Financial accounting worksheet with answers

A sunk cost is:

1. AA cost already incurred that cannot be recovered
2. BA cost that will be paid next year
3. CA cost saved by a decision
4. DA cost that changes in total with the level of output

Which statement shows cash coming in and going out in operating, investing and financing activities?

1. AThe income statement
2. BThe cash flow statement
3. CThe notes to the accounts only
4. DThe balance sheet

In double-entry bookkeeping, every transaction:

1. AIncreases both assets and expenses equally
2. BIs recorded only once
3. CIs recorded with equal debits and credits
4. DMust involve cash

Operating profit is €120,000 and interest expense is €30,000. What is interest cover?

1. A3 times
2. B4 times
3. C90,000 times
4. D0.25 times

Cost of sales is €600,000 and average inventory is €100,000. What is the inventory turnover?

1. A6 times a year
2. B0.17 times a year
3. C16 times a year
4. D60 times a year

Which depreciation method charges the same amount every year?

1. ASum-of-the-years'-digits
2. BReducing balance
3. CUnits of production
4. DStraight-line

Machine hours are scarce. Product X earns €20 contribution and needs 4 hours; product Y earns €15 and needs 2 hours. Which should be made first?

1. AEither, because the total contribution is the same
2. BX, because it uses more machine time
3. CX, because it earns more contribution per unit
4. DY, because it earns €7.50 per hour versus €5 for X

A company "sells" inventory to a bank and must buy it back later at a higher price, keeping the risks and rewards. How should it be accounted for?

1. AAs a gain on disposal of inventory
2. BAs revenue on the date of transfer
3. CAs a contingent asset in the notes
4. DAs a secured loan, not a sale