used up. As a result, the reported net income will be greater...
statement accounts, and The owner’s drawing account The income statement accounts record and report the company’s revenues, expenses, gains, and losses. When the company is a sole proprietorship, the balances in...
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