Financial accounting worksheet with answers

Contribution per unit is:

1. ASelling price minus variable cost per unit
2. BSelling price minus full absorption cost per unit
3. CRevenue minus fixed costs
4. DFixed costs divided by units sold

Accounts receivable are:

1. ACash held in the bank
2. BAmounts customers owe the company for sales on credit
3. CAmounts the company owes its suppliers
4. DShares owned by investors

A customer pays in advance for services the company will provide next year. At year end the money is shown as:

1. AAn expense of this year
2. BA liability (deferred revenue)
3. CRevenue of this year (cash received)
4. DA non-current asset

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€600
2. B€560
3. C€500
4. D€550

Which ratio measures a company's ability to pay its short-term obligations?

1. AEarnings per share
2. BReturn on equity
3. CThe current ratio
4. DThe gross margin

The prudence (conservatism) concept suggests that accountants should:

1. AIgnore possible losses
2. BValue assets at their selling price
3. CAvoid overstating assets and income under uncertainty
4. DAlways record the highest possible profit to attract investors

When does activity-based costing (ABC) give the biggest improvement over traditional absorption costing?

1. AWhen a firm makes only one standard product
2. BWhen all costs are variable with labour hours
3. CWhen overheads are very small compared with direct costs
4. DWhen overheads are large and driven by activities like set-ups rather than volume

Making a part costs €10 materials, €6 labour and €4 variable overhead, plus €5 of fixed overhead that continues anyway. A supplier offers it at €22. What should the firm do on cost grounds?

1. ABuy it, because fixed costs are always relevant
2. BBuy it, because the full cost of €25 per unit is above €22
3. CMake it, because the full cost of €25 is below €22
4. DMake it, because the relevant cost of €20 is below €22