Jack, Who Recently Retired, Wants to Invest in a New

question 20

Multiple Choice

Jack, who recently retired, wants to invest in a new upstart local company. As part of the deal for investing in The Turmoil Corp., the company has agreed to give Jack "...some sort of maintenance or security job for as long as he feels able". This agreement would best be placed

• A) in a separate side agreement as to avoid clutter and confusion.
• B) in the by- laws, since it will need changing.
• C) in the charter.
• D) under seal since it lacks consideration.
• E) in writing since it falls under the Statute of Frauds.

---

Definitions:

Gross Accounts Receivable

The total amount owed to a company by its customers for goods or services delivered, before deducting any allowance for doubtful accounts.

Contra-Asset Account

An asset account where its balance is a reduction of another asset account, typically used for accumulated depreciation.

Allowance for Doubtful Accounts

A contra-asset account reducing total accounts receivable to reflect the amount that is expected to be uncollectible.

Income Statement Approach

The income statement approach is a method for preparing financial statements, focusing on calculating net income by summarizing revenues and expenses.