, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
in the accounting periods in which the asset is being used. More Information on the Depreciation Entry It is important to understand the following: The depreciation entry will cause a decrease in the company’s net...
by the corporation will be deductible on the corporation’s income tax return. If a corporation’s combined federal and state income tax rate is 35%, then $100,000 of interest expense will save the corporation $35,000...
: $60,000 Year 3: $80,000 Year 4: $100,000 Year 5: $70,000 The payback period is 3.4 years ($20,000 + $60,000 + $80,000 = $160,000 in the first three years + $40,000 of the $100,000 occurring in Year 4). Note that the...
Under accrual accounting, how are worker comp premiums handled? Worker comp insurance premiums should be charged to the areas where the related wages and salaries are charged. Let’s assume that the net cost of worker...
payable are required when a company borrows money from a bank or other lender. Notes payable may also be part of a transaction to acquire expensive equipment. In certain cases, a supplier will require a note payable...
is Accumulated Depreciation. Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets...
of the unique services it provided nor does it know the market value. As a result, WSC discounts the future $100,000 by using the interest rate of 20% for two years to arrive at the present value of $69,400. WSC will...
income statement. Since the costs of products may be higher when they are reordered/purchased, the order in which their costs are removed from inventory will have an impact on the inventory valuation and the amount...
that the company’s balance sheet will report the net realizable value of $194,800. If the balance in the Allowance account was $0, the company will write an adjusting entry to: Debit the income statement account such...
are closed at the end of the accounting year, the net amount will ultimately end up in a balance sheet equity account such as the proprietor’s capital account or the corporation’s retained earnings account....
are not allocated to the products, the company must have its selling prices and sales revenues sufficiently large to cover both the product costs and the period expenses to have a positive amount of net income. Join PRO...
Treasury stock – total cost Retained earnings Accumulated other comprehensive income or loss Total stockholders’ equity Examples of the Descriptions for the Rows or Lines Appearing on the Statement Some typical...
by a company’s liabilities will generally have a lower cost than money raised from stockholders’ equity for the following reasons: Some liabilities such as accounts payable have no interest expense associated with...
accounts are also referred to as temporary accounts or nominal accounts because at the end of each accounting year their balances will be closed. This means that the balances in the income statement accounts will be...
methods: Indirect method (almost always used) Direct method (rarely used) The indirect method begins with the company’s net income based on the accrual method. That amount is then converted to the cash from operating...
of the revenues will be available (after the variable expenses are covered) for the fixed expenses and net income. The contribution margin amount or ratio (ratio) can be presented for: The company as a whole A product...
costs and fixed expenses ($18,000 + $12,000 + $1,000). Once the $31,000 has been covered, 70% of the revenues will flow to the company’s net income. Join PRO to Track Progress Mark the Question as Read Must-Watch...
rato. This ratio is computed by dividing a company’s net sales during a year by the average amount of the company’s total assets during the same year. In the case of financial ratios, a higher turnover ratio...
unsecured claim is likely to be settled only after the secured creditors’ claims and the priority unsecured creditors’ claims are settled. Example of Unsecured Claim Assume that on July 1, Supplier Company sells...
% ($120,000/$400,000). Definition of Operating Income A retailer’s operating income is its sales minus the cost of goods sold and all selling and administrative expenses (fixed and variable). Operating income is...
. The inventory turnover ratios are high because the stores feature the fast selling brands at low prices. Their strategy is that huge sales volumes with small profit margins will still result in adequate net income...
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
a net cost of $7,000 per year on the $100,000 loan. This means the after-tax cost is 7% ($7,000 divided by $100,000) per year. Using the example above, the after-tax interest rate can also be calculated. The formula for...
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...
Accounting Basics (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (26) Marked Wrong (0) Marked Right (0) gross profit (or) gross margin This is the remainder after subtracting the cost of goods...
the employees’ pay, 2) payroll taxes that are paid solely by the employer, and 3) the payroll taxes that are withheld from the employees’ gross pay and also paid by the employer Payments to employees for their net...
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 Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
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...
's net income will cause a change in which component of stockholders' equity? Accumulated Other Comprehensive Income Wrong. Paid-in Capital Wrong. Retained Earnings Right! 7. Which financial statement's...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
to one account entitled __________ Common Stock. 12. Stockholder's equity is subdivided into two major sections: __________ paid-in capital and __________ retained earnings . 13. The net income of a corporation is...
. A corporation cannot record a gain or loss on its income statement for transactions involving its own __________. 17. The preferred __________ requirement must be deducted from a corporation’s net income when...
. The amount that an employee "clears" or "takes home" is the __________ net pay. 12. A tax paid by the employer that is 0.6% (net of credits) of each employee's first $7,000 of annual salary or...
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...
). As a result of the accounting rules, assets may be reported at various amounts. Here are a few examples: Certain marketable investment securities will be reported at market value Inventory is often reported at the...
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