Which of the Following Is an Application of the Wherewithal-To-Pay

question 43

Multiple Choice

Which of the following is an application of the wherewithal-to-pay concept?

• A)Percentage-of-completion
• B)Hybrid method of accounting
• C)Installment method
• D)Accrual method of accounting

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Definitions:

Contractual Liability

The obligations and responsibilities one party owes to another under the terms of a contract.

Unidentified Principal

An unidentified principal occurs in agency relationships when the third party interacting with the agent does not know the identity of the principal for whom the agent is acting.

Disclosed Principal

A principal whose identity is made known by the agent to the third party at the time of entering into a contract with the third party.

Undisclosed Principal

A party in a contract whose identity is unknown to the third party with whom the agent interacts, during the transaction.