1. The Cost Basis Principle says that the practice of showing assets on the balance sheet at their cost is explained, in part, by the fact that the original cost will never change and is supported by an invoice or other source that can be verified.

true or false

2. Satellite Mobile Sound, a local music company, entertained guests at a wedding reception at the Bourbon Orleans Hotel on Saturday, September 28. No fee or deposit was collected in advance, and nothing was recorded prior to the event. At the reception, the full fee was collected in cash from the hotel wedding coordinator at the end of the evening. Recording this transaction on the companys books the next day on Sunday, September 29th

. A. Violated the matching principle because nothing should have been recorded until Friday, October 4 when the music company paid the DJ and his road crew for their services.

B. Caused an increase in assets, and a decrease in both liabilities and owners equity.

C. Caused an increase in assets, a decrease in owners' equity, and had no effect on revenue.

D. Involved debiting Cash and crediting Revenue.

3.If a companys cash balance increases during a year, it must mean that

A. There was positive net income on the income statement.

B. Retained earnings increased.

C. None of the three statements above must necessarily be true.

D. The net worth of a company increased.