1. Which of the following is true if a firm has only variable expenses? a) A...

1. Which of the following is true if a firm has only variable expenses?

a) A 10% increase in sales will lead to no change in expenses and no change in profits

b) A 10% increase in sales will lead to no change in expenses and 10% increase in profits

c) A 10% increase in sales will lead to 10% increase in expenses and 10% change in profits

d) A 10% increase in sales will lead to 10 % change in expenses and no change in profits

2. When recording accounting transactions, revenue and expenses will ultimately be recorded in ________ on the balance sheet

a) Revenue

b)Expenses

c) Assets

d) Liabilities

e) Equity

Solutions

Expert Solution

Here you are with the question: Q1 - Option C & Q2 - Option E

Ques 1	Which of the following is true if a firm has only variable expenses? a) A 10% increase in sales will lead to no change in expenses and no change in profits b) A 10% increase in sales will lead to no change in expenses and 10% increase in profits c) A 10% increase in sales will lead to 10% increase in expenses and 10% change in profits d) A 10% increase in sales will lead to 10 % change in expenses and no change in profits

Solution:	The correct answer would be Option c) A 10% increase in sales will lead to 10% increase in expenses and 10% change in profits, if the firm has only variable expenses. Variable Expenses will change as and when sales increases

Ques 2	2. When recording accounting transactions, revenue and expenses will ultimately be recorded in ________ on the balance sheet a) Revenue b)Expenses c) Assets d) Liabilities e) Equity

Solution:	The correct answer would be Option e) Equity as all the transactions and revenue and expenses ultimately gets transferred to Shareholder Funds - Reserve & Surplus in Balance Sheet.

ekkarill92 answered 1 year ago

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