referred to as a __________–__________ cost. 5. The additional quantity of inventory held by a company so that it will not run out of stock when there is an unexpected increase in demand for its product is known as...
referred to as a __________–__________ cost. 5. The additional quantity of inventory held by a company so that it will not run out of stock when there is an unexpected increase in demand for its product is known as...
operation on 100,000 units of product. The robot has a cost of $225,000 and is expected to have a salvage value of $25,000 at the end of the 100,000 operations. Under the units-of-activity method, the company will...
What is absorption costing? Definition of Absorption Costing Absorption costing (also known as full absorption costing) indicates that all of the manufacturing costs have been assigned to (absorbed by) the units of goods...
. The company depreciated the asset at the rate of $20,000 per year for five years. If the machine is used for three more years, the depreciation expense will be $0 in each of those three years. During those three years,...
) is the difference between the number of shares issued and the number of shares outstanding. Since the treasury shares result in fewer shares outstanding, there may be a slight increase in the corporation’s earnings...
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...
's useful life). When the units-of-activity method is used, the equipment's depreciation is expressed as an amount per document produced. (Years are not relevant.) To calculate the depreciation rate per...
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...
), and the targeted or required interest rate. Example of the Effective Interest Rate Assume that a corporation issues a $1,000 bond with a stated, contractual, face, or nominal interest rate of 5%. This means that the...
of $48,000 ($4,000 per month multiplied times 12 months in a year). A person with a semimonthly salary of $3,000 is earning an annualized salary of $72,000 ($3,000 multiplied times 24 semimonthly pay periods). A company...
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...
these are recorded in accounts such as Purchases, Purchases Returns and Allowances, Purchases Discounts, etc. Must be adjusted at the end of the accounting year in order to report the costs actually in inventory...
in the variable costs. Here’s the formula: Variable Cost Rate = Change in total costs divided by the change in the MHs. In our example, Variable Cost Rate = $40,000 ($140,000 minus $100,000) divided by 4,000 MHs...
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.
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.
with the same financial condition purchased this unique machine by issuing a $7,120 note with a stated interest rate of 12% per year (and the rate is a fair interest rate for the situation), the compounded interest cost...
with operating cash, they should be classified as __________ liabilities. Select... current noncurrent 14. The cost of goods sold divided by average inventories during the period describes the inventory __________...
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...
balance could begin by comparing the balance with an aging of the accounts receivable. Another example is reconciling the balance in the general ledger account Utilities Payable. This might be accomplished by computing...
in the fire is in the company’s general ledger accounts at a cost of $106,000. The insurance policy deductible was $1,000 per occurrence. The journal entry for this transaction is: Debit Cash for $105,000 Credit...
Used in conjunction with cost or expense behavior. Mixed expenses consist of a constant or fixed portion and a variable portion. For example, sales salaries would be a mixed expense if each sales person’s...
and the depreciation expense begins. This expense will reduce the company’s profits (net income, earnings). There may also be some additional revenues and costs, and perhaps cost savings, that will also affect the...
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...
What is the death spiral? Definition of Death Spiral In cost accounting and managerial accounting, the term death spiral refers to the repeated elimination of a manufacturer’s products which will result in spreading...
, the account that is credited is __________. Select... Accounts Payable Accounts Receivable Inventory 6. The entry on the right side of a T-account is a __________. Select... debit credit 7. When a company’s...
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...
changed by $2,000 ($18,000 vs. $16,000) when the number of MHs changed by 20,000 (120,000 vs. 100,000). In other words, the variable cost rate was $0.10 per machine hour ($2,000/20,000 MHs). Continuing with this...
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...
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
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.
of shares will cause a change in the market price of each share. For example, if a share had been trading at $50 before a 2-for-1 stock split, a share should be trading at $25 after the stock split. If the corporation...
turnover, the numerator is net __________. 9. To compute the earnings per share (EPS), you must deduct the cumulative preferred stock’s __________ requirement from the corporation’s net income. 10. Earnings per...
the depreciation expense of an asset, the expected amount of the salvage value is not included. Example of Salvage Value Assume that a plant asset has a cost of $325,000 and is expected to have a salvage value of...
makes an expenditure of $255,500 to purchase equipment. The expenditure occurs on a single day and the equipment is immediately placed in service. Assuming the equipment will be used for seven years, the asset’s cost...
What is the difference between revenues and earnings? Definition of Revenues and Earnings Revenues are the amounts earned from providing goods or services to customers during the period shown in the heading of the income...
, a company sells one of its machines that is no longer used for $3,000. Depreciation was last recorded on December 31. Also assume that the depreciation expense is $400 per month and the general ledger shows the...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
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...
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