XYZ Company,a Distributor of Auto Parts,is in Debt to the Bank

question 110

Multiple Choice

XYZ Company,a distributor of auto parts,is in debt to the bank for $35 000 due on February 25.The company is having difficult times and wants to negotiate with the bank to pay only $33 000 as payment in full.With these facts in mind,which of the following statements of the law is true?

• A)If the bank agrees to accept the $33 000 as payment in full if paid early,by February 15,and the company does as requested,the bank could later sue for the remainder because the company gave good consideration for the bank's forgiveness of the debt.
• B)Even if the bank takes the $33 000,the bank can still sue for the entire amount plus punitive damages.
• C)If the company obtained from the bank the bank's promise to forgive the $2000 under seal,the bank could later sue for the remainder.
• D)A statutory provision provides that the creditor who accepts less than full payment as payment in full cannot later sue for the remainder.
• E)At common law,if the bank accepted the $33 000 as payment in full,even absent additional consideration,it could not later sue for the remainder because such promises are always binding.

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Definitions:

Periodic System

An inventory system where updates to inventory levels are made periodically, as opposed to continuously.

Voucher Systems

A control and documentation system used in accounting to process and monitor transactions.

Net Method

An accounting method where discounts for early payment are assumed to be taken and sales or purchases are recorded at their net of discount values.

Purchases Discount

Purchases discount is a reduction in the price paid for goods or services, often granted to a buyer when payment is made within a specified period.