The stockholders’ equity account that represents the amount paid to a corporation for its common stock that was in excess of the common stock’s par value. This account is sometimes referred to as the premium...
The stockholders’ equity account that represents the amount paid to a corporation for its common stock that was in excess of the common stock’s par value. This account is sometimes referred to as the premium...
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The book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. The book value of a company is the amount of owner’s or stockholders’ equity....
A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...
A multicolumn listing of each payment required during the period of a loan. Each payment is detailed by the amount of interest, the principal payment, and the remaining unpaid principal balance. The interest portion of...
The method used for removing costs from the inventory of goods. The cost flow can be different from the physical flow of goods. For example, in the U.S. the LIFO cost flow can be used even if the oldest goods are shipped...
A variance arising in a standard costing system that indicates the difference between 1) the standard cost of the direct labor that should have been used (the standard hours times the standard rate) for the good output,...
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
Under the accrual method of accounting, this account reports the employer’s expense for the company’s 401(k) plan associated with the employees in the delivery department during the period indicated in the...
A potential gain that is not recognized by accountants in the financial statements until it actually occurs. For example, Company P is suing Company D over a patent infringement. Company P has a contingent gain. Because...
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
A factory or manufacturing overhead rate used to allocate, apply, assign, or spread indirect product costs to items manufactured. Under traditional cost accounting, the burden rate might be a percentage of direct labor...
A bearer bond is a bond that is not registered in its owner’s name. The person holding the bond is presumed to be the owner of the bond. The interest on a bearer bond is received by clipping one of the dated...
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...
What is an impairment? Definition of Impairment The term impairment is associated with an asset currently having a market value that is less than the asset’s book value . A test is done to determine whether the...
, a manufacturer using equipment that is fully depreciated will have lower manufacturing overhead and lower cost of goods sold because the current year’s depreciation for the equipment is $0. Generally, the cost...
expenses (cost of a new delivery van), and some costs become expenses immediately (airing a television advertisement). Examples of Costs and Expenses Assume that a company purchases 2,000 units of a supply item each of...
of a manufacturer. The amount of Work-in-Process Inventory would be reported along with Raw Materials Inventory and Finished Goods Inventory on the manufacturer’s balance sheet as a current asset. Definition of...
-in-process, and the finished goods that are owned and on hand. Inventory is generally valued at its cost and it is likely to be the largest component of the company’s current assets. Since the unit cost of inventory...
When do you adjust the amount of prepaid expenses? Definition of Adjusting Prepaid Expenses The balance in the current asset account Prepaid Expenses should be adjusted prior to a company issuing its financial...
of the sinking fund balance growing to approximately $20 million by the time the bonds come due in 20 years. The corporation will report the bond sinking fund balance in the investments section of its balance sheet. The...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
Subscription Expense and will credit Cash (or Accounts Payable). If the amount of the subscription is significant, the company should debit the cost of the subscription to the current asset account Prepaid Expenses and...
. 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,...
checks for more than it has in its checking account. Example of Reporting Negative Cash on the Balance Sheet When a company prepares its balance sheet, a negative balance in the cash account should be reported as a...
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
by the current bond market. It is also possible that a bond investor will have no choice. For example, if the investor wants to purchase a bond with a high rating that matures in 8 years, perhaps only one bond will be...
current liability amount on its balance sheet. It also means that the accounts and amounts recorded as debits will better reflect the historical cost principle. If a company uses the net method, but fails to remit the...
to increase on January 1, 2020 to $684 per week. For a full-year employee, this means the current annual amount of $23,660 ($455 X 52 weeks) will become $35,568. You should refer to both the U.S. Department of Labor...
will likely have a feature that generates the aging of accounts receivable. Example of Aging Method Let’s assume that a company’s Accounts Receivable has a debit balance of $89,400. The aging method indicates that...
invoice are placed in one of six columns that appear to the right. The headings for those columns are: Current, 1-30 days past due, 31-60 days past due, 61-90 days past due, 91-120 days past due, and 120+ days past due....
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