Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
The statement of comprehensive income covers the same period of time as the income statement, and consists of two major sections: Net income (taken from the income statement) Other comprehensive income (adjustments...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
of $5,000 and cost of goods sold of $3,000. The difference of $2,000 is part of the retailer’s gross profit, operating income, and net income. The word “gain” is not appropriate since the activities involved the...
of the usual 30 days. For instance, let’s assume that a company purchases goods and the supplier’s sales invoice is $28,000 with terms of 1/10, net 30. This means that the company can deduct $280 (1% of...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Unscramble 9. Permits the immediate expensing of insignificant assets. MATERIALITY TLYMEIAAITR Unscramble MATERIALITY ARMTIYATEIL Unscramble 10. FASB is the acronym for _____________ Accounting Standards Board....
the split. An investor owning 100 shares before the stock is split 2-for-1 will have 200 shares after the split. Stock Price After a Stock Split Since the corporation is not changed (total assets, liabilities,...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. An entry on the right side of a T-account. Select... Debit Credit 2. This will increase the...
, direct labor, and manufacturing overhead that are based upon the per unit amounts in the company’s annual profit plan. 11. __________ budgeting focuses on the expenditures for fixed assets that will likely affect the...
shown on the bank statement. Any differences must be justified. When there are no unexplained differences, accountants state that the bank statement has been reconciled. The bank reconciliation is an important part of a...
about this topic by reading our Accounts Receivable and Bad Debts Expense (Explanation). 1. When a sale is made with the credit terms of 2/10, net 30, the "10" refers to the __________ discount period. 2....
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...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
estate are known as __________ bonds. 15. Bonds that are not secured by specific assets are known as __________. 16. The document that specifies the terms of a bond is the bond __________. 17. A fund that contains cash...
What increases a break-even point? Definition of Break-even Point The break-even point is the volume of sales in units or in dollars that is equal to a company’s total expenses (including the cost of goods sold). In...
for income tax and before investment income, interest expense, or other non-operating income or expense items. Operating income is also reported as income from operations, operating earnings, or operating profit. Major...
Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order for the balance sheet to report the net realizable value of the company’s...
, and net income are uncertain. This risk has resulted in the decline of defined benefit pension plans and has increased the popularity of defined contribution pension plans. Join PRO to Track Progress Mark the Question...
An unfavorable budget variance (e.g. an actual expense is more than the budgeted amount, or actual revenues are less than the budgeted amount) An amount that is being subtracted The meaning of a negative amount in a...
they are not expenses. However, dividends on preferred stock will appear on the income statement as a subtraction from net income in order to report the earnings available for common stock. Join PRO to Track Progress...
suppliers sell goods to customers and grant credit terms such as net 10 days. In those situations, a supplier is selling goods on account and the customer has purchased goods on account. The supplier has also increased...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
What to do with the balance in Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account that is used with the balance in Accounts...
How do you reduce a company's break-even point? Definition of Break-even Point The break-even point is the level of sales where a company’s income statement will report exactly zero net income. The level of sales...
be combined, such as raw materials and supplies, or raw materials and work-in-process. In addition, a manufacturer (and others with inventory) should disclose the method for valuing the inventory. This includes whether...
are recorded in a contra revenue account such as Sales Discounts. Hence, its debit balance will be one of the deductions from sales (gross sales) in order to report the amount of net sales. Example of Sales Discounts To...
Does a dividend reduce profit? Definition of Dividend A dividend declared by a corporation is a distribution to its stockholders of the profits the corporation had earned. Since the dividends are not an expense, the...
sheet. Here are some of the changes: Owner’s equity or stockholders’ equity will increase by the positive amount of net income Accounts receivable will change by the amount of sales/services provided with...
for one of its customers. Periodicity allows the manufacturer to divide the manufacturing costs of the machine into the 24 monthly periods covered by the contract. Periodicity also allows the manufacturer to report the...
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....
consider a project, its internal rate of return must equal or exceed the hurdle rate. The hurdle rate is also used to discount a project’s future cash flows to its net present value. Example of Hurdle Rate The...
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...
: The byproducts could be valued at the split-off point at their net realizable value. This amount reduces the common costs which will be allocated to the joint products at the split-off point. None of the common costs...
on the preferred stock will appear on the corporation’s income statement as a subtraction from the corporation’s net income. This is necessary to report the earnings available for common stock. When the earnings...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
of its goods to the buyer and in return has a current asset known as accounts receivable. One consequence is the seller becomes one of the buyer’s unsecured creditors. This means that the seller has the risk of bad...
manufactured during the accounting period minus the cost of finished goods in ending inventory. The cost of sales for a retailer is the cost of merchandise in its beginning inventory plus the net cost of merchandise...
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