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

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

2. Long-term creditors are generally most interested in evaluating:

a. solvency.
b. liquidity.
c. marketability.
d. profitability.

3. Journal entry to record issuance of bonds at premium will include a:

a. debit to Cash for face amount of the bonds.
b. debit to Cash for face amount of the bonds plus amount of premium.
c. credit to Cash for face amount of the bonds.
d. debit to Cash for face amount of the bonds minus amount of 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 the accrual basis of accounting:

a. ledger accounts should be adjusted to reflect cash basis of accounting before financial statements are created under generally accepted accounting principles.
b. cash should be received before revenue is recognized.
c. revenues and expenses are recognized in period they happen rather than in the period in which cash is paid or received.
d. net income is computed by matching cash outflows against cash inflows.