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...
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...
efficient equipment or to retain its existing equipment. Net incremental cash flows are necessary for calculating an investment’s: net present value internal rate of return payback period To illustrate net incremental...
and it is often used to compute the net present value of the cash flows in a proposed investment. It is also considered to be the minimum after-tax internal rate of return to be earned on new investments. For a...
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...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
In the context of inventory this means that the inventory should be reported at the lower of its cost or its net realizable value (NRV). The rule is associated with the conservatism guideline or principle. Net realizable...
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
Future Value of a Single Amount Future Value of a Single Amount The future value of a single amount is also known as the future value of 1. The amount is a single, one-time deposit made at time period 0, which is also...
See paid-in capital in excess of par value – common stock, or paid-in capital in excess of par value – preferred stock.
What is the net book value of a noncurrent asset? The net book value of a noncurrent asset is the net amount reported on the balance sheet for a long-term asset. To illustrate net book value, let’s assume that several...
What is the book value of bonds payable? Definition of Book Value of Bonds Payable The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or...
What is the face value of a bond payable? Definition of Face Value of a Bond Payable The face value of a bond payable is the amount printed on the bond. The face value is also referred to as the following: Face amount...
The allocation of common costs based on the sales value of the products that emerge. For example, a company develops a large parcel of land at a cost of $5 million dollars. Individual lots will be sold for $100,000 to...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
What is the book value per share of stock? Definition of Book Value per Share of Stock The book value of a corporation is the amount of its stockholders’ equity. Assuming the corporation does not have preferred stock...
A corporation’s total stockholders’ equity (excluding preferred stock) divided by the number of shares of common stock outstanding.
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to...
value or legal capital of these issued shares. common stock This type of capital stock is present at every U.S. corporation. It is also the title of the general ledger account that reports the total par value or legal...
A “clean” auditor’s report. That is, the auditor has concluded that the financial statements present fairly the results of the company’s operations and its financial position according to...
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Industries that are regulated by the government often have prescribed reporting requirements that carry over to the generally accepted reporting formats for financial reporting. For example, utilities’ balance...
A company’s sales in a market as compared to the total sales in that market. For example, General Motors share of the U.S. market has decreased from more than 50% in the 1960’s to its present market share of...
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...
as part of the asset’s cost Example of Capitalized Interest Assume that a company is constructing an addition to its present manufacturing building. Its bank is lending the company $320,000 at an annual interest rate...
and distribute to its stockholders, the following corporation information should be considered: Present cash balance Cash needed to finance the business operations (growth, inflation, etc.) Cash needed to finance future...
of the U.S. Securities and Exchange Commission (SEC) and U.S. generally accepted accounting principles (US GAAP), the following financial statements of corporations with publicly traded shares of stock must present the...
The type of stock that is present at every corporation. (Some corporations have preferred stock in addition to their common stock.) Shares of common stock provide evidence of ownership in a corporation. Holders of common...
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
in the present and in the future. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills...
What is the difference between par and no par value stock? Definition of Par Value Stock Some states’ laws require or may have required common stock issued by corporations residing in their states to have a par value....
How do you calculate an asset's salvage value? Definition of Asset Salvage Value In accounting, an asset’s salvage value is the estimated amount that a company will receive at the end of a plant asset’s useful...
The stockholders’ equity account that represents the amount paid to a corporation for its preferred stock that was in excess of the preferred stock’s par value. This account is sometimes referred to as the...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
Are LIFO inventory amounts ever written-up to their market value? LIFO inventory amounts will not be written-up, even when the current market value of the inventory is far greater than the amount reported on the balance...
The stockholders’ equity account that represents the amount paid to a corporation for its common stock that was in excess of the common stock’s par value. This account is sometimes referred to as the premium...
The stockholders’ equity account that reports the amount paid to a corporation that is in excess of the common stock’s stated value. The stated value of each share issued is recorded in the Common Stock...
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