of the unique services it provided nor does it know the market value. As a result, WSC discounts the future $100,000 by using the interest rate of 20% for two years to arrive at the present value of $69,400. WSC will...
of the unique services it provided nor does it know the market value. As a result, WSC discounts the future $100,000 by using the interest rate of 20% for two years to arrive at the present value of $69,400. WSC will...
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...
are not allocated to the products, the company must have its selling prices and sales revenues sufficiently large to cover both the product costs and the period expenses to have a positive amount of net income. Join PRO...
are closed at the end of the accounting year, the net amount will ultimately end up in a balance sheet equity account such as the proprietor’s capital account or the corporation’s retained earnings account....
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
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...
statement accounts, and The owner’s drawing account The income statement accounts record and report the company’s revenues, expenses, gains, and losses. When the company is a sole proprietorship, the balances in...
income statement. Since the costs of products may be higher when they are reordered/purchased, the order in which their costs are removed from inventory will have an impact on the inventory valuation and the amount...
sheet account Accounts Receivable. The combination of the credit balance in Allowance for Doubtful Accounts and the debit balance in Accounts Receivable is the net realizable value of the company’s accounts...
rato. This ratio is computed by dividing a company’s net sales during a year by the average amount of the company’s total assets during the same year. In the case of financial ratios, a higher turnover ratio...
, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
payable are required when a company borrows money from a bank or other lender. Notes payable may also be part of a transaction to acquire expensive equipment. In certain cases, a supplier will require a note payable...
Accounting Basics (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (26) Marked Wrong (0) Marked Right (0) gross profit (or) gross margin This is the remainder after subtracting the cost of goods...
the employees’ pay, 2) payroll taxes that are paid solely by the employer, and 3) the payroll taxes that are withheld from the employees’ gross pay and also paid by the employer Payments to employees for their net...
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...
to one account entitled __________ Common Stock. 12. Stockholder's equity is subdivided into two major sections: __________ paid-in capital and __________ retained earnings . 13. The net income of a corporation is...
's net income will cause a change in which component of stockholders' equity? Accumulated Other Comprehensive Income Wrong. Paid-in Capital Wrong. Retained Earnings Right! 7. Which financial statement's...
into Accounts Payable, the information on the invoice should be compared to the pertinent __________ order. 15. A vendor’s invoice includes terms of 2/10, net 30. If the invoice amount is $2,000 before a vendor...
. A corporation cannot record a gain or loss on its income statement for transactions involving its own __________. 17. The preferred __________ requirement must be deducted from a corporation’s net income when...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
. The amount that an employee "clears" or "takes home" is the __________ net pay. 12. A tax paid by the employer that is 0.6% (net of credits) of each employee's first $7,000 of annual salary or...
). As a result of the accounting rules, assets may be reported at various amounts. Here are a few examples: Certain marketable investment securities will be reported at market value Inventory is often reported at the...
balance sheet accounts and income statement accounts Neither balance sheet accounts nor income statement accounts 13. An internal report that shows whether the general ledger debits are equal to the credits is the trial...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
on a vendor’s invoice before it is paid. 15. A vendor’s invoice of $800 has credit terms of 2/10, net 30. The amount to be remitted if the invoice is paid within 10 days is $__________. 16. If the terms of a...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
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...
, a vendor might offer terms of “1/10, n/30” which means that the buyer can deduct 1% of the net amount owed if the amount is paid within 10 days. If the buyer does not pay within 10 days no discount is...
A company might construct a building and then sell the building to an investor who in turn leases the building back to the company.
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.
flows so that the present value of those cash flows is equal to the cash outlay for the project. Net present value discounts the project’s future cash flows by a predetermined rate, such as the rate needed or the...
reporting at cost is the general rule, inventories must be reported at less than cost in certain situations. For example, some inventories will have to be reported at their net realizable value when it is less than...
for 15% of the dollars 70% of the items which account for 5% of the dollars 10. Which of the following is the most logical calculation of a company’s inventory turnover? Select... Annual cost of goods sold divided by...
proprietor working in her own business. For example, Jane works as a sole proprietor and her business reported a net income of $30,000 for the year. Since a sole proprietor does not receive a salary or wages, there is...
and its credit terms are 2/10, net 30. If the invoice is paid on July 16, the amount that should be received by the seller is $__________. 5. A company deposited one of its customer’s checks that it received as...
period's net income is part of the corporation's ___________ earnings reported on the balance sheet. RETAINED DRTNIEAE Unscramble RETAINED TIRNEEAD Unscramble 18. The costs expiring during the current...
since it has a credit balance. Whenever depreciation expense is recorded (with a debit entry), Accumulated Depreciation is credited. The combination (or net) of the asset’s debit balance and the asset’s accumulated...
that the objective of the accounting process is to have accurate financial statements. In this case we want an income statement which reports an accurate amount of cost of goods sold, and the resulting gross profit...
. Knowing how costs behave when sales or other activities change will allow you to better understand how a company’s gross profit and net income will change. It also allows you to quickly calculate a product’s...
is the net of the revenues that were missed minus the variable costs that were avoided. Calculating Opportunity Costs Since opportunity costs are the missed revenues associated with a missed opportunity you won’t find...
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