as Insurance Expense for the accounting year ending on December 31 is $__________. Use the following information for answering Questions 13 - 18: On December 21, a company borrowed $100,000 from its bank. The loan has...
as Insurance Expense for the accounting year ending on December 31 is $__________. Use the following information for answering Questions 13 - 18: On December 21, a company borrowed $100,000 from its bank. The loan has...
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...
through May 31. When making the payment on December 1, the company debited Prepaid Insurance for $1,200 and it credited Cash for $1,200. The adjusting entry to be made as of December 31 will include a debit to the...
will likely be one of its customer's __________ creditors until it receives payment. Secured Wrong. Unsecured Right! 13. After several years of operations, a company's Bad Debts Expense for a given year is...
to the credits. Mark as wrong Mark as right adjusting entry This type of journal entry is recorded at the end of an accounting period in order to accrue and/or defer expenses and revenues. (Each will include a...
pertains to one or more future accounting periods. To illustrate, assume that on December 1, a company recorded its $2,400 payment for six months of property insurance for December through May. At December 31, one month...
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...
similar to the sole proprietor’s Drawing account and Capital account which are part of owner’s equity. Both the Dividends account and the Drawing account are temporary balance sheet accounts since they are closed at...
. In order for a company to avoid losses, it is important that the stock of goods in all locations (retail display area, warehouses, factory, etc.) be rotated. When the grocery store rotates its stock, the units are...
prices in order to determine whether the quantity of inventory has increased or decreased. Base year is also the initial year in a series of annual amounts. For instance, an accountant might prepare a chart that...
a fixed asset had been put into service and simply keeps the asset in working order. (The amount spent to acquire a fixed asset is referred to as a capital expenditure. The amount of the capital expenditure will be...
What is a credit memo? Definition of Credit Memo One type of credit memo is issued by a seller in order to reduce the amount that a customer owes from a previously issued sales invoice. Another type of credit memo, or...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to...
be the case under the allowance method. [The Internal Revenue Service requires the direct write off method in order to prevent taxpayers from claiming a bad debts expenses based on an anticipated potential loss.] Join...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
to departmental rates. Some allocations that were allocated on the basis of direct labor hours are now based on machine hours. In order to improve those bases of allocations, some accountants are implementing activity...
to the health insurance company. Then in account 4211 they can see the portion of the cost that was paid by the employees. The company’s income statement will report the combination of the amounts in accounts 4210 and...
outflows for each option. Since these cash flows will occur at different times, you must “discount” the future cash flows to a present value. (This is necessary in order to recognize the time value of money.) The...
can be converted to cash much faster than inventory. The nature of the company’s sales and how customers pay. If a company has very consistent sales via the Internet and its customers pay with credit cards at the time...
of the accounts receivable activity in a subsidiary ledger, employees in a company’s credit department of a company can access the credit sales information without having access to any information in the general...
= the cost of goods sold of $440,000. When there is inflation, the retailer must also elect a cost flow assumption in order to determine the cost of the ending inventory, which of course is a factor in the calculation...
. The payout ratio policy should reflect the needs of the corporation as well as the interests of the stockholders. For instance, a startup corporation will likely have a payout ratio of 0%, since 1) the corporation will...
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...
some use Sales because the Cost of Goods Sold number is not readily available for every company. In order to have comparability with all companies, they may have opted to use Sales.) Join PRO to Track Progress Mark the...
. Hence, both presentations show the cost of goods sold of $990. Recap Again, inventory is a current asset that is reported on the balance sheet. The change in inventory is used to adjust the amount of purchases in order...
its owner (as would be the case with a corporation). However, the sole proprietor may be able to register as a limited liability company in order to limit his or her personal liability. You should seek professional...
What is a balance sheet and why is it prepared? Definition of Balance Sheet The balance sheet is prepared in order to report an organization’s financial position at the end of an accounting period, such as midnight on...
, it would likely reduce the number of its supervisors, the space it rents, and some other fixed costs in order to reduce the $200,000 of monthly fixed costs. If the company’s volume were to increase to 18,000 units of...
of the cost of goods sold. True Wrong. False Right! 6. SG&A expenses can vary between products and between customers. True Right! False Wrong. 7. Activity based costing is recommended for the allocation of SG&A...
of the sale, the company can experience a temporary or even permanent cash flow problem. In order for the company to minimize these potential problems, a company is wise to routinely review an aging of accounts...
liability until it is moved from the balance sheet to the income statement as an expense. This is done to achieve the accountants’ matching principle. Examples of Deferred Expenses Let’s assume that a large...
of the sale. In order to know the asset’s book value at the time of the sale, the depreciation expense for the asset must be recorded right up to the date that the asset is sold. If the cash received is greater than...
period in order to report the amount of its ending inventory for its balance sheet and the cost of goods sold for its income statement. Computing the Inventory Amount Under the Periodic Inventory Method At the end of an...
times Mary should have some combination of cash and petty cash vouchers (receipts) that are equal to $100. Next, let’s assume that there is only $20.00 in cash remaining and Mary realizes that $20 is not sufficient....
and to credit Sales $60,000. We also knew that the beef would shrink approximately 800 pounds as it traveled in the refrigerated truck and that the customer would deduct $1,200 (800 pounds X $1.50) when the customer...
low. There can also be differences within the same industry. For example, one computer company might assemble and ship computers within hours of receiving the order via its website. Its inventory turnover will be off...
to the financial statements. These notes are needed in order to disclose additional information about items that are reported or are not reported in the financial statements. You can see examples of the required...
. (There are likely to be several accounts or sub-accounts in order keep track of the manufacturing supplies by category.) When the manufacturing supplies are used they will become part of the manufacturing overhead,...
prepare a balance sheet as of the end of each day, you will need to make daily adjusting entries in order for the balance sheet to be meaningful. For example, each day more electricity is used and therefore each day...
involving: Operating revenues Operating expenses Non-operating revenues and gains Non-operating expenses and losses Large companies may have thousands of income statement accounts in order to budget and report revenues...
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