Which of the Following Statements Is True of the Liability

question 39

Multiple Choice

Which of the following statements is true of the liability of an agent who is acting for a nonexistent or incompetent principal?

• A) If the third person is unaware of the lack of capacity of a nonexistent or incompetent principal, the agent is not personally liable on the contract.
• B) A minor is considered an incompetent principal, and an agent acting on behalf of such principals is personally liable on the contract.
• C) If the principal is judged insane, the law imposes an apparent warranty by the agent that the principal has the capacity to be bound.
• D) A person judged insane is considered to be nonexistent or incompetent and is personally liable for acts undertaken by an agent.

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Definitions:

Conversion

The process of changing or causing something to change from one form to another.

Conversion Costs

Expenses directly related to the transformation of raw materials into finished goods, typically including labor and overhead costs.

Canning Department

A division within a production facility where products are canned for preservation and future sale.

Process Cost Summary

A report detailing the total cost and production information in a process costing system, used to calculate cost per equivalent unit.