Collection of an accounts receivable: 1 Increases the total assets of a company. 2 Decreases the total assets of a company. 3 Does not change the total assets of a company. 4 Reduces a company's total liabilities. Hancock prepares monthly financial statements. Which of the following violates the matching principle? 1 A portion of the salary payments made this month are not recognized as expense because some of the work was done by employees last month. 2 The premium on a six-month insurance policy is charged immediately to expense 3 Expenses for the period exceed revenue. 4 The cost of advertising done during the month is charged to expense even though no payment is due for 60 days. A journal entry which records revenue must include: 1 A debit to Cash. 2 A credit to a revenue account. 3 A credit to the owners' equity account. 4 A debit to the owners' equity account. The measures most often used in evaluating solvency-the current ratio, quick ratio, and amount of working capital are developed from amounts appearing in the: 1 Balance sheet. 2 Income statement. 3 Statement of retained earnings. 4 Statement of cash flows. The current ratio: 1 Is computed by dividing current assets by current liabilities. 2 Is computed by subtracting current liabilities from current assets. 3 Remains unchanged throughout the operating cycle. 4 Is a measure of short-term profitability. Which method will yield higher cash flows from operating activities? 1 The indirect method. 2 The direct method. 3 Both direct and indirect methods will yield the same amount. 4 Depends upon the situation