FAC1502 Financial Accounting Elementary Calculations FINAL PAPER Questions and Answers Verified Solutions Latest Update

FAC1502 Financial Accounting
Elementary Calculations
FINAL PAPER Questions and Answers
Verified Solutions Latest Update


Question:

What are retained earnings?

Answer:
Profits kept in the business instead of paid as dividends.


Question:

How to calculate retained earnings?

Answer:
Beginning RE + Net Income − Dividends = Ending RE


Question:

What is par value?

Answer:
nominal (face) value assigned to stock; used for legal/accounting purposes, not market
value.


Question:

What is Paid-In Capital (PIC)?

Answer:
Amount investors pay above par value for stock.


Question:

Formula for paid in capital

Answer:
Issue Price − Par Value

, Question:

How do you record a normal partnership entry (investment)?

Answer:
Debit Cash (or asset), Credit Partner Capital


Question:

What are the key characteristics of partnerships?

Answer:
Shared ownership Unlimited liability Mutual agency Limited life Pass-through taxation


Question:

What is a sole proprietorship?

Answer:
A business owned by one person with full control and unlimited liability.


Question:

What is mutual agency?

Answer:
Each partner can act on behalf of the business and bind the partnership legally.


Question:

How do you find the balance of one capital account?

Answer:
Beginning Balance + Investments + Share of Income − Withdrawals


Question:

How are funds allocated when a partnership dissolves?

Answer:
1. Pay liabilities


Question:

Return capital balances