to make meaningful comparisons between years. Consistency does allow a company to make a change to a more preferred accounting method. However, the change and its effects must be clearly disclosed for the benefit of the...
to make meaningful comparisons between years. Consistency does allow a company to make a change to a more preferred accounting method. However, the change and its effects must be clearly disclosed for the benefit of the...
, 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...
Depreciation However, U.S. companies continue to use the term reserve in regards to the accounting for inventories using the LIFO cost flow method. For example, the company will use a contra inventory account entitled...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
size of machines square footage For each of the items 10 - 19, select one of the following three methods for allocating service or support department costs: Direct Method Step Method Reciprocal Method 10. The least...
of current assets. working capital (or) net working capital This is calculated by subtracting the amount of current liabilities from the amount of current assets. Mark as wrong Mark as right LIFO (or) last in, first out...
, increasing the speed in which inventory and/or accounts receivable are converted to cash will mean that the company will have more liquidity. In other words, it will have the cash available sooner in order to pay...
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...
than merely spreading the costs on the basis of direct labor hours or production machine hours. A second use of ABC involves categorizing inventory items into “A” items, “B” items, and “C” items. The “A”...
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
Is the direct method still used in the statement of cash flows? The direct method is one of two methods allowed for preparing the statement of cash flows (or cash flow statement). The direct method is recommended by the...
the supplier to its location. If the freight cost is $1, then the retailer’s inventoriable cost of the item is $21. [If this is the only item in the retailer’s inventory, the retailer’s balance sheet will report...
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
How do you calculate the cost of goods sold for a retailer? Formula for Calculating a Retailer’s Cost of Goods Sold A retailer’s cost of goods sold is: The cost of the retailer’s beginning inventory Plus the cost...
Should a retailer's delivery surcharges be reported as revenues or as other income? I believe that a retailer’s delivery surcharges are a price adjustment and should be reported as operating revenues. The surcharges...
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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
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...
of the page. NOTE: Cash flow statement, statement of cash flows, and SCF are used interchangeably. If not indicated, you should assume that the indirect method is being used. 1. Which of the following methods of...
Financial Statements Video Training Part 2 Balance sheet: accounts receivable, estimated allowance for doubtful accounts, inventory cost flows (FIFO & LIFO) Must-Watch Video Learn How to Advance Your Accounting and...
What is the major weakness of the traditional method of allocating factory overhead? Definition of Traditional Method Allocating Factory Overhead The traditional method of allocating factory overhead (manufacturing...
How do I compute the units of production method of depreciation? Definition of Units of Production Depreciation The units of production method of depreciation (which is also referred to as the units of activity method)...
Isn't objectivity violated when estimates are used in bookkeeping and accounting? The use of estimates does not necessarily violate objectivity. If it is not possible to determine the exact amount of an expense and/or...
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability A contingent liability is a potential liability (and a potential loss or potential expense). 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...
of these. assets These are a company’s resources that have future economic value which can be measured in the company’s currency. Prepaid expenses are one of these. Mark as wrong Mark as right expenses Under the...
inventory using the periodic inventory method contained an error of $10,000. The correct/actual cost of the inventory at the end of the first year was $110,000. The physical inventory at the end of the second year...
for controlling operations, and estimating selling prices when quoting prices for new work. Other Examples of Accounting Some of the many other examples of accounting include: Advising on accounting systems Income tax...
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