Examples of Certificate of Deposit in the following topics:
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- Cash and cash equivalents are not just the amount of currency that a business has in its cash registers and bank accounts; they also include several different types of financial instruments.
- Cash equivalents include all undeposited negotiable instruments (such as checks), bank drafts, money orders and certain certificates of deposit.
- A certificate of deposit, or CD, is a financial product offered by banks to their customers.
- CDs are similar to savings accounts in that both types of accounts are insured by the FDIC up to a value of $250,000.
- An example of an early Certificate of Deposit.
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- Using a bank is one of the best internal controls on a business's cash.
- Banks generally require that every deposit is accompanied by a signed and dated deposit slip.
- This statement will list all deposits and withdrawals.
- It will also include a copy of each transaction's documentation.
- Describe why a bank is one of the best internal controls a business can use
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- There are three methods that recognize revenue after delivery has taken place: the installment sales, cost recovery, and deposit methods.
- The deposit method is used when a company receives cash before transfer of ownership occurs.
- The seller records the cash deposit as a deferred revenue, which is reported as a liability on the balance sheet until the revenue is earned.
- For example, sales of magazine subscriptions utilize the deposit method to recognize revenue.
- Differentiate between the installment sales method, the cost recover method and the deposit method to account for recognizing revenue after the delivery of goods
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- Assume that in 2010 a company paid USD 650,000 for a tract of land containing ore deposits.
- To record the land purchase, Land is debited for USD 50,000 along with Ore Deposits for USD 600,000 and a credit is posted to Cash for USD 650,000.
- After mining begins, it is deemed impossible to extract the ore and the Ore Deposits account must be written off by debiting Loss on Ore Deposits for USD 600,000 and crediting Ore Deposits for USD 600,000.
- In accounting terminology, it refers to recognition of the reduced or zero value of an asset no longer in use.
- Assets that are natural resources, which are used throughout the course of business, are subject to periodic depletion.
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- The cost of the recoverable oil reserves are USD 780,000 (500,000 - 20,000 value of land +100,000 + 200,000).
- Natural reserves supplied by nature, such as ore deposits, mineral deposits, oil reserves, gas deposits, and timber stands, are natural resources or wasting assets.
- Similar to depreciation, depletion reflects the use and reduction of value of an asset over the course of time.
- Recoverable copper reserves include the amount of the current copper deposits present.
- The amount of recoverable reserves are used to compute an asset's depletion.
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- The journal entry to record the retirement of a bond: Debit Bonds Payable & Credit Cash.
- The carrying value of bonds at maturity will always equal their par value.
- In case of a zero coupon bond, only the amount of par value is paid when the bond is redeemed at maturity.
- A bond certificate issued via the South Carolina Consolidation Act of 1873.
- Explain how to record the retirement of a bond at maturity
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- Resources supplied by nature, such as ore deposits, mineral deposits, oil reserves, gas deposits, and timberstands, are natural resources or wasting assets.
- If all of the resource is sold, expense all of the depletion and removal costs.
- The cost of any portion not yet sold is part of the cost of inventory.
- For example, assume that in 2010 a company paid $650,000 for a tract of land containing ore deposits and $100,000 in exploration costs.
- In the example where the land was purchased, the total costs of the mineral deposits equal the cost of the site ($650,000) (minus the residual value of land and $50,000) plus costs to develop the site ($300,000), or a total of $900,000.
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- Depletion is a method of recording the use of natural resources over time.
- It can include costs related to the acquisition of the asset, exploration, development and preparation of the asset for use, and performance of restoration work .
- For this purpose, the term "property" means each separate interest business owned in each mineral deposit in each separate tract or parcel of land.
- This is an accounting method by which costs of natural resources are allocated to depletion over the period that make up the life of the asset.
- Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits).
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- Then how come the credit balance in our bank accounts goes up when we deposit money?
- How do they view the money we have just deposited?
- It's ours; therefore, from the bank's perspective the deposit is viewed as a liability (money owed by the bank to others).
- When we deposit money into our accounts, the bank's liability increases, which is why the bank credits our account.
- The rule of debit and credit depends on the type of account you are talking about:
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- A lease allows a company to get a major piece of equipment with no large expenditure of cash.
- The value of the leasehold improvements should be capitalized and depreciated over the lesser of the lease life or the leasehold improvements life.
- If the life of the leasehold improvement extends past the life of the initial term of the lease and into an option period, normally that option period must be considered part of the life of the lease.
- Security Deposits: Nonrefundable security deposits:deferred by the lessor as unearned revenue; capitalized by the lessee as a prepaid rent expense until the lessor considers the deposit earned.
- Refundable security deposits: treated as a receivable by the lessee; treated as a liability by the lessor until the deposit is refunded to the lessee.