the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
. If a store sells its old delivery truck for cash, and the cash amount is more than its book value, a __________ is reported on the income statement. 4. An asset’s book value or carrying value is the the asset’s...
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...
have increased in value, the depreciation and cost of goods sold reported on the income statement will be less than the value of the economic capacity being used up. As a result, the reported net income will be greater...
the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
Why does our company's balance sheet report its land at cost when it is so much more valuable? Accountants are guided by the cost principle. This requires accountants to report assets at their cost when...
, the property, plant and equipment are reported at cost minus the accumulated depreciation (except land). If these assets have increased in value, the fair value is not reported because of the cost principle. Also,...
. 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,...
are paying interest. However, our agreement did not specify any interest, nor did it state an interest rate. To find the interest rate that is implicit in this arrangement, you need to carry out what’s known as a...
, unattractive, etc. New technologies that disrupt the way things are done Decline in overall demand for the items Arrival of unique competitors Consequences of Obsolete Inventory When inventory items become obsolete,...
into service until the date of the balance sheet. The account Accumulated Depreciation is a contra asset account because it will have a credit balance. The credit balance is reported in the property, plant and equipment...
What are assets? Definition of Assets In accounting and bookkeeping, a company’s assets can be defined as: Resources or things of value that are owned by a company as the result of company transactions Prepaid expenses...
See net present value.
An estimate of an asset’s market value
Present value.
Life insurance without a cash value.
See net realizable value.
See cash surrender value.
Financial Statements Video Training Part 4 Balance sheet: property, plant and equipment (accumulated depreciation, book value) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
avoid the use of the payback reciprocal. Instead, you should compute the internal rate of return or the net present value because they will discount each of the actual cash amounts to reflect the time value of money....
will decide to also issue preferred stock. Usually the holders or owners of a corporation’s common stock elect the corporation’s directors, vote on significant matters, and enjoy increases in the value of their...
in the property’s cost of $1,600,000. A real estate appraisal indicates that the land has a current value of $400,000 and the warehouse building has a current value of $1,200,000. The transaction will be recorded with...
of a peripheral activity, such as a retailer selling one of its old delivery trucks. A gain occurs when the cash amount (or its equivalent) received is greater than the asset’s carrying amount, which is also referred...
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
is sold for $5,000. If the truck had a cost of $40,000 and accumulated depreciation of $35,000 there will be no gain or loss reported on the income statement. The reason is the $5,000 received is equal to the $5,000 of...
. There will be no depreciation expense recorded after the asset is fully depreciated. No entry is required until the asset is disposed of through retirement, sale, salvage, etc. To illustrate this, let’s assume that a...
realizable value (NRV) that is less than the cost of the inventory, it may choose to keep the original costs in its Inventory account and to reduce the reported amount of inventory through a contra inventory account...
of land. Depreciation attempts to match an asset’s cost (minus any expected salvage value) with the revenues that the asset will be generating over an estimated number of accounting periods. Example of Depreciation...
cost, appraised value, and assessed value amounts range from $150,000 to $270,000. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
bonds. The result is that liabilities decrease and stockholders’ equity increases. 3) A corporation declares a cash dividend. A current liability Dividends Payable is created and the Retained Earnings (part of...
will include vehicle loans, bonds payable, capital lease obligations, pension and other post-retirement benefit obligations, and deferred income taxes. Some long-term debt that will be due within one year can continue...
of a company’s liabilities divided by the total amount of the company’s assets. Note: Debt includes more than loans and bonds payable. Debt is the total amount of all liabilities (current liabilities and long-term...
of contra accounts that will result in the balance sheet totals being different from the post-closing trial balance totals include: Allowance for Doubtful Accounts Discount on Bonds Payable Bond Issue Costs Owner’s...
and the owner’s drawing account. Mark as wrong Mark as right assets These are a company’s resources which have future economic value that can be measured and expressed in the company’s currency. assets These are a...
when a corporation’s 1) cash dividend per share of common stock is divided by 2) the earnings per share of common stock. Mark as wrong Mark as right book value of a corporation This value is equal to the amount of...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
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