SealCoat Paving Enters into a Contract with Royal Golf

question 25

Multiple Choice

SealCoat Paving enters into a contract with Royal Golf & Tennis Club to provide surface material for Royal's tennis courts by April 1 for a tournament to begin May 1.The contract specifies an amount to be paid if the contract is breached.This is a liquidated damages clause if the amount is

• A)meant to pay for additional liquid sealant in the event of damage.
• B)a reasonable estimate of the loss on a breach.
• C)designed to penalize the breaching party.
• D)intended to quickly provide cash to the nonbreaching party.

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Definitions:

Operating Expenses

Costs associated with running a business's core operations on a daily basis, excluding costs of goods sold.

Merchandising Companies

Companies that purchase goods in a finished condition and sell them without further processing, making profit through the buying and selling of merchandise.

Service Companies

Businesses that provide intangible products or services to customers, as opposed to selling physical goods.

Gross Profit

The difference between sales revenue and the cost of goods sold, indicating the financial health of a company's core business activities.