Smart Computer Services had a service contract with Johnson College to maintain all of the college computers used for instructional services. The college depended heavily on its computer system being maintained properly at all times. A liquidated damage clause in the contract provided that Smart Computers pay $500 to Johnson College for each day that Smart was late responding to a service call
On October 10, Smart was notified that Johnson College's computer system failed. Smart, however, did not respond to the college's request until October 15 . If Johnson College sues Smart Computer Services under the liquidated damages provision of the contract, Johnson College will
a. win, unless the liquidated damage provision was determined to be a penalty.
b. win because, regardless of the circumstances, the liquidated damages provision is valid.
c. lose, because Smart's breach is only a minor.
d. lose, because the liquidated damages clause in the Smart/Johnson College contract was against public policy.
A
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stock, $5 par value 450,000 450,000 Additional paid-in capital 70,000 70,000 Retained earnings 311,000 290,000 Total stockholders' equity 831,000 810,000 Total liabilities & stockholders' equity$ 1,322,000 $ 1,310,000 Income Statement-Year 2For the Year Ended December 31, Year 2Sales (all on account)$1,390,000 Cost of goods sold 830,000 Gross margin 560,000 Operating expenses 500,615 Net operating income 59,385 Interest expense 16,000 Net income before taxes 43,385 Income taxes (35%) 15,185 Net income$ 28,200 Dividends on common stock during Year 2 totaled $7,200. The market price of common stock at the end of Year 2 was $3.69 per share.The company's current ratio at the end of Year 2 is closest to: A. 1.96 B. 0.45 C. 0.83 D. 0.37
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