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...
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...
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...
A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2024, the employee’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare...
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...
by a company’s liabilities will generally have a lower cost than money raised from stockholders’ equity for the following reasons: Some liabilities such as accounts payable have no interest expense associated with...
, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
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...
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...
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...
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...
in the most recent higher costs being reported in the cost of goods sold resulting in less gross profit, less net income, less taxable income, and less income taxes than FIFO. LIFO also means that the older lower costs...
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...
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...
. 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...
, 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,...
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 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...
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...
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...
: $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...
accounts are also referred to as temporary accounts or nominal accounts because at the end of each accounting year their balances will be closed. This means that the balances in the income statement accounts will be...
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
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...
a net cost of $7,000 per year on the $100,000 loan. This means the after-tax cost is 7% ($7,000 divided by $100,000) per year. Using the example above, the after-tax interest rate can also be calculated. The formula for...
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...
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...
Accounting Basics (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (26) Marked Wrong (0) Marked Right (0) gross profit (or) gross margin This is the remainder after subtracting the cost of goods...
the employees’ pay, 2) payroll taxes that are paid solely by the employer, and 3) the payroll taxes that are withheld from the employees’ gross pay and also paid by the employer Payments to employees for their net...
to one account entitled __________ Common Stock. 12. Stockholder's equity is subdivided into two major sections: __________ paid-in capital and __________ retained earnings . 13. The net income of a corporation is...
's net income will cause a change in which component of stockholders' equity? Accumulated Other Comprehensive Income Wrong. Paid-in Capital Wrong. Retained Earnings Right! 7. Which financial statement's...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
. A corporation cannot record a gain or loss on its income statement for transactions involving its own __________. 17. The preferred __________ requirement must be deducted from a corporation’s net income when...
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 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 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...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
). As a result of the accounting rules, assets may be reported at various amounts. Here are a few examples: Certain marketable investment securities will be reported at market value Inventory is often reported at the...
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