Accounting

Using CCM accounting, revenue and expenses are not recognized on a company’s income statement even if cash payments were issued or received during the contract period. By deferring the recognition of revenue and expenses until the end of the project, the company might put itself at risk of higher tax liabilities. For example, let’s say a project is estimated to take three years to complete and tax laws change, leading to an increase in the business tax rate. The tax liability would […]

Therefore, when your company issues equity, the equity issuance must impact both sides of the equation. The equity issuance increases owner’s equity by the amount of the stock issued and increases cash, an asset, by the amount of the money it received. Total paid-in capital$ 220,000When it issues no-par stock with a stated value, a company carries the shares in the capital stock account at the stated value.

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Substantially higher loan and lease losses might cause a bank to report a loss in income. Also, regulators could place a bank on a watch list and possibly require that it take further corrective action, such as issuing additional capital. Arriving at the provision for loan losses involves a high degree of judgment, representing management’s best evaluation of the appropriate loss to reserve. Because it is a management judgment, the provision for loan losses can be used to manage a bank&#8 […]

To an investor, a sharp bump in earnings like this makes the company look like a very attractive investment. However, since the sale cannot be replicated or duplicated, it can’t be considered operating income and should be removed from performance analysis. The problem is that profit in an accounting period can be skewed by things that have little to do with the everyday running of the business. For example, there are occasions when a company earns a significant, one-off amount of income […]

To begin, we are given two assumptions that the current share price (i.e., equity value per share) is $20.00 and the basic shares outstanding is 10mm. If we were to ignore the dilutive impact of non-basic shares in the calculation of equity value, we would arrive at $200mm ($20.00 per share x 10mm basic shares outstanding). Upon dividing the exercise proceeds of $250,000 by the current market share price of $50.00, we get 5,000 as the number of shares repurchased. And then, we subtract the 5,00 […]

If a firm has performance based remuneration system, then it may result in a favorable variance. Becuase the remuneration will be paid based on outcome and not on the basis of actual hours worked. In this case, two elements are contributing to the favorable outcome.

For example, the standard hours that the workers should have used to complete the 1,000 units is 100 hours. Variable overhead efficiency variance is the difference between actual hours worked at standard rate/price and standard hou […]