How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
accounting periods. Capital budgeting usually means listing each project along with its cash outlays and expected cash inflows for each year. The amounts should be discounted to their present values and also ranked by...
at say 7% interest, the interest expense after the income tax benefit may be only 5%. If the cost savings from the new equipment does occur, the corporation’s present owners will enjoy the increased earnings without a...
have a credit balance of $10,000. If the present balance is $0, the journal entry will be a debit of $10,000 to Bad Debts Expense and a credit of $10,000 to Allowance for Doubtful Accounts. The balance sheet will now...
since the goods are not physically present at either the seller’s or the buyer’s location. It is necessary to examine whether the sales terms were FOB shipping point or FOB destination. The rules to be followed are:...
It is common for a small quantity to account for most of the value. Examples: 20% of the people may have 80% of the wealth; 20% of the members do 80% of the work; 20% of the items in inventory account for 80% of the...
An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account). The contra asset account is related to another asset account. For example, the contra asset...
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset. (As an asset is depreciated its book value declines.) This technique results in greater...
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...
Goodwill is a long-term (or noncurrent) asset categorized as an intangible asset. Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the...
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
An entry without debit or credit amounts. For example, assume that a corporation has 100,000 shares of $0.50 par value common stock before a 2-for-1 stock split. At the time of the split a memo entry would be entered in...
The ABC inventory system is different from activity-based costing. The ABC inventory system is used in order to focus on the most important items in inventory. Usually a relatively few items will account for a very...
Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land,...
This is a contra long-term asset account which is credited for the depreciation associated with Buildings. Since it is a balance sheet account, the accumulated depreciation account balance does not close at the end of...
This account is a contra long-term asset account which is credited for the depreciation associated with land improvements. As an asset account, the accumulated depreciation account balance does not close at the end of...
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...
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...
year). current assets This is defined as a company’s cash and other resources that are expected to turn to cash within one year of the balance sheet date (or within the operating cycle if the operating cycle is longer...
The amount of cash received is debited to the company’s Cash account If the cash received is greater than the asset’s book value, a Gain on Sale of a Plant Asset is recorded. If the cash received is less than the...
is the carrying amount or book value of the main account. An adjunct account might be referred to as a valuation account. Example of Adjunct Account Assume that a corporation issued bonds with a maturity value of...
of __________ stock. 6. If the shares of a corporation’s common stock have a very small amount (such as $0.10) assigned to each share, it is likely to be the share’s __________ value. 7. If a corporation has only...
. The par value of __________ common stock usually has no economic significance. 9. The dividend on preferred stock is often expressed as a percentage. To calculate the annual dividend on preferred stock, you multiply...
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
. If a store sells its old delivery truck for cash, and the cash amount is more than its book value, a __________ is reported on the income statement. 4. An asset’s book value or carrying value is the the asset’s...
Financial Statements Video Training Part 4 Balance sheet: property, plant and equipment (accumulated depreciation, book value) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
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...
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...
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...
, unattractive, etc. New technologies that disrupt the way things are done Decline in overall demand for the items Arrival of unique competitors Consequences of Obsolete Inventory When inventory items become obsolete,...
the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
that the number of shares has changed and that the par value per share has changed (if the stock has a par value). However, a typical journal entry (one with a debit and a credit) is not needed since the total dollar...
these bonds will be paying the investors less than the market rate of interest ($300,000 semiannually instead of $305,000), the investors will pay less than $10,000,000 for the bonds. Assume the investors pay $9,800,000...
Why does our company's balance sheet report its land at cost when it is so much more valuable? Accountants are guided by the cost principle. This requires accountants to report assets at their cost when...
have increased in value, the depreciation and cost of goods sold reported on the income statement will be less than the value of the economic capacity being used up. As a result, the reported net income will be greater...
interest rate for similar bonds. Example of Premium on Bonds Payable Assume that a corporation prepares to issue bonds having a maturity value of $10,000,000 and a stated interest rate of 6%. However, when the 6% bonds...
. The accounting rule requires inventory to be reported at the lower of its cost or its net realizable value (NRV). The amount of the inventory write-down is reported on the current income statement. To illustrate,...
, the property, plant and equipment are reported at cost minus the accumulated depreciation (except land). If these assets have increased in value, the fair value is not reported because of the cost principle. Also,...
into service until the date of the balance sheet. The account Accumulated Depreciation is a contra asset account because it will have a credit balance. The credit balance is reported in the property, plant and equipment...
Featured Review
"I want you to know just how much I love AccountingCoach, I use it all the time. I love the puzzles and tests, the information is broken down and extremely easy to understand. It's easy to find answers to specific questions. Finding AccountingCoach was the best thing for me and my employer benefits big time. I missed my opportunity to attend college but with AccountingCoach I have the same knowledge at my fingertips, forever! I can study at my own pace at home or at work. I am a full charge bookkeeper for a multi-million dollar business and occasionally I run into issues where I need help and I get it with AccountingCoach. Even if you have a degree you can't pass this up. No one remembers everything. Forever grateful. Thank you Harold." - Carrie H.
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: