one year later. The $11,000 represents: An amount for today’s services Interest compensation for the company waiting 365 days to be paid Under the accrual basis of accounting and with a time value of money of 10%, the...
one year later. The $11,000 represents: An amount for today’s services Interest compensation for the company waiting 365 days to be paid Under the accrual basis of accounting and with a time value of money of 10%, the...
, an invoice of $1,000 with terms of 1/10, net 30 means that the $1,000 obligation will be settled in full for $990 if it is paid within 10 days. If the customer has adequate cash or a readily available line of...
($40,000 X 70%). To comply with the cost principle the company will debit Purchases (or Inventory) for $28,000 and will credit Accounts Payable for $28,000. Early payment discount. Some suppliers offer discounts of 1%...
the amount of $1,000 along with credit terms of 2/10, net 30 days. This means the $1,000 is due within 30 days, but if the company pays the invoice within 10 days, only $980 needs to be paid. ($980 is the “net”...
Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
to an annual percentage rate closest to __________. 2% Wrong. 24% Wrong. 36% Right! [(20 days early and 2%) both x 18 = 360 days and 36%] 72% Wrong. 15. The Internal Revenue Service form to be issued for amounts paid to...
in the general ledger account Purchase Discounts.] Example of Discount on Purchase of Office Furniture Assume that a company purchases furniture for the office of a newly appointed executive. The cost of the furniture...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
a $9,100 increase in cash (receipts of $10,000 minus payments of $900). Now assume that a different company had a profit of $60,000 in its first year, but paid out $65,000 near the end of the year to acquire equipment...
% of the amount owed if the invoice is paid within 10 days. (The amount owed is the original invoice amount minus any returns and allowances.) If the invoice is not paid within 10 days, the buyer must pay the full amount...
The stockholders’ equity account that represents the amount paid to a corporation for its preferred stock that was in excess of the preferred stock’s par value. This account is sometimes referred to as the...
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...
Where can I find the amount of income taxes paid by a corporation? Definition of Income Taxes Paid by a Corporation The amount of income tax paid by a corporation is different from the amount of income tax (income tax...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
What is the difference between paid-in capital and retained earnings? Definition of Paid-in Capital Paid-in capital is one of the major categories of stockholders’ equity. Generally, paid-in capital reports the amount...
The stockholders’ equity account that reports the amount paid to a corporation that is in excess of the common stock’s stated value. The stated value of each share issued is recorded in the Common Stock...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
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...
Which date is used to record a credit card transaction? When a business uses its credit card, the transaction date is the date the credit card is used, not the date that the credit card statement is paid. For example, if...
and paid to the employees on Friday, January 8. The amount of the wages for the five days of December 27 through December 31 are calculated to be $5,000. In addition, the retailer incurred payroll taxes and fringe...
Is it possible to have a balance sheet for a single day? A balance sheet presents the amounts of a company’s assets, liabilities, and owner’s equity as of an instant or moment in time within a day. Usually it is the...
of goods sold is more logical than using sales when computing a company's ______ sales in inventory. DAYS ASYD Unscramble DAYS YDAS Unscramble 8. A company's average ____________ period is calculated by...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that...
record the $9 cash discount with a debit to the account Sales Discounts. The buyer will record the $9 savings as a credit to Purchase Discounts or as a reduction to the cost recorded in inventory. My dentist offers a 5%...
amount if it is paid within 10 days instead of the required 30 days) the amount of the discount is recorded in the contra revenue account Sales Discounts. Again, the company’s management will see the original amount...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
days. Using the alternate formula we first determine the average credit sales per day, which is the $400,000 of credit sales divided by 365 days = $1,096. Next, the average accounts receivable balance of $40,000 is...
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...
's average collection period for the year was __________ 28 Days' sales in receivables = 360 or 365 / accounts receivable turnover ratio = 360 / 13 = 27.69 = 28 days when rounded, or 365 / 13 =...
marketing consulting services and is billed $10,000 with terms of 1/10, net 30. If the bill is paid within 10 days, the cost is $9,900 ($10,000 minus the 1% discount of $100). This means that Cash should be...
What is a deferred cost? Definition of Deferred Cost A deferred cost is a cost that is already recorded in a company’s accounts, but at least some of the cost should not be expensed until a future accounting period....
: Divide company’s net credit sales for the year by 360 or 365 days = average credit sales per day Divide the average balance in Accounts Receivable during the year by #1 An alternative calculation is to use the...
What is Notes Payable? Definition of Notes Payable In accounting, Notes Payable is a general ledger liability account in which a company records the face amounts of the promissory notes that it has issued. The balance in...
could clear (be paid from) the bank account prior to that date. Post-dating a check makes sense only if you are certain that the payee will not cash or deposit the check before the date appearing on the check. Example...
What are wages payable? Definition of Wages Payable Wages payable refers to the wages that a company’s employees have earned, but have not yet been paid. Under the accrual method of accounting, this amount is likely...
of $250, but the bill will be paid 10 days later. Since owner’s equity is reduced by expenses (and is increased by revenues), the bookkeeping equation will show the following: Assets of $900 = Liabilities of $250 +...
on the first day of the month, there will be a __________ entry to Rent Expense. Select... debit credit 19. When a company purchases goods with credit terms of net 30 days, Accounts Payable will be __________. Select......
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