1. Matching rule relates to credit losses by stating that bad debt expense must be recorded:

a. In the same period as allowed for tax purposes.
b. For an exact amount.
c. In the period of the sale.
d. In the period of the loss.

2. Long-term creditors are generally MOST interested in evaluating

a. Solvency.
b. Liquidity.
c. Marketability.
d. Profitability.

3. The journal entry to record issuance of bonds at premium will comprise a:

a. Debit to Cash for face amount of the bonds.
b. Debit to Cash for face amount of the bonds plus the amount of the premium.
c. Credit to Cash for face amount of the bonds.
d. Debit to Cash for face amount of the bonds minus the amount of the premium.

4. Declaring a cash dividend will:

a. Decrease common stock.
b. Decrease retained earnings.
c. Increase common stock.
d. Increase retained earnings.

5. Under accrual basis of accounting:

a. Ledger accounts should be adjusted to reflect cash basis of accounting before financial statements are prepared under usually accepted accounting principles.
b. Cash should be received before revenue is recognized.
c. Revenues and expenses are recognized in period they occur rather than in period in which cash is paid or received.
d. Net income is compute by matching cash outflows against cash inflows.