A non-operating item that results from the sale of a long-term asset for more (gain) or less (loss) than its carrying amount or book value.
A non-operating item that results from the sale of a long-term asset for more (gain) or less (loss) than its carrying amount or book value.
A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
Usually a change in the estimated useful life of an asset or a change in the estimated salvage value. The change usually causes a change in the depreciation expense for the current year and subsequent years. The...
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
Future cash amounts that have not been discounted to their present value.
The ratio of the market value of a share of common stock to the earnings per share of common stock. For example, if a corporation earned $3 per share and its stock is trading at $36, it’s price earnings ratio is...
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
In business decision-making, payback means the number of years before the cash invested in a project is returned. It involves the cash flows from the project but generally the cash flows are not discounted to reflect the...
A contra asset account arising when the present value of a note receivable is less than the face amount of the note. The credit balance in this account will be amortized to interest revenue over the life of the note.
An interest rate that is not explicitly stated. For example, instead of paying $100 cash a person is allowed to pay $9 per month for 12 months. The interest rate is not stated, but the implicit rate can be determined by...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
A decrease in the value of a long term asset to an amount that is less than the amount shown under the cost principle.
The book value of a company equal to the recorded amounts of assets minus the recorded amounts of liabilities. To learn more, see Explanation of Balance Sheet.
A phrase that indicates a transaction was between two independent parties and that the resulting amount is a fair representation of the value.
In accounting this is the rate used to discount future cash flows in order to determine their present value.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
The rate that will discount all cash flows to a net present value of zero.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
A report prepared by a professional appraiser with detailed information on the calculation of an asset’s current market value.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
A non-operating item that results from the sale of a long-term asset at an amount greater than the carrying amount (book value) of the truck at the time it is sold.
. A manufacturer’s inventory consists of the cost to produce the items (the costs of direct materials, direct labor, and manufacturing overhead). Sometimes a company’s inventory cost has to be reduced to a lower...
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...
value of money where current dollars are more valuable than future dollars. 4. Which of the following best describes the annual external financial statements of a corporation that has several wholly owned subsidiaries?...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
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...
. Which of the following is a contra asset account? Select... Accumulated Depreciation Bond Issue Costs Discount on Bonds Payable J. Smith, Drawing View Coaching The only contra asset in the list is Accumulated...
liability accounts normally have credit balances, a contra liability account is expected to have a debit balance. Discount on Bonds Payable and Bond Issue Costs are contra accounts to the liability account Bonds...
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...
accounting year will report the same amount of depreciation. The total amount of depreciation over the years of the asset’s useful life will be the asset’s cost minus any expected or assumed salvage value. In the...
are the corporation’s creditors as evidenced by the liabilities.) Stockholders’ equity and liabilities are also seen as the claims to the corporation’s assets. However, the stockholders’ claim comes after the...
for $40,000 (the balance after the January 31 entry); debit Loss of Sale of Fixed Assets $7,000; and credit Machines for $50,000. The $7,000 loss recorded on January 31 is the result of removing the machine’s book...
is approximately 2.75 years ($30,000 + $40,000 + $30,000 of Year 3’s $40,000). Limitations of Payback Period The payback period has two limitations or drawbacks: The net cash inflows are typically not adjusted for the...
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