See interest revenues.
See interest revenues.
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
assume that a company uses the accrual basis of accounting. If the company borrows $100,000 on December 15 and agrees to pay interest on the 15th day of each month at the rate of 1% per month, the interest expense for...
See compound interest.
The current asset that represents the amount of interest revenue that was reported as earned, but has not yet been received.
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
table for various combinations of n and i are referred to as future value __________ factors. 4. In the future value of 1 table, n refers to the number of __________ periods of time, such as months, quarters, years. 5....
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
between interest expense and interest payable, let’s assume that a company borrows $200,000 on November 1 at an annual interest rate of 6%. The company is required to pay each month’s interest on the 15th day of the...
What does per annum mean? Definition of Per Annum Per annum means yearly or annually. It is a common phrase used to describe an interest rate. Often “per annum” is omitted, as in “I have a 4% mortgage loan.” or...
an annualized interest rate of 18% (1.5% per month multiplied times 12 months). A vendor’s invoice having an early payment discount of “1/10, net 30” means that 1% can be saved if the amount owed is remitted...
, you can calculate the __________ interest rate by using a present value of an ordinary annuity factor. 9. Which of the following present value of an ordinary annuity (PVOA) factors are larger? PVOA Factors For 10%...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
, a bond’s future cash payments will not change, but the market interest rates will change frequently. The change in the market interest rates will cause the bond’s present value or price to change. For instance, if...
will occur, you can compute the __________ interest rate by using a present value calculation. 9. Which present value factor is larger: the PV of 1 factor for 10% or the PV of 1 factor for 12%? PV Of 1 Factor For 10%...
of semiannual interest payments that are part of a bond payable is an example of an ordinary annuity. A 10-year bond with a face value of $10 million and a stated interest rate of 6% will include an ordinary annuity...
or discount on bonds payable that results in the same amount each period is the __________–__________ method of amortization. 8. Under the __________ interest rate method of amortizing bond discount, the amount of...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
, if a corporation’s incremental federal and state income tax rate is 30%, bond interest payments of $40,000 will reduce the income tax payments by $12,000 (30% of the $40,000 reduction in taxable income). If the bond...
date. However, if the depositor insists on withdrawing the money before the maturity date, the financial institution will assess a penalty—usually the loss of interest. Since the depositor agreed to a maturity date,...
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...
to the owner’s capital account at the end of each accounting year. Select... True False 3. The closing entries will include a __________ to the Sales account. Select... debit credit 4. Prepaid Insurance is a temporary...
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
What is a predetermined overhead rate? Definition of Predetermined Overhead Rate A predetermined overhead rate is often an annual rate used to assign or allocate indirect manufacturing costs to the goods it produces....
The combined federal and state income tax rate that applies to an additional amount of taxable income.
A variance arising in a standard costing system that indicates the difference between the standard cost of direct labor for the good output (standard hours times standard rate) and the standard cost of the actual hours...
What is a burden rate in inventory? I assume that the burden rate in inventory refers to a manufacturer’s indirect manufacturing costs, which are also referred to as factory overhead, indirect production costs, and...
A single overhead rate for assigning all of the manufacturing production and service department costs to products. This rate is less accurate than departmental rates if a company manufactures a diverse group of...
What is the interest coverage ratio? Definition of Interest Coverage Ratio The interest coverage ratio is a financial ratio used as an indicator of a company’s ability to pay the interest on its debt. (The required...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
issue costs to Interest Expense over the remaining life of the bonds. (Bonds are likely to mature 10 years or more after they are issued.) The most precise way to amortize these amounts is to use the effective interest...
A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
amount not expected to be collected within one year is a noncurrent or long term asset. It is common for the loan to an employee to specify an interest rate and a schedule of payments. Entry to Record a Loan to Employee...
its face value, ___________ on Bonds Payable is recorded. PREMIUM PUIREMM Unscramble PREMIUM MERMIPU Unscramble 7. The market interest rate and the yield-to-maturity should be the same as the __________ interest rate....
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