You have been provided with accounting research tools. Use them to answer the following multiple choice questions. After you make your choice, tell me what theory you are basing your answer on, or what part of the codification applies to the question. As you may have guessed, this is an open book quiz.

1 Alex Co. has the following items listed in the asset section of its balance sheet. Which should be classified as a current asset?

A) Investment in held-to-maturity securities.

B) Prepaid insurance on a 3-year policy expiring within the year.

C) Cash surrender value of life insurance policies.

D) Cash to be used for sinking fund payments to retire long-term debt

2 Grown Company is a leading producer of medicinal herbs. From the time the herbs are planted until the crop is cured and sold, a period of 4 years will have passed. The basis for the segregation of current assets will be

A) Assets that may be immediately realized.

B) Assets that may be realized in cash within 1 year.

C) Assets that are directly used in the production of herbs.

D) Assets that are realized in cash, sold, or consumed during the 4-year period from seeding to sale of the crop.

3 The cash over-and-short account is a

A) Suspense account.

B) Nominal account to recognize reconciling items in the bank reconciliation.

C) Real account to average and equalize minor errors in handling cash, that is, to defer and average them.

D) Nominal account to recognize small errors in handling cash.

4 When an account receivable previously written off is collected,

A) Bad debt expense should be debited.

B) Allowance for doubtful accounts should be credited.

C) Revenue should be credited.

D) Cash should be credited.

5 A transferor entity most likely should continue to recognize a transferred financial asset if

A) The transferor may reacquire the asset, and the asset is readily obtainable in the market.

B) The transferee may sell the full fair value of the asset.

C) The transferor has an option to reacquire the asset, and the reacquisition price is fair value.

D) The transferor is entitled and obligated to repurchase the asset, and the transferee receives a lenders return.

6 Gnu Co. commenced operations on the first day of the current year. At year end, its records indicated that $800,000 of goods were purchased for resale and that the ending inventory was $160,000. All sales are on credit, and Gnu has recognized no bad debt expense and no inventory write-down. If its markup on cost is 50% and its collections equaled $710,000, the ending balance of accounts receivable for the first year of operations must have been

A) $90,000

B) $135,000

C) $250,000

D) $320,000

7 According to current authoritative literature, all of the following disclosures should be made in the financial statements or notes regarding depreciable assets and their corresponding methods of depreciation except

A) Balances of major classes of depreciable assets, by nature or function at the balance sheet date.

B) Accumulated depreciation, either by major classes of depreciable assets or in total, at the balance sheet date.

C) A general description of the method(s) used in computing depreciation for major classes of depreciable assets.

D) The depreciation lives by major class of assets used in computing depreciation.

8 In January Year 1, Colonial Company purchased equipment for $120,000 to be used in its manufacturing operations. The equipment was estimated to have a useful life of 8 years, with salvage value estimated at $12,000. Colonial considered various methods of depreciation and selected the sum-of-the-years-digit method. On December 31, Year 2, the related allowance for accumulated depreciation should have a balance

A) $15,000 less than under the straight-line method.

B) $15,000 less than under the double-declining-balance method.

C) $18,000 greater than under the straight-line method.

D) $18,000 greater than under the double-declining-balance method.

9 Composite depreciation and group depreciation

A) Are straight-line methods.

B) Are accelerated methods.

C) Provide a constant return on carrying amount.

D) Recognize a gain or loss on retirement of an asset.

10 XYZ Co. purchased a mine for $600,000 and incurred a cost of $80,000 to prepare for the extraction of ore. The mines estimated value is $40,000 after the ore has been extracted. If the original estimated amount of ore that can be extracted from the mine was 32,000 tons, the depletion charge per ton was

A) $17.50

B) $21.25

C) $20.00

D) $18.75

11 Carr, Inc., purchased equipment for $100,000 on January 1, Year 1. The equipment had an estimated 10-year useful life and a $15,000 salvage value. Carr uses the 200% declining balance depreciation method. In its Year 2 income statement, what amount should Carr report as depreciation expense for the equipment?

A) $13,600

B) $16,000

C) $17,000

D) $20,000