Blog

Obligations not due within one year or the company’s operating cycle, whichever is longer, are reported as current liabilities.

Additions to land that increase the usefulness of the land such as parking lots, fences, and lighting are not depreciated.

Periodic interest payments on bonds are determined by multiplying the par value of the bond by the contract rate.

The phrase capital-intensive refers to companies with large amounts invested in plant assets.

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine’s useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. Determine the machines’ second year depreciation under the straight-line method.

A company cannot have a liability if the amount of the obligation is unknown.

On September 1, Knack Company signed a $50,000, 90-day, 5% note payable with Central Savings Bank. What is the journal entry that should be recorded by Knack upon maturity of the note? (Use 360 days a year.)

A lease is a contractual agreement between a lessor and a lessee that grants the lessee the right to use the asset for a period of time in return for cash payment(s) to the lessor.

Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $32,500 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is:

Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems.