Which of the Following Statements Regarding Novation Is False

question 19

Multiple Choice

Which of the following statements regarding novation is false?

• A) Novation refers to the creation of a new contract through the substitution of a third party for one of the original parties to a contract, with everyone's consent.
• B) Novation requires that the new debtor assume complete liability.
• C) Novation requires the creditor to accept the new debtor as principal debtor, not merely as a guarantor.
• D) Novation requires the creditor to accept the new contract in full satisfaction and substitution for the old contract.
• E) Novation requires the inclusion of a force majeure clause in order to be enforceable.

---

Definitions:

Expense Recognition Principle

An accounting concept that expenses should be recognized in the period when the revenues generated by such expenses are recognized.

Payroll Tax Expense

Payroll tax expense refers to the taxes that employers are required to pay on behalf of their employees, such as Social Security and Medicare taxes in the United States.

Estimated Warranty Costs

The projected expenses a company expects to incur for repairing or replacing products under warranty.

Warranty Contracts

Agreements that guarantee the repair or replacement of a product within a specified time period if it fails to meet outlined conditions.