Yard Mowing

question 34

Multiple Choice

Yard Mowing.Paula agreed to mow John's yard once a week for $50 per week throughout the summer.Paula,however,was having trouble getting her money from John.On one occasion,he gave her a handwritten IOU stating "I,John Jones,owe Paula Smith $50" which he signed at the end.A couple of weeks later,John did not have the money with which to pay Paula for additional mowing,and he handwrote the following on a piece of paper and gave it to her: "I,John Jones,promise to pay Paula Smith or to bearer,the sum of $100 on Monday,July 22,2017." Paula quit mowing John's yard,and disgusted with John,Paula assigned both documents to Vince.When Vince presented the documents to John,John refused to pay on the basis that after inspecting the yard,he decided that Paula was doing a poor job.Vince told him the documents constituted negotiable instruments,but John disagreed.What is the effect of the instruments being written by hand?

• A)Handwriting does not prevent the instruments from being considered negotiable,but only because neither Paula nor John would be considered merchants in the transactions at issue.
• B)Handwriting does not prevent the instruments from being considered negotiable,but only because John would not be considered a merchant in the transaction at issue and Paula's status as a merchant is irrelevant.
• C)Handwriting does not prevent the instrument from being considered negotiable,but only because Paula would not be considered a merchant in the transaction at issue and John's status as a merchant is irrelevant.
• D)Handwriting does not prevent the IOU instrument from being negotiable,but it does prevent the other instrument from being negotiable.
• E)The issue of the instruments being handwritten does not prevent either from being considered negotiable.

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Definitions:

Cost Of Capital

The required return necessary to make a capital budgeting project, such as building a new plant, worthwhile.

Cost Of Labor

The total cost incurred by employers to compensate employees, including wages, benefits, and taxes associated with employing labor.

Total Cost

The sum of all costs incurred by a business in producing a certain level of output, including both fixed and variable costs.

Cost Of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.