Michael Agrees to Buy Joshua's Company After Joshua Tells Him

question 1

True/False

Michael agrees to buy Joshua's company after Joshua tells him that it makes a gross profit of approximately £1 million per year. John provides documents which actually indicate that the company's profits have never surpassed £100,000, but Michael fails to read them carefully before signing the contract. Can Michael rescind the contract due to Joshua's misrepresentation?

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Definitions:

Note

A financial instrument that represents a debt or obligation between two parties, wherein the issuer promises to pay the holder a certain amount of money at a future date.

Adjusting Journal Entry

An entry made in the accounting journals at the end of an accounting period to allocate items between accounting periods.

Allowance for Doubtful Accounts

An estimate of the amount of accounts receivable that may not be collected, used to reduce the carrying amount of receivables on the balance sheet.

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal.