Which of the Following Situations Appears to Involve a 'Common

question 19

Multiple Choice

Which of the following situations appears to involve a 'common mistake'?

• A) A beneficiary and an insurance company negotiated a life insurance policy, both unaware that the subject of the life insurance policy was in fact already dead.
• B) X, who spoke little English, signed a document granting Y an option, believing it to be a receipt. This belief was encouraged by Y.
• C) X purchased goods on credit from Y, believing Y to be Z. Y was aware of X's mistake.
• D) Two parties agreed to send goods by a particular ship but there were two ships with that name and each party was thinking of a different ship.

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Definitions:

Incremental Borrowing Rate

The interest rate a company would have to pay if it borrows funds, used as a benchmark in lease agreements to calculate the present value of minimum lease payments.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.

Liability

Financial obligations or debts owed by a business to others, which must be settled over time through the transfer of economic benefits.

Cash Flows

The inflows and outflows of cash and cash equivalents, reflecting the operational, investing, and financing activities of a business.