by reading our Payroll Accounting (Explanation). 1. The combination of the Social Security tax and the Medicare tax is referred to by the acronym __________ FICA (FICA is the acronym for Federal Insurance Contribution...
by reading our Payroll Accounting (Explanation). 1. The combination of the Social Security tax and the Medicare tax is referred to by the acronym __________ FICA (FICA is the acronym for Federal Insurance Contribution...
. For example, a company may arrange with its bank to borrow money as needed but never owe the bank in excess of $500,000. The agreement might specify that interest will be calculated by multiplying the prime rate times...
value and internal rate of return. While the discounted cash flow models are the ideal, I would also want to forecast or project the impact on the company’s future financial statements. Therefore, I would also...
The additional amount given to employees for the overtime hours. Usually this is the “half-time” in time and one-half. For example, if an employee’s hourly pay rate is $10 per hour and the employee...
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...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
. An unrelated customer asks the company to inform them of the price for constructing a specific residence. The company prepares a detailed calculation of the final price that the customer will pay. The price will...
per unit of product, per unit of input (such as direct materials, factory overhead), or per unit of output. Examples of a Budget and a Standard Typically, a manufacturer will have a budget for each of its manufacturing...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
as the subsidiary ledger containing the details for the general ledger account Work in Process. The Work in Process account will now be a control account containing summary amounts for direct materials, direct labor,...
income statement. This is achieved with techniques such as the allocation of manufacturing overhead costs and through the use of process costing, operations costing, and job-order costing systems. Cost accounting...
. (There are likely to be several accounts or sub-accounts in order keep track of the manufacturing supplies by category.) When the manufacturing supplies are used they will become part of the manufacturing overhead,...
for the manufacturer’s cash to be used to: pay for the raw materials needed in its products pay for the labor and overhead costs needed to convert the raw materials into products hold the finished products in...
, and manufacturing overhead used to manufacture a product. Definition of Period Costs Period costs are expenses that will be reported on the income statement without ever attaching to products. Since they are not...
for each item (or each job or special order). The job cost record will report each item’s direct materials and direct labor that were actually used and an assigned amount of manufacturing overhead. The job cost...
, labor, and manufacturing overhead. Some manufacturers use standard costs in their accounting system. The term price is used when referring to the amount that a seller has established for its products. Accountants might...
, a manufacturer using equipment that is fully depreciated will have lower manufacturing overhead and lower cost of goods sold because the current year’s depreciation for the equipment is $0. Generally, the cost...
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...
. Another example of a non-discount method in capital budgeting is the accounting rate of return method, which is similar to the return on investment (ROI). [To overcome the above shortcomings, capital budgeting should...
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
worked multiplied by an hourly rate of pay. Generally, the employees earning hourly wages will be paid in the week that follows the hours worked. Example of Wages For example, a warehouse employee works 40 hours during...
rate. For instance, in some states unprepared grocery items are not subject to a sales tax. Items purchased for resale are not subject to the sales tax when purchased by the retailer, but will be subject to the sales...
, the business will have a credit card expense of $300. If July’s sales are $30,000 the credit card expense will be $900. The total credit card expense varies with sales because the fee has a constant rate of 3% of...
issue costs to Interest Expense over the remaining life of the bonds. (Bonds are likely to mature 10 years or more after they are issued.) The most precise way to amortize these amounts is to use the effective interest...
What is accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation is the allocation of a plant asset‘s cost at a faster rate than straight-line depreciation. Compared to straight-line...
assume that a company uses the accrual basis of accounting. If the company borrows $100,000 on December 15 and agrees to pay interest on the 15th day of each month at the rate of 1% per month, the interest expense for...
.] Example of Interest Payable Let’s assume that on December 1 a company borrowed $100,000 at an annual interest rate of 12%. The company agrees to repay the principal amount of $100,000 plus 9 months of interest when...
. The company depreciated the asset at the rate of $20,000 per year for five years. If the machine is used for three more years, the depreciation expense will be $0 in each of those three years. During those three years,...
by discounting them with an appropriate interest rate The number of years it takes for a project’s cash flow to pay back the initial cash investment An assessment of risk along with the urgency of the project Join PRO...
What is cash flow net of tax? I view cash flow net of tax as the amount of cash spent minus the income tax savings when the amount is deductible on the corporation’s income tax return. To illustrate this, let’s...
of an Expense As a prepaid cost such as the $6,000 in the asset account Prepaid Insurance expires, the part that expires will be reported on the income statement as Insurance Expense. If the insurance cost is expiring...
. Once an asset is fully depreciated, there will be no additional depreciation expense. Example of a Fully Depreciated Asset Let’s assume that a company purchased a building more than 30 years ago at a cost of...
variable is expressed as x and is referenced on a graph’s x-axis.) Hence the equation for the monthly electricity cost will be y = a + bx, which signifies that the total electricity cost (y) for a specific month is...
at the end of the year and the increase occurred at a uniform rate throughout the year. The corporation’s return on stockholders? equity was 10% ($100,000 divided by the average stockholders? equity of $1,000,000)....
to arrive at their present value. The annuity payments can also be used to determine the effective interest rate that is embedded in an agreement. Depending on the starting point of the first payment, an annuity will be...
amount not expected to be collected within one year is a noncurrent or long term asset. It is common for the loan to an employee to specify an interest rate and a schedule of payments. Entry to Record a Loan to Employee...
to employees for the overtime hours. To illustrate, let’s assume that a company pays “time-and-a-half” for hours worked that are greater than 40 hours during the work week. If an employee earns $9 an hour (the...
Featured Review
"I am truly grateful to AccountingCoach who has not only been a lifeline, but has been a rescuer on numerous occasions. I appreciate the in-depth explanations, concepts and even links to obtain additional information, especially when going through an on-the-job crunch period with close deadlines. I highly recommend AccountingCoach to everyone. Those in large or small companies, business owners, and all levels of educational studies, will find AccountingCoach a great go-to source!" - Pat W.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: