Napolean Wanted to Borrow Money from the Bank of Winnipeg

question 4

Multiple Choice

Napolean wanted to borrow money from the Bank of Winnipeg.The bank was not,however,fully convinced that Napolean would be able to repay the debt.It therefore wanted some assurance from Napolean's mother,Josephine,that she would repay the loan if necessary.Which of the following statements is most likely to be TRUE?

• A)If it was not evidenced in writing,Josephine's promise will certainly be enforceable if it was a guarantee,but it may not be enforceable if it was an indemnity.
• B)If Josephine's promise must be evidenced in writing in order to be enforceable,the bank may be able to satisfy that requirement by combining several documents even if those documents do not refer to each other.
• C)If Josephine's promise is not evidenced in writing,and if such writing is required by statute,then neither Josephine nor Napolean needs to repay the loan.
• D)If Josephine's promise must be evidenced in writing in order to be enforceable,then the contract will be unenforceable unless both Josephine and the bank sign the relevant document.
• E)If Josephine's promise is properly classified as an indemnity,then the bank cannot demand payment from her unless Napolean has first refused to pay.

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Definitions:

Process Costing

An accounting method used to calculate the cost of a process, or series of processes, through which a product moves, assigning average costs to each product unit.

Equivalent Units

A term used in cost accounting to express the amount of production output in terms of fully completed units of output.

Conversion Costs

The costs required to convert raw materials into finished products, including direct labor and manufacturing overhead.

FIFO Method

An inventory valuation method that assumes the items purchased or produced first are sold first.