these bonds will be paying the investors less than the market rate of interest ($300,000 semiannually instead of $305,000), the investors will pay less than $10,000,000 for the bonds. Assume the investors pay $9,800,000...
these bonds will be paying the investors less than the market rate of interest ($300,000 semiannually instead of $305,000), the investors will pay less than $10,000,000 for the bonds. Assume the investors pay $9,800,000...
What is a cash discount? Definition of Cash Discount A cash discount is a deduction allowed by some sellers of goods or by some providers of services to motivate customers to pay within an earlier specified time. The...
What is the difference between Notes Payable and Accounts Payable? Definition of Notes Payable The account Notes Payable is a liability account in which a borrower’s written promise to pay a lender is recorded. (The...
What is the advantage of issuing bonds instead of stock? Definition of Bonds Bonds payable are a form of long-term debt, which include a formal agreement to pay interest semiannually and the principal amount at maturity....
What are bonds payable? Definition of Bonds Payable Bonds payable are a form of long term debt usually issued by corporations, hospitals, and governments. The issuer of bonds makes a formal promise/agreement to...
cost. The cost of workers’ compensation insurance for the office staff will be a period cost and will be expensed immediately as part of SG&A. The cost of workers’ compensation insurance varies by the type of...
What is the accrual method? Definition of Accrual Method The accrual method of accounting reports revenues on the income statement when they are earned even if the customer will pay 30 days later. The accrual method of...
What is liquidity? Definition of Liquidity Liquidity is a company’s ability to convert its assets to cash in order to pay its liabilities when they are due. Current Assets Generally, the assets that are expected to...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
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...
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...
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 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...
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...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
What is a lump sum payment? A lump sum payment is often associated with a single amount paid to acquire a group of items. For instance, a corporation might pay $50,000 for the inventory and equipment of a small...
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...
The additional amount given to employees for the overtime hours. Usually this is the “half-time” in time and one-half. For example, if an employee’s hourly pay rate is $10 per hour and the employee...
to the modifications. Irrevocable letters of credit are often used to facilitate international trade because of the additional risks involved. The irrevocable letter of credit assures the seller that it will be paid by...
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...
of Direct Labor Variances Direct labor variances often consist of two parts: Direct Labor Rate Variance which reports the difference between the actual pay rate and the standard pay rate Direct Labor Efficiency Variance...
to the company’s weak financial position it would normally have to pay a high interest rate if it were able to borrow money. In this example, the promissory note does not show an explicit interest cost. However, due...
. The company will then have to pay the endorsers/payees the amounts on the checks plus any fees their banks charged for handling the NSF checks. The payees may require the company to pay for future transactions...
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.
, 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...
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...
that the liability will be replaced with a long-term liability). Liquidity Liquidity refers to a company’s ability to pay its bills as they come due. In accounting terms, we might say that liquidity is a company’s...
assume that a company uses the accrual basis of accounting. If the company borrows $100,000 on December 15 and agrees to pay interest on the 15th day of each month at the rate of 1% per month, the interest expense for...
from Employees. Example of Employee Loan Assume an employee’s car needs an $800 repair and the employee does not have the money. The company employer agrees to give the employee an $800 advance to pay for the repair....
What is Subchapter S? Subchapter S refers to a section of Chapter 1 of the U.S. Internal Revenue Code. A subchapter S corporation, which is also referred to as an S corporation, is a corporation that does not pay the...
What is solvency? Definition of Solvency I use the term solvency to mean a company is able to 1) pay its obligations when they come due, and 2) continue in business. Some people look to a company’s working capital to...
(or current ratio) is one indicator of a company’s ability to pay its current obligations. Example of Working Capital Ratio If a company has $600,000 of current assets and has $400,000 of current liabilities, its...
and it is positioned immediately after current assets. The cash restricted for a long-term asset is not reported as part of the company’s current assets because the cash is not available to pay current liabilities....
current ratio, but may not have liquidity. Hence, the inventory turnover ratio and the accounts receivable turnover ratio can provide insights as to a company’s ability to convert its current assets to cash in time to...
Is the sales tax on merchandise purchased for resale included in inventory? In our state, sales tax is paid only by the end customer. In other words, a retailer does not pay sales tax on merchandise that is purchased for...
by discounting them with an appropriate interest rate The number of years it takes for a project’s cash flow to pay back the initial cash investment An assessment of risk along with the urgency of the project Join PRO...
What are quick assets? Definition of Quick Assets Quick assets are a company’s current assets which can quickly be converted into cash. Quick assets provide the liquidity necessary to pay the company’s obligations...
entitled Petty Cash when the petty cash fund is established. Example of Petty Cash Affecting Expenses Assume that the petty cash money is used to pay postage of $10. While the company incurs this cost at the time of...
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