Accounting and Financial Management 1A (University of New South Wales)
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Master acct quiz 2 file
Question 1
1 out of 1 points
Which of the following are assumptions of cost volume profit analysis?
i. Sales mix is constant.
ii. External factors do not change.
iii. Fixed costs change with sales volume.
iv. Variable costs are constant per unit of sales.
Answer
Selected Answer:
i, ii and iv
Correct Answer:
i, ii and iv
Response In performing CVP analysis, there are several assumptions made, including:
Feedback: • Sales price per unit is constant
• Variable cost per unit is constant per unit of sales
• Total fixed costs are constant
• Everything produced is sold
• Costs are only affected because activity changes
• If company sells more than one product, they are sold in the same mix (to allow
for the aforementioned assumptions to coexist).
Comparing the list above to the answers leaves us with only one option – C.
Fixed costs do not vary with sales volume. They remain the same, irrespective of
whether you sell 0 units or many.
Question 2
1 out of 1 points
The general ledger account representing the subsidiary ledger is known as a control account
because:
Answer
Selected
Answer: the accuracy of the detailed accounts in the subsidiary ledger can be checked
against the aggregate data and the balance contained in it
Correct
Answer: the accuracy of the detailed accounts in the subsidiary ledger can be checked
against the aggregate data and the balance contained in it
Response A subsidiary ledger is a group of similar accounts whose combined balances equal
Feedback: the balance in a specific general ledger account. The general ledger account that
summarises a subsidiary ledger’s account balance is called a control account. For
example, an accounts receivable subsidiary ledger includes a separate account for
each customer who makes a credit purchase. The combined balance of every account
in the subsidiary ledger equals the balance of accounts receivable in the general
ledger. Thus, by a process of elimination, and in light of the explanation, the answer
is B. In and of themselves they don’t improve control. They work concurrently,
feeding off each other, which enables the financial and accounting team to cross-
check the accuracy of the accounts.
Question 3
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1 out of 1 points
The firm’s fixed costs are $60 000, variable cost per unit is $15 and selling price per unit is $20.
The contribution margin per unit is:
Answer
Selected Answer:
$5
Correct Answer:
$5
Response The contribution margin represents the amount of income or profit the company
Feedback: made before deducting its fixed costs. Said another way, it is the amount of sales
dollars available to cover (or contribute to) fixed costs. Once fixed costs are covered,
the next dollar of sales results in the company having income.
Contribution Margin Per Unit = Selling Price Per Unit – Variable Cost Per Unit =
20-15=$5—A
Question 4
1 out of 1 points
The external auditor renders an adverse opinion when he/she:
Answer
Selected
Answer: considers that the financial statements are not presented fairly in accordance
with GAAP
Correct Answer:
considers that the financial statements are not presented fairly in accordance
with GAAP
Response Auditors give users of company’s financial statements confidence in those
Feedback: statements. By law, auditors must provide an independent assessment of a
company’s financial statements and then render their opinion on how fairly the
financial statements are presented and whether they are in accordance with
accounting standards. When an auditor gives an adverse opinion, he/she considers
that the financial statements are not presented fairly in accordance with GAAP.
Thus, the answer is B.
Question 5
1 out of 1 points
The break-even point is that level of activity where:
Answer
Selected Answer:
total revenue equals total cost.
Correct Answer:
total revenue equals total cost.
Response The break-even point represents the level of sales where net income equals zero.
Feedback: In other words, the point where total revenue equals total costs – A.
Question 6
1 out of 1 points
The entry to record a credit purchase when the periodic inventory method is employed will include
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a:
Answer
Selected Answer:
debit to Purchases
Correct Answer:
debit to Purchases
Response Under the periodic inventory system, inventory purchases are recorded in the
Feedback: purchases account, and the inventory account balance is updated only at the end of
each accounting period, after a stock take has been conducted. To record a credit
purchase, we debit purchases and credit accounts payable, so the answer is C.
Question 7
1 out of 1 points
Which of the ratios listed helps to indicate whether current liabilities could be paid without having to
sell the inventory?
Answer
Selected Answer:
quick ratio
Correct Answer:
quick ratio
Response Quick assets are defined as cash, marketable (short-term) securities, and accounts
Feedback: receivable and notes receivable, net of allowances for doubtful debts. These assets
are considered to be very liquid (easy to obtain cash from the assets) and therefore
available for immediate use to pay for obligations. We exclude inventory from this
calculation because inventory is not as liquid as the other current assets listed above.
The answer is C.
Question 8
1 out of 1 points
Creep Ltd purchased a machine for $100 000 on 1 January 2008. It has an estimated useful life of 5
years. Creep Ltd’s financial period ends on 31 December. The machine was depreciated using the
reducing balance method at 60%.
What was the balance of accumulated depreciation at 31 December 2010?
Answer
Selected Answer:
$93 600
Correct Answer:
$93 600
Response The balance of accumulated depreciation at 31 December 2010 was
Feedback: $93,600 – B.
Question 9
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