to one-twelfth of the property’s annual real estate tax. Assuming the annual tax is $6,000 the monthly mortgage payment will include an escrow payment of $500. When the lender receives these monthly escrow payments of...
to one-twelfth of the property’s annual real estate tax. Assuming the annual tax is $6,000 the monthly mortgage payment will include an escrow payment of $500. When the lender receives these monthly escrow payments of...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
Where can I find the amount of income taxes paid by a corporation? Definition of Income Taxes Paid by a Corporation The amount of income tax paid by a corporation is different from the amount of income tax (income tax...
entries Deferral adjusting entries Other adjusting entries (such as depreciation, bad debts expense, etc.) View Coaching The expenses listed in the question will require accrual adjusting entries because it is common...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
to address the second part of your question, which involved the R&D costs on the income tax returns. You will need to ask an income tax adviser or do a search on www.IRS.gov regarding the capitalization of R&D...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
on their paycheck. Social Security Taxes Social Security taxes are paid by both the employee and the employer. Usually the rate for each has been 6.2% of the employee’s gross pay. In other words, if an employee earns...
by reading our Payroll Accounting (Explanation). 1. The combination of the Social Security tax and the Medicare tax is referred to by the acronym __________ FICA (FICA is the acronym for Federal Insurance Contribution...
Instead of Stock There are several advantages of issuing bonds (or other debt) instead of issuing shares of common stock: Interest on bonds and other debt is deductible on the corporation’s income tax return while the...
is also known as the times interest earned ratio. The interest coverage ratio is computed by dividing 1) a corporation’s annual income before interest and income tax expenses, by 2) its annual interest expense. A...
expense and income tax expense divided by its interest expense. The larger the times interest earned ratio, the more likely that the corporation can make its interest payments. The times interest earned ratio is also...
Federal Unemployment Tax Act. See federal unemployment tax.
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...
are required by the __________ principle. 6. The adjusting entry for depreciation will include a debit to Depreciation Expense and a credit to __________ __________. 7. Adjusting entries help to convert accounting...
statement reports revenues and expenses using the accrual method of accounting, the net income will have to be adjusted to cash amounts. A common adjustment involves depreciation expense. The reason is the depreciation...
cost and will not be depreciated Buildings and equipment will be reported at cost minus accumulated depreciation Some very valuable intangible assets (trade names, logos, excellent reputation, management, etc.) that...
the goods) and is typically a percentage of the selling prices. The seller must file a sales tax report and remit the sales taxes it had collected. Basically, the company making the sale and collecting the sales taxes...
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...
a salary of $50,000 and a part-time employee was paid hourly wages of $5,000. What is the company’s expense for the federal unemployment tax assuming that the company is entitled to the full federal unemployment tax...
Benefits given to employees that are in addition to wages and salaries. Examples include health, dental, life, vision, and disability insurances, employer’s portion of social security and Medicare tax, paid...
The section of the U.S. Internal Revenue Service (IRS) code which includes public charities such as religious, scientific, educational, and certain other organizations. Under section 501(c)(3) a nonprofit can be approved...
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
What is EBIT? EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings...
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...
for income tax purposes Bondholders are not owners and therefore the ownership interest of the existing stockholders will not be diluted Example of Bonds Payable Usually public utilities issue bonds to help finance a...
a $300 digital camera to be used for the next five years. The matching principle would call for an expense (depreciation) of $60 per year for five years. Most accountants would violate the matching principle and expense...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
and equipment (or) fixed assets This noncurrent section of the balance sheet reports the assets that are used in a business (buildings, equipment, etc.) and the related accumulated depreciation. property, plant and...
Form 990 is the Internal Revenue Service (IRS) form entitled Return of Organization Exempt from Income Tax. This federal form must be filed annually by tax exempt organizations. However, some organizations such as...
) and the income statement will report supplies expense of $7,500 (1,500 units at $5). Assume that a company purchases a delivery truck to be used in its business. Initially the truck’s cost will be recorded in the...
and equipment. This classification includes land, buildings, machinery, equipment, vehicles, fixtures, etc. that are used in the business. These assets are reported at cost and the contra asset accumulated depreciation...
of the balance sheet, reports assets at their original cost less accumulated depreciation. However, the current value of some of these assets may be much greater. Some intangible assets such as trade names, patents,...
causes of the overhead costs. Examples of Cost Allocations The following are only a few of the many cost allocations that occur in some companies or organizations: The cost of a manufacturing building is allocated to...
run smoothly with the same amount of monthly fixed costs, which on average are approximately $200,000 per month for the cost of supervisors, rent, depreciation, and other fixed costs. However, if the manufacturer’s...
revenues and the related liabilities that were included in a previously recorded transaction To record depreciation expense and/or bad debts expense and the change in the related contra asset account Definition of...
are contrary to the usual debit balances found in most asset accounts. Examples of Asset Accounts with Credit Balances Two examples of contra asset accounts are: Accumulated Depreciation which is associated with a...
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