At the End of the Year, Long-Term Debt Was $255

question 208

Multiple Choice

At the end of the year, long-term debt was $255 and total debt was $390. The firm paid $20 of interest during the year. What is the amount of the cash flow to creditors?

• A) -$20
• B) -$5
• C) $5
• D) $45
• E) $60

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Definitions:

Novation

The act of replacing an existing contract with a new one, where a new party takes over the rights and obligations from an original party.

Substantial Performance

Substantial Performance is a legal concept where a party has completed a majority of its obligations, justifying payment or consideration despite minor faults.

Material Breach

A significant violation of a contract that goes to the essence of the agreement, giving the aggrieved party the right to terminate the contract and seek damages.

Breach

The act of infringing upon or failing to comply with a law, obligation, or any type of agreement.