In What Circumstances Will Adam Be a Principal and David

question 35

Multiple Choice

In what circumstances will Adam be a principal and David an agent?

• A)David has authority to bind Adam to a contract with a third party.
• B)Adam is paying David to perform a task but has no control over how David will complete the task.
• C)David is claiming to be Adam's legal representative.
• D)Adam is paying Eve to perform a task to be carried out by David.

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Definitions:

Year-End Information

Data and records compiled at the end of a fiscal year used for accounting and tax purposes, including final balances, inventories, and financial statements.

Perpetual Inventory System

An accounting method that continuously updates inventory records for sales and purchases, providing a highly current account of inventory on hand.

Net Method

An accounting technique where discounts for prompt payment are calculated and recorded immediately, reducing the purchase cost of inventory.

Allowance for Sales Discounts

An account used in bookkeeping to estimate the reduction in revenue due to sales discounts that customers are expected to take advantage of.