A Flood Will Require Cessation of Mining Operations for at Least

question 28

Multiple Choice

A flood will require cessation of mining operations for at least six months.How would a force majeure clause affect the legal status of the miner's obligations relating to its existing supply contracts?

• A) non-performance of the contract will be excused without liability
• B) gives the innocent party the right to terminate and sue for breach
• C) performance obligations are suspended until a specified event occurs
• D) gives the innocent party the right to sue for damages for breach

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Definitions:

Net Realizable Value

The estimated selling price of an item in the ordinary course of business minus any costs associated with the sale or disposal of the item.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may not be collectible.

Gross Accounts Receivable

The total amount owed by customers to a business for goods or services provided without deducting any allowance for doubtful accounts.

Contra-Revenue Account

An account that decreases the gross amount of revenue reported on the financial statements, such as sales returns, discounts, and allowances.