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...
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...
and providers offering a cash discount will refer to it as a sales discount, while the buyer will refer to the same discount as a purchase discount. Examples of a Cash Discount Let’s assume that a company offers a...
, the difference between the amounts of assets and liabilities is reported as net assets (instead of owner’s or stockholders’ equity). The net assets are presented as: without donor restrictions or with donor...
. The accounting rule requires inventory to be reported at the lower of its cost or its net realizable value (NRV). The amount of the inventory write-down is reported on the current income statement. To illustrate,...
, our Net Sales and our weekly profit, I immediately made an entry to debit Discount for Shrinkage (a contra account to Sales) and a credit to Provision for Discounts (a contra account to Accounts Receivable). By...
of goods sold, SG&A) and losses. Revenues are sometimes referred to as the top line amount on a company’s income statement. Earnings or net income are often referred to as the bottom line amount on the income...
Short-term marketable securities Accounts receivable (net of the allowance for uncollectible accounts) Notice that inventory (which is a significant current asset for retailers and manufacturers) and prepaid expenses...
, a $20,000 amount will likely be immaterial for a large corporation with a net income of $900,000. However, the same $20,000 amount will be material for a small corporation with a net income of $40,000. Another view of...
What is a single-step income statement? Single-Step Income Statement Definition A single-step income statement arrives at a company’s net income in one step or subtraction: [total revenues and gains] – [total...
flows, the proceeds from the sale of a long-term asset is reported as a positive amount in the investing activities section. Since the gain on the sale is included in the net income, the gain is shown as a deduction...
as the result of earning revenues. EXPENSES SXENEESP Unscramble EXPENSES NPSEESEX Unscramble 7. Other ___________________ income includes foreign currency translation adjustments. COMPREHENSIVE PHVNCREISEOEM Unscramble...
the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
statements. The reason is that it causes the company’s net income in the early years of an asset’s life to be lower than it would be under the straight-line method. One reason for using double-declining-balance...
equity. The amount reported as the cost of goods sold will affect the calculations of gross profit and net income. Since the amount reported as the cost of this year’s ending inventory will carry forward to become the...
Depreciation is $55,000. By crediting the account Accumulated Depreciation instead of crediting the Equipment account, the balance sheet at the end of the year can easily report both the equipment’s cost of $70,000...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
of the statement of cash flows usually begins with a company’s net income and then immediately adds the period’s depreciation expense. In effect the noncash depreciation expense is added back because the...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
is reported as a _________ asset. CURRENT RRUCNET Unscramble CURRENT TCENURR Unscramble 2. Inventory is often reported at the _______ of cost or net realizable value. LOWER ORWEL Unscramble LOWER LEORW Unscramble 3....
More than it should be Examples of the Effect of Overstating Inventory If a corporation overstates its inventory, it will affect the following reported amounts on the corporation’s income statement: Cost of goods sold...
method, the interest expense will be included in the company’s net income or net earnings. The interest expense is adjusted to a cash amount through the changes to the working capital amounts, which are also reported...
. Operating Cycle If a company sells goods (products, component parts, etc.) its operating cycle is the time it takes for a company’s money to purchase the inventory items and for the money from their sale to return to...
to the other stockholders. Any dividends in arrears should be disclosed in the notes to the financial statements. 10. Which of the following will increase a corporation’s retained earnings? Select... Net income only...
, as well as its gross profit, net income, income tax payments, and more.) FIFO. This results in the oldest, lower costs as the first to flow out of inventory and becoming the cost of goods sold LIFO. This results in the...
and expenses and the resulting net income. Statement Of Cash Flows Wrong. This financial statement explains how a company's cash balance changed during the accounting period. 3. Under the accrual basis of...
as a percent of total assets. The vertical analysis of an income statement results in every income statement amount being restated as a percent of net sales. Example of Vertical Analysis of a Balance Sheet If a...
Unscramble TURNOVER UNRRVOTE Unscramble 4. Net ______ sales divided by accounts receivable is the receivables turnover ratio. CREDIT CIRDET Unscramble CREDIT EDTIRC Unscramble 5. Days sales in accounts receivable is 365...
ICTCONLELO Unscramble 9. A company's cost of goods sold divided by its average inventory is its inventory _____________ ratio. TURNOVER VNRUOTER Unscramble TURNOVER UNOTRERV Unscramble 10. When a company's...
to approving a vendor’s invoice for payment, the invoice, receiving report, and __________ order should be compared. 3. A supplier’s invoice for $1,000 is received on June 1 and has terms of 1/10, net 30. If...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
? Select... Cost of goods sold Total credit sales Total sales 11. Which of the following should be used to compute the receivables turnover ratio? Select... Gross sales Net credit sales Net sales 12. A company’s net...
by management 2. Which method or basis of accounting best measures the net income earned by a company during a short period of time? Select... Accrual Cash 3. Which of the following would you expect in the heading of a...
is sometimes referred to as a noncash expense. True Right! The entry for depreciation is a debit to Depreciation Expense and a credit to Accumulated Depreciation. Cash is not involved. The depreciation entry reduces net...
An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account). The contra asset account is related to another asset account. For example, the contra asset...
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
The statement of comprehensive income covers the same period of time as the income statement, and consists of two major sections: Net income (taken from the income statement) Other comprehensive income (adjustments...
An account used in combination with another account. For example, the account Allowance for Doubtful Accounts is used with Accounts Receivable in order to present the net amount of the accounts receivable. The account...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
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