Examine the financial statements, Financial Accounting

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Your firm has been hired to examine the financial statements of Bonanza Development Corp. for possible irregularities.  As part of this task, you reviewed certain land transactions involving John Walters, who worked as an agent for Bonanza.  Bonanza feared the price of land would skyrocket if it became known that it was trying to purchase a large number of tracts of land to develop a shopping center near Flats, Nebraska.  It, therefore, instructed Walters not to disclose to prospective sellers that he was acting as an agent on its behalf.  None of the sellers asked Walters if he was an agent for anyone.  The agreement between Walters and Bonanza was in writing and signed by both parties.

Based on the above facts, answer the following questions as (1-6) True or False.

1.  Bonanza is an unidentified principal.

2.  Walters is personally liable on the contracts he enters into on behalf of Bonanza.

3.  Bonanza cannot enforce the contracts made by Walters secretly on its behalf.

4.  The sellers who entered into contracts with Walters can enforce the contracts against Walters, but not Bonanza.

5.  Walters had actual authority to enter into the contracts with the sellers.

6. Walters is not an agent of Bonanza since the prospective sellers did not know he was working for Bonanza.


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