A Principal-Agency Relationship Is Created Between a Customer and a Bank

question 106

Multiple Choice

A principal-agency relationship is created between a customer and a bank:

• A) only if the customer deposits a check that the bank must collect for the customer.
• B) any time the customer deposits an amount into the customer's checking account.
• C) only when the customer writes a check against her account.
• D) if the customer deposits a check that the bank must collect for the customer, or if the customer writes a check against his or her account.
• E) if the customer has an overdraft and the bank needs to collect.

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Definitions:

Trade-In Allowance

The amount credited to the buyer of a new item for the value of the old item that is being traded in as part of the transaction.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired.

Gain Or Loss

The financial result that occurs when the selling price of an asset differs from its purchase price.

Initial Cost

The initial expense of acquiring an asset, including purchase price, setup, and preparation costs.