The marketing firm would debit the bad debts expense for this amount and credit accounts receivable for the $7,000. For example, a company may recognize $1 million in sales in one period, and then wait three or four months to collect all of the related accounts receivable, before finally charging some bad debts off to expense. This creates a lengthy…

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If both preferred and common exist, then the formula is done separately for both types, then the amount is added together. The par value of Apple stock is ​​$0.00001, but we all know you will have to pay a lot more per share if you want to own a piece of Apple. Divide the book value of common shares by…

This calculator will compute the margin of safety for a company in terms of both a percentage and amount of sales, given the company’s break-even point and its expected sales. Because the Margin of Safety is just 50% of the Sticker Price, it allows you the ability to purchase into the business with lower risk. Setting this limitation on the…

Companies pay in advance for services or goods they anticipate to receive in the future. They are called assets because it is a commitment that is expected to add to a business’s economic value. Over time, as the prepaid expense is utilized, it needs to be recognized as an expense. This adjustment impacts both the income statement and the balance…