Under a Contract with Red Wines, Sancho Begins Grading a Terraced

question 62

Multiple Choice

Under a contract with Red Wines, Sancho begins grading a terraced hillside for the planting of grapes. Halfway through the project, Sancho asks for $5,000 over the contract price, claiming an increase in the "cost of doing business." Red agrees but later refuses to pay. Red's agreement to pay more is

• A) unenforceable because Sancho's performance was a preexisting duty.
• B) unenforceable because Red's promise was illusory.
• C) enforceable.
• D) unenforceable because Sancho's request modified the contract.

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Definitions:

Journal Entry

A record in accounting that represents a transaction where debits and credits are equal, ensuring the accounts are balanced.

Indirect Labor Cost

Labor costs not directly associated with the production of goods or the provision of services, such as the wages of maintenance workers or supervisors.

Process Costing System

An accounting methodology used for homogenous products, allocating costs across all units produced.

Journal Entry

A record of a financial transaction in an accounting system, ensuring the debits and credits balance.