FAC1502 FINANCIAL ACCOUNTING ELEMENTARY CALCULATIONS FINAL PAPER PRACTICE SOLUTION TESTED QUESTIONS WITH COMPLETE ANSWERS

FAC1502 FINANCIAL ACCOUNTING
ELEMENTARY CALCULATIONS FINAL
PAPER PRACTICE SOLUTION TESTED
QUESTIONS WITH COMPLETE ANSWERS

●● What are retained earnings?
Answer: Profits kept in the business instead of paid as dividends.


●● How to calculate retained earnings?
Answer: Beginning RE + Net Income − Dividends = Ending RE


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


●● What is Paid-In Capital (PIC)?
Answer: Amount investors pay above par value for stock.


●● Formula for paid in capital
Answer: Issue Price − Par Value


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

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


●● What are the key characteristics of partnerships?
Answer: Shared ownership
Unlimited liability
Mutual agency
Limited life
Pass-through taxation


●● What is a sole proprietorship?
Answer: A business owned by one person with full control and unlimited
liability.


●● What is mutual agency?
Answer: Each partner can act on behalf of the business and bind the
partnership legally.


●● How do you find the balance of one capital account?
Answer: Beginning Balance + Investments + Share of Income −
Withdrawals


●● How are funds allocated when a partnership dissolves?
Answer: 1. Pay liabilities