A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
be calculated by discounting the bond’s future cash amounts (semiannual interest payments and the maturity amount) back to the amount of cash paid to buy the bond (the present value). Example of Actual or Real...
in __________ their ownership interest. 19. Additional paid-in capital includes amounts received in excess of the stock’s par or __________ value. 20. Preferred stockholders will receive their __________ before the...
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
What is the difference between residual value, salvage value, and scrap value? The terms residual value, salvage value, and scrap value are often used when referring to the estimated value that is expected at the end of...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
amount) discounted by the market interest rate at the time of the bond sale. Example of a Bond Premium A person would buy a bond at a premium (pay more than its maturity value) because the bond’s stated interest rate...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Federal government securities with a fixed interest rate and maturing in more than 10 years.
The long term asset category of a classified balance sheet which appears immediately after the current assets. Listed in this category would be a bond sinking fund, funds held for construction, the cash surrender value...
, but we expect to have the item in stock within 5 working days.” A recently organized, regular U.S. corporation will be issuing 100,000 new shares of stock for $100 per share. All of the shares being issued are common...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
What is an annuity in present value calculations? In present value calculations, an annuity is a series of equal cash amounts occurring at equal time intervals. The identical cash amounts are sometimes referred to as...
or the owner’s capital account at the end of each accounting year.) Contra-liability accounts such as Discount on Bonds Payable or Unamortized Bond Issue Costs. (These debit balances allow for the presentation of both...
the asset’s book value An unfavorable settlement of a lawsuit against the company The retirement of bonds payable at a cost that is greater than the carrying value of the bonds Loss is also used to describe write-down...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
of money, the smaller the amount of the discount. In turn, a larger discount will mean a smaller present value. A smaller discount will result in a greater present value. DCF is also useful for calculating the...
at a premium. Any discount or premium on the bonds is recorded in a separate account. Another account is used to record the bond issue costs such as legal fees, auditing fees, registration fees, etc. These bond-related...
... Common stock Preferred stock View Coaching Every business corporation will have issued common stock. However, relatively few corporations will also issue preferred stock. 5. Which of the following shares of stock are...
will receive their dividends before the common stockholders are to receive any dividend. Preferred stock is relatively rare since corporations will use debt in addition to its common stock. Example of Preferred Stock...
500,000 shares of common stock with no par value. If the corporation actually issues only 100,000 shares for $50 each, the corporation will debit its Cash account for $5,000,000 and will credit its account Common Stock...
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...
: The company has a sufficient, long-term investment that is restricted for the purpose of paying the bondholders the maturity amount of the bonds when they come due. Typically, this investment is known as a bond sinking...
The amount of owner’s equity or stockholders’ equity reported on a company’s balance sheet. This is not an indication of the company’s fair market value.
The discounted value of a series of equal amounts occurring at future points with equal time intervals.
What is present value? Definition of Present Value In accounting, present value refers to the amount after discounting future cash amounts to the present. The present is depicted on a timeline as the point 0, which is...
Billing a client based on the value of the information or service provided rather than billing based on time spent.
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
What is value billing? Value billing is a way of billing a client for services provided. Basically, the amount billed is based on the value of the service (or information) instead of the number of hours spent. The...
A term used to describe the net present value method and the internal rate of return. The model discounts future cash flows back to the present time.
Future amounts that have been discounted to the present.
What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
See present value of an annuity due table, present value of an ordinary annuity table, and present value of 1 table.
The present fair market value.
See cash surrender value.
The net result of combining the discounted cash inflows and the discounted cash outflows of an investment, project, company, etc.
Featured Review
"The lifetime PRO membership is the greatest purchase ever. This is like having your own personal tutor at your fingertips!! I love it. I have benefited greatly from my purchase. I recently had to use this site for a college course and it is a great learning resource for any accounting class too. I can't recommend it enough." - Gina J.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviewsWe now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: