Financial accounting worksheet with answers

Contribution per unit is:

1. AFixed costs divided by units sold
2. BRevenue minus fixed costs
3. CSelling price minus variable cost per unit
4. DSelling price minus full absorption cost per unit

At the break-even point:

1. ASales revenue is zero
2. BProfit is at its maximum
3. CTotal revenue equals total costs
4. DVariable costs equal fixed costs

Information is "material" in financial reporting when:

1. ALeaving it out or misstating it could influence users' decisions
2. BIt has been checked by the tax authority
3. CIt relates to physical materials and inventory
4. DIt exceeds one million euros

On 1 October a company pays €12,000 rent for the next 12 months. Its year ends on 31 December. What is the rent expense for this year?

1. A€1,000
2. B€12,000
3. C€9,000
4. D€3,000

Under IAS 16, which cost should be included in the cost of a new machine?

1. AInstallation costs needed to get it working
2. BStaff training costs after it starts operating
3. CGeneral office overheads for the year
4. DRepairs carried out two years later

Revenue is €200,000 and cost of sales is €140,000. What is the gross profit margin?

1. A43%
2. B70%
3. C30%
4. D60%

Closing inventory this year is overstated by €10,000 by mistake. What is the effect on profit, if not corrected?

1. AThis year's profit is overstated and next year's understated by €10,000
2. BBoth years' profits are overstated
3. CProfit is unaffected; only the balance sheet changes
4. DOnly this year's profit is understated

A company borrows at 5% interest to invest in assets that earn 12%. What is the likely effect on return on equity?

1. AROE falls, because interest is an expense
2. BROE stays the same, because debt is not equity
3. CROE rises and financial risk falls
4. DROE rises, but financial risk also increases