Dave is an agent for easy pay insurance. easy pay insures only high-quality applicants. dave wanted to earn more commissions, so he sold some policies to applicants he knew were below-average risks. when these policyowners started filing claims, easy pay tried to deny the claims stating that dave had not acted appropriately. which general rule of agency makes easy pay responsible for the claims of the higher-than-average risk policyowners? there is no presumption of an agency relationship. agents should be compensated based on the quality of the business they generate. an agent must have authority to represent the principal. a principal is responsible for the acts of its agents who are acting within the scope of their authority.

Costco wholesale corporation operates membership warehouses selling food, appliances, consumer electronics, apparel and other household goods at 471 locations across the u. s. as well as in canada, mexico and puerto rico. as of its fiscal year-end 2005, costco had approximately 21.2 million members. selected fiscal-year information from the company's balance sheets follows. ($ millions). selected balance sheet data 2005 2004 merchandise inventories $4,015 $3,644 deferred membership income (liability) 501 454 (a) during fiscal 2005, costco collected $1,120 cash for membership fees. use the financial statement effectstemplate to record the cash collected for membership fees. (b) in 2005, costco recorded $46,347 million in merchandise costs (that is, cost of goods sold). record thistransaction in the financial statement effects template. (c) determine the value of merchandise that costco purchased during fiscal-year 2005. use the financial statementeffects template to record these merchandise purchases. assume all of costco's purchases are on credit.