SuitCity Purchased an Operating Asset Expected to Benefit the Company

question 29

Multiple Choice

SuitCity purchased an operating asset expected to benefit the company for 10 years for a cost of $100,000 cash.The old operating asset was fully depreciated and was kept in operations.What effect will acquiring this asset have on the performance measurement of an investment centre?

• A)A negative effect
• B)A positive effect
• C)No effect since cash replaces the asset sold
• D)More information is needed to determine the effect

Understand the criteria for determining the enforceability of restrictive covenants and noncompetition clauses in different contexts.

Examine the role and requirements of exculpatory clauses and the legal limitations of their enforceability.

Grasp the consequences and legal remedies available for parties in illegal agreements, including the possibility of rescission before illegal acts are performed.

Understand the significance of consideration in making parts of an agreement divisible and the enforceability of contracts with indivisible illegal and legal components.

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Definitions:

Extraordinary Item

Transactions and events that are both unusual and infrequent in nature, distinctly separate from the ordinary activities of the company, often excluded from the assessment of its ongoing operational performance.

Transitory Earnings

Earnings that are considered to be non-recurring or not indicative of the company's future earning potential.

Permanent Earnings

Profits generated by a company that are expected to continue in the future, excluding one-time events or transactions.

Implied Share Price

The calculated value of a company's share based on future earnings, cash flows, or market expectations.