, another company in an industry where the credit terms are net 60 days will need a greater amount of working capital. Having an approved credit line with no borrowing allows a company to operate comfortably with a small...
, another company in an industry where the credit terms are net 60 days will need a greater amount of working capital. Having an approved credit line with no borrowing allows a company to operate comfortably with a small...
from customers (if the checks are not postdated) Petty cash Cash equivalents, such as U.S. Treasury Bills which were purchased within 90 days of their maturity Temporary investments, such as certificates of deposit...
days. After reviewing and approving the invoice, the retailer will enter the invoice in its accounting records with a debit of $980 ($1,000 minus 2% discount) to Purchases or Inventory and a credit of $980 to Accounts...
+ $10,000 of owner’s equity. Next, let’s assume the new company completes a service for another business and earns revenues of $1,500 and allows the business to pay in 10 days. This means the new company will have...
(with payment due 30 days later). Company A will record the amount of the sale with a credit to Sales and a debit to Accounts Receivable. Company B will record the purchase (perhaps as inventory) with a credit to...
the customer to pay in 30 days, the company will increase its asset account Accounts Receivable with a debit of $500. It must also record a credit of $500 in Service Revenues because the revenue was earned. The credit...
that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
or moment, there is an inconsistency between the numerator and the denominator. For example, the numerator in the inventory turnover ratio is the cost of goods sold for the 365-day year, while the denominator reflects...
to cash in 10 to 40 days. However, inventory may require several months to be sold and the money collected. Hence, inventory is not considered to be a “quick asset.” To assist in evaluating a company’s liquidity,...
as a result of having sold goods on credit. Through the use of the aging method, the company sees that $18,000 of the receivables are 100 days past due. Upon further checking, the company believes that $10,000 of these...
to provide electricity on peak demand days) A variable amount based on the number of kilowatt hours of electricity actually used by the company The manufacturer’s electricity cost is also semivariable in relation to...
for a customer on December 28 and allows the customer 10 days in which to pay its invoice of $850. On December 28, HRS records the $850 it has earned in the current asset account Accounts Receivable and in the revenue...
will record an account receivable when it delivers a truckload of goods to a customer on June 1 and the customer is allowed to pay in 30 days. From June 1 until the company receives the money, the company will have an...
at the time the computer is shipped, the company will have very little in accounts receivable and will enjoy great cash flow. Another computer company might sell only through retailers. This company will have to...
ratio, here are some additional accounting/financial ratios: Quick ratio Debt to equity ratio Accounts receivable turnover ratio Days’ sales in inventory Interest coverage ratio Gross margin ratio Return on...
makes an expenditure of $255,500 to purchase equipment. The expenditure occurs on a single day and the equipment is immediately placed in service. Assuming the equipment will be used for seven years, the asset’s cost...
and will usually increase an asset when the revenues are earned (as opposed to waiting until the client’s cash is received). For example, if the company earns fees of $4,000 and allows the client to pay in 30 days,...
, the interest expense that is reported on the income statement is the amount of interest that was __________. Select... incurred paid 5. A company’s superior management team and the company’s logo will be reported...
... Asset Liability Expense 17. A company with a calendar year and calendar months is more likely to need adjusting entries for which group of employees? Select... Hourly employees paid weekly Salaried employees paid on...
The amount owed to employees as of a specified date for the amount of vacation pay that has been earned but has not been taken. For example, the accrued vacation pay as of December 31, 2023 is the amount the employees...
Under the accrual method of accounting, the account Salaries Expense: Delivery Dept reports the salaries that the employees in the delivery department have earned during the period indicated in the heading of the income...
Under the accrual method of accounting, the account Unemployment Tax Expense on Warehouse reports the unemployment tax expense the company has incurred for the employees in the warehouse during the period indicated in...
This account is a non-operating or “other” expense for the cost of borrowed money or other credit. The amount of interest expense appearing on the income statement is the cost of the money that was used...
A person whose pay is based on an annual amount (instead of being based on an hourly rate of pay multiplied by actual hours worked). For example, the officers of a corporation and the heads of departments within a...
A liability account whose balance is the unpaid principal balance as of the balance sheet date. The amount of principal required to be paid within 12 months of the balance sheet date is reported as a current liability....
A class of corporation stock that provides for preferential treatment over the holders of common stock in the case of liquidation and dividends. For example, the preferred stockholders will be paid dividends before the...
Insurance often required by states and paid for by the employer to compensate workers who were injured on the job. The amount of the insurance premiums vary by type of work performed. For example, rates are higher for...
A payroll tax paid solely by the employer and usually calculated as 0.6% times each employee’s first $7,000 of annual wages or salaries. (The tax rate is 6.0% but a credit of up to 5.4% is usually given for...
A contra liability account that reports the amount of unamortized discount associated with bonds that are outstanding. The discount on bonds payable originates when bonds are issued for less than the bond’s face or...
A technique used when processing accounts payable in order to be certain that only legitimate bills and invoices are paid. Its name is derived from the matching of 1) the vendor invoice with 2) the company’s...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...
. deferral-type adjusting entry (or) prepayment-type adjusting entry (or) deferral adjusting entry This type of entry adjusts an amount that was paid or received in advance of it becoming an expense or revenue. Mark as...
within stockholders’ equity as part of which category? Select... Paid-in capital Retained earnings Treasury stock View Coaching Paid-in capital reports the amounts that the corporation received at the time the...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
How do you calculate accrued vacation pay? Definition of Accrued Vacation Pay Accrued vacation pay is the amount of vacation pay that a company’s employees have earned, but the company has not yet paid. Example of...
rate is 5.1% and there was no accrued interest. As a result, the investors paid $99.5 million for the bonds. The corporation also incurred $1 million of bond issue costs which were paid from bonds’ proceeds. The entry...
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