statements. The reason is that it causes the company’s net income in the early years of an asset’s life to be lower than it would be under the straight-line method. One reason for using double-declining-balance...
statements. The reason is that it causes the company’s net income in the early years of an asset’s life to be lower than it would be under the straight-line method. One reason for using double-declining-balance...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
Depreciation is $55,000. By crediting the account Accumulated Depreciation instead of crediting the Equipment account, the balance sheet at the end of the year can easily report both the equipment’s cost of $70,000...
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...
to the other stockholders. Any dividends in arrears should be disclosed in the notes to the financial statements. 10. Which of the following will increase a corporation’s retained earnings? Select... Net income only...
ICTCONLELO Unscramble 9. A company's cost of goods sold divided by its average inventory is its inventory _____________ ratio. TURNOVER VNRUOTER Unscramble TURNOVER UNOTRERV Unscramble 10. When a company's...
and expenses and the resulting net income. Statement Of Cash Flows Wrong. This financial statement explains how a company's cash balance changed during the accounting period. 3. Under the accrual basis of...
Unscramble TURNOVER UNRRVOTE Unscramble 4. Net ______ sales divided by accounts receivable is the receivables turnover ratio. CREDIT CIRDET Unscramble CREDIT EDTIRC Unscramble 5. Days sales in accounts receivable is 365...
as a percent of total assets. The vertical analysis of an income statement results in every income statement amount being restated as a percent of net sales. Example of Vertical Analysis of a Balance Sheet If a...
, as well as its gross profit, net income, income tax payments, and more.) FIFO. This results in the oldest, lower costs as the first to flow out of inventory and becoming the cost of goods sold LIFO. This results in the...
to approving a vendor’s invoice for payment, the invoice, receiving report, and __________ order should be compared. 3. A supplier’s invoice for $1,000 is received on June 1 and has terms of 1/10, net 30. If...
of purchases. Mark as wrong Mark as right 2/10, net 30 This early payment discount indicates that the net amount (after any returns or allowances) is due within 30 days. However, 2% can be deducted if it is paid...
by reading our Accounting Equation (Explanation). 1. The basic accounting equation is Assets = Liabilities + __________ Owner's Equity or Stockholders' Equity (if a corporation). Net assets (if a nonprofit...
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...
? Select... Cost of goods sold Total credit sales Total sales 11. Which of the following should be used to compute the receivables turnover ratio? Select... Gross sales Net credit sales Net sales 12. A company’s net...
. If a manufacturer sells merchandise to a retailer with terms of net 30 days, the manufacturer is the creditor and retailer is the debtor. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
for the newly issued shares of its capital stock. Paid-in capital is also referred to as contributed capital and as permanent capital. Definition of Retained Earnings Generally, retained earnings is the cumulative...
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
An account used in combination with another account. For example, the account Allowance for Doubtful Accounts is used with Accounts Receivable in order to present the net amount of the accounts receivable. The account...
The statement of comprehensive income covers the same period of time as the income statement, and consists of two major sections: Net income (taken from the income statement) Other comprehensive income (adjustments...
An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account). The contra asset account is related to another asset account. For example, the contra asset...
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
Liabilities Equity or net assets Investments by owners Distributions to owners Comprehensive income Revenues Expenses Gains Losses The above list is based on the FASB’s Statement of Financial Accounting Concepts No....
One component of the FICA tax (the other component is Social Security). This payroll tax is withheld from employees’ payroll checks and is also matched by the employer. The employee and the employer each pay 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.
part will be affected. 1. Depreciation Expense. Operating Right! Depreciation is added back to net income in the operating activities section because the company's net income was reduced by the depreciation expense...
of the usual 30 days. For instance, let’s assume that a company purchases goods and the supplier’s sales invoice is $28,000 with terms of 1/10, net 30. This means that the company can deduct $280 (1% of...
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...
of $5,000 and cost of goods sold of $3,000. The difference of $2,000 is part of the retailer’s gross profit, operating income, and net income. The word “gain” is not appropriate since the activities involved the...
in order to replace the units sold. The use of historical costs during periods of increasing prices means that companies with large amounts of plant assets and inventory will be reporting net income that is greater than...
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