, the company’s financial statements can use straight-line depreciation over the 10 years while the income tax return is using an accelerated method of depreciation over the 7 years.) The difference in each year’s...
, the company’s financial statements can use straight-line depreciation over the 10 years while the income tax return is using an accelerated method of depreciation over the 7 years.) The difference in each year’s...
be: Revenues (sales, service fees) that were earned during the accounting period Expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during the...
of money, the smaller the amount of the discount. In turn, a larger discount will mean a smaller present value. A smaller discount will result in a greater present value. DCF is also useful for calculating the...
the asset’s book value An unfavorable settlement of a lawsuit against the company The retirement of bonds payable at a cost that is greater than the carrying value of the bonds Loss is also used to describe write-down...
as dividends to its stockholders. Are Retained Earnings an Asset? The amount of a corporation’s retained earnings is reported as a separate line within the stockholders’ equity section of the balance sheet. However,...
life of the cell phones could be 10 years). Also assume that the company has purchased 100 smart phones at a total cost of $120,000. The company also estimates that the phones will have no salvage value at the end of...
– $25,000) is divided by the 5 years of useful life to arrive at the straight-line depreciation expense of $60,000 for a full year or $5,000 per month ($300,000/60 months). Accountants and income tax regulations...
needs permit A drawback of common stock is that the common stockholders are last in line to receive money if a corporation is dissolved. Common Stock is also the title of the general ledger account that is credited when...
, the company purchases a new machine for $300,000 that is expected to have no salvage value at the end of its 10-year useful life. If the company uses the straight-line method of depreciation, the depreciation expense...
, gains and losses (except for items stipulated as other comprehensive income) for a period of time such as a year, quarter, 13 months, etc. Statement of comprehensive income. This financial statement begins with the...
it will be scrapped for no salvage value. Using the straight-line depreciation method, the monthly depreciation will be $5,000 per month ($600,000/120 months). Therefore, each month for 10 years the company will...
, product line, and so on. Nonoperating expenses which pertain to a company’s incidental activities. A common nonoperating expense for a retailer is interest expense. Join PRO to Track Progress Mark the Question as...
, Plant and Equipment. At that point, the depreciation of the addition will begin. (If a company is constructing an assembly line or a huge machine that will take time to build, the amounts would also be accumulated in...
the retailer uses the straight-line depreciation method, during each month of the display racks’ lives the retailer’s monthly income statement will report depreciation expense of $1,000. However, the credit balance...
will be the following: Debit Premium on Bonds Payable for $3,000 Credit Interest Expense for $3,000 Reducing the balance in the account Premium on Bonds Payable by the same amount each period is known as the...
, it doesn’t matter for the decision to eliminate product line E whether the company’s other expenses are $500,000 or $5,000,000. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
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...
, another company in an industry where the credit terms are net 60 days will need a greater amount of working capital. Having an approved credit line with no borrowing allows a company to operate comfortably with a small...
Cost on Income Statement Let’s assume that a company buys equipment for $100,000 and it is expected to be used for 10 years with no salvage value at the end of its useful life. Using the straight-line method of...
of the cost of goods sold. If the amount of the Loss on Write-Down of Inventory is significant, it should be reported as a separate line on the income statement. Since the amount of the write-down of inventory reduces...
balance. When a bank credits a company’s checking account, the bank’s liability account Customer Deposits is increased. However, the company must debit its Cash account to increase the company’s asset Cash. Credit...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
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...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
volume, the resulting line would not be a straight line. Perhaps the line will curve upward thereby revealing that some variable expenses may be increasing exponentially instead of increasing at a constant rate. Fixed...
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 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...
, a product line, or for the entire company. Examples of Gross Margin Calculations If a retailer had net sales of $40,000 and its cost of goods sold was $24,000, the retailer had a gross margin of $16,000 or 40% of net...
) but the actual quantity exceeded the standard quantity due to inefficiencies, the materials usage variance will have to be reported on the income statement as an addition to the standard amount of the Cost of Goods...
plant built for a cost of $1 billion will cost $10 billion at the end of a useful life of 25 years. By computing straight-line depreciation based on the historical cost, the income statement will report depreciation...
a process known as capital budgeting. Examples of Methods for Evaluating Capital Expenditures Of course, capital expenditures that are necessary to continue operating are identified first. These could be government...
will report net before income tax of $80,000 ($360,000 – $280,000) and net income after tax of $68,000 ($80,000 – $12,000). As a result of these two differences, the net income (which is the bottom line of the...
13. An assembly line. Select... Cost center Revenue center Profit center Investment center 14. Responsible for return on capital employed. Select... Cost center Revenue center Profit center Investment center 15. Not...
displays for its store at a cost of $120,000. The displays have a useful life of 10 years and will have no salvage value. The straight-line method of depreciation will result in depreciation of $1,000 per month...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
and their related costs before using the high-low method. (The number of units uses the scale on the x-axis and the related total cost at each level of activity uses the scale on the y-axis.) It is possible that at...
Featured Review
"I am a 52 year old former stay-at-home mom who finally decided to take a stab at earning an AAS in Accounting. Starting Accounting 1 was initially an intimidating experience. The text was confusing, and I felt like I was learning a whole new language. A fellow classmate suggested AccountingCoach, and I'm so glad she did! I find the information here understandable and relatable. I currently have a 98% in the class! I earned my 4-year degree almost 30 years ago, and I wish there had been programs like this around for every major. I am looking forward to using AccountingCoach for the next 2 years and possibly beyond. Thank you." - Pam 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: