In Order to Minimize Complications, All Loans to and from Family

question 5

Multiple Choice

In order to minimize complications, all loans to and from family members should

• A)be in writing
• B)state the interest rate, if there is an interest rate
• C)include a repayment schedule
• D)include the final payment date
• E)all of these should be included

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Definitions:

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, often reinvested into the company.

Investment Elimination Entry

An accounting entry made in the process of consolidating financial statements to remove the effects of intercompany investments and avoid double counting.

Subsidiary Asset

An asset owned by a subsidiary company, which itself is controlled by a parent company through ownership of more than half of its voting stock.

Accumulated Impairment Loss

The total amount of impairment loss that has been recognized on assets over their lifetime, reducing their book value.