1.

Montauk Oil Company reports these account balances at December 31, Year 1:

Accounts Payable	$ 120,000
Land	210,000
Notes Payable	270,000
Equipment	170,000
Cash	90,000
Accounts Receivable	110,000
Buildings	250,000
Capital Stock	350,000
Retained Earnings	80,000

On January 2, Year 2, Montauk Oil collected $60,000 of its accounts receivable and paid $30,000 of its accounts payable. On January 3, Year 2, total liabilities are:

A. $360,000

B $390,000

C. $310,000

D. $80,000

2.

The matching principle:

Multiple Choice

A. Applies only to situations in which a cash payment occurs before an expense is recognized.

B. Applies only to situations in which a cash receipt occurs before revenue is recognized.

C. Is used in accrual accounting to determine the proper period in which to recognize revenue.

D. Is used in accrual accounting to determine the proper period for recognition of expenses.