The Rule in Foakes V Beer States That

question 12

Multiple Choice

The rule in Foakes v Beer states that:

• A)consideration must be possible to perform.
• B)consideration must have a legally recognised value.
• C)performance of an existing contractual duty does not provide valuable consideration.
• D)part payment of a debt cannot satisfy the debt.

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Definitions:

Initial Value Method

An accounting approach where investments are reported at their acquisition cost without subsequent adjustment for changes in market value.

Goodwill

An intangible asset on a company's balance sheet that arises when a company acquires another for a price higher than the fair value of its net tangible assets.

Retained Earnings

The portion of net income that is not distributed as dividends to shareholders, but rather reinvested in the business or kept as reserve.

Equity Method

A method of accounting employed by a business to log its investment in another firm when it possesses considerable sway but lacks complete authority.