Financial accounting worksheet with answers

A sunk cost is:

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

Under IAS 2, inventory is measured at:

1. AIts original cost, whatever happens
2. BThe lower of cost and net realisable value
3. CThe higher of cost and current replacement cost
4. DIts expected selling price

An accrued expense (accrual) is:

1. AAn expense paid in advance that relates to next year
2. BAn expense incurred in the period but not yet paid
3. CA cost that will never be paid
4. DIncome received before it is earned

Retained earnings represent:

1. AThe share price
2. BAccumulated profits that have not been paid out as dividends
3. CCash kept in the bank
4. DMoney owed to shareholders

A company increases its allowance for doubtful receivables. What is the effect?

1. ARevenue increases and gross receivables rise by the same amount
2. BOnly the notes change; no figures move
3. CCash decreases immediately
4. DAn expense is recognised and net receivables fall

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€500
2. B€560
3. C€600
4. D€550

A firm has spent €50,000 on market research for a new product and must decide whether to launch it. How should the €50,000 be treated in the decision?

1. AAdded to the launch cost
2. BDeducted from expected sales
3. CIgnored, because it is a sunk cost
4. DSpread over the product's expected life

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. CShown in financing activities
4. DIgnored completely