Financial accounting worksheet with answers

A variable cost is a cost that:

1. AChanges in total in proportion to the level of activity
2. BIs never included in product costs
3. CIs paid only once when a business starts
4. DStays the same in total within the relevant range of output

At the break-even point:

1. ATotal revenue equals total costs
2. BSales revenue is zero
3. CProfit is at its maximum
4. DVariable costs equal fixed costs

In double-entry bookkeeping, an increase in a liability is recorded as:

1. AA credit
2. BA debit
3. CA debit to cash only
4. DNo entry until it is paid

A firm buys 200 units at €5 and 300 units at €6, then sells 400 units. Using weighted average cost, what is closing inventory?

1. A€550
2. B€560
3. C€600
4. D€500

An item cost €80. It can be sold for €90, but €20 must be spent to sell it. At what amount is it shown in inventory?

1. A€60
2. B€80
3. C€70
4. D€90

A machine costs €10,000 and is depreciated at 20% a year on the reducing balance. What is the depreciation charge in year 2?

1. A€4,000
2. B€1,600
3. C€1,800
4. D€2,000

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, but financial risk also increases
4. DROE rises and financial risk falls

In the indirect method of the cash flow statement, depreciation is:

1. ASubtracted from net profit
2. BAdded back to net profit because it is a non-cash expense
3. CIgnored completely
4. DShown in financing activities