A Small Company,Software Design Limited,was Indebted $150,000 to a Sole

question 55

Multiple Choice

A small company,Software Design Limited,was indebted $150,000 to a sole individual,now due.This individual was an investor who was a former classmate of the firm's president,Angela.Owing to a reversal of fortunes for the company,Software Design could now only repay $100,000.With her investor chalking the affair up to experience,Angela intended the firm to repay what it could now,and then she would wind up the company.A few weeks after paying off her creditor at $100,000,but before she could wind up the company,a new investor with both ideas and money approached her,and encouraged Angela to continue on in the business.Once Angela's former classmate heard of the new investor,she demanded the balance due on her loan.Angela briefly considered repaying more,but her new investor demanded a hardline approach.Angela was holding the repaid note in her hands as her later investor said "Neither you nor she could see the future when she agreed to accept $100,000.But accept she did.Business is business."

• A)Since Software Design gave no consideration for Angela's classmate's promise to forgive the rest of the debt,Angela's classmate can successfully sue the company for the balance.
• B)While Angela's classmate would have been able to sue the firm under Common Law,statute law says that,having accepted part of the debt as payment for the full amount,she cannot now demand the balance.
• C)Whether or not Angela's classmate could successfully sue for the balance of the debt,the courts would not allow a debtor to be unjustly enriched in this way and would order Software Design to repay the balance of the debt.
• D)None of the responses are correct.
• E)All of the responses are correct.

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Definitions:

Uncollectible Accounts

Accounts receivable that a company does not expect to collect and thus considers as a loss.

Effective Interest Rate

The real rate of interest earned or paid on an investment, loan, or other financial product adjusted for compounding over a given period.

Present Value

The value today of a future cash amount or series of payments, based on a particular rate of return.

Fair Value

The value received from selling an asset or the expense of transferring a liability in a regulated transaction among market players on the date of evaluation.