AC 312 Exam 3
A(n) ____________ opinion is a qualified opinion by an auditor that indicates that the financial statements are an accurate reflection of the company's financial health apart from some minor deviation from GAAP, not serious enough to warrant an adverse opinion. a. "except for" b. "unless" c. "adverse" d. "indeterminate"
"except for"
To submit a shareholder proposal, a shareholder must have owned (for the past year) __________ percent or __________ in market value of the voting stock of the corporation. a. 5; $5,000 b. 3; $1,000 c. 1; $2,000 d. 1; $5,000
1; $2,000
If Titanic Co. makes a tender offer to acquire more than ____________ of the shares of a target, Titanic Co. must file a statement with the SEC. a. 5% b. 105 c. 15% d. 20%
5%
Jamie authorizes Amy to sell his house, but does not clarify about the compensation payable to Amy. What amount should be paid to Amy when she sells Jamie's house? a. Nothing, since agency relationships are assumed to be gratuitous unless an agreement specifies compensation b. An amount to be determined by arbitration c. A fair value for the services performed d. Ten percent of the sales price
A fair value for the services performed
____________ occurs when a targeted corporation makes a deal with the suitor to protect management of the target. a. Greenmail b. A lockup agreement c. A public relations campaign d. A targeted shareholder agreement
A targeted shareholder agreement
____________ refer to a system of coordinated health care institutions for Medicare patients developed by the Department of Health and Human Services. a. High-deductible health plans b. Preferred provider organizations c. Accountable care organizations d. Health maintenance organizations
Accountable care organizations
Some suggest that the insistence that all disputes involving U.S. corporations be fashioned under ____________ law, a trend known as ____________, makes listing in the U.S. unpopular. a. American; special interest group control b. American; corporate governance c. American; legal imperialism d. Sarbanes-Oxley; legal imperialism
American; legal imperialism
Charlena, a shelf-stocker, offers Megan the post of Vice-President of Procurement to express appreciation for Megan's hard work in stocking the shelves at Charlena's store, Thrift City. Megan creates business cards with her new title on them and uses one to purchase a new truck in Thrift City's name from Highway Auto. Which of these types of authority, if any, has Charlena given Megan? a. Express authority b. Operation of law authority c. Apparent authority d. Charlena has likely given Megan no authority
Apparent authority
Repair Garage Company rents tools and stalls to independent auto mechanics to repair cars. Repair Garage allows Joe to print business cards reading "Repair Garage Company—Joe, Certified Mechanic." A customer is unhappy with the repairs Joe made to her car and sues Repair Garage. What legal theory, if any, would allow Repair to be sued by the customer? a. Express authority b. Implied authority c. Apparent authority d. Incidental authority
Apparent authority
Janice requires information about the voting rights of members of Titan, LLC. Which document will contain this information? a. Articles of incorporation b. Articles of organization c. Bylaws d. Operating agreement
Articles of organization
____________ refer(s) to the written application to the state for permission to form a limited liability company. a. Novation b. Estoppel c. Operating agreement d. Articles of organization
Articles of organization
Desmond, obeying the instructions of his employer, Bigger Company, sells Harry a computer system that is not capable of being expanded. Harry is now suing Desmond asserting fraud, but Desmond defends that Harry did not request an expandable system. What responsibility if any, does Bigger Company owe Desmond? a. Bigger has no responsibilities, since Desmond has a defense to fraud. b. As Bigger's agent following instructions, Desmond is entitled to indemnification. c. Bigger's only duty is to cooperate while Desmond defends the lawsuit. d. Bigger's responsibility is to support Harry's lawsuit against Desmond.
As Bigger's agent following instructions, Desmond is entitled to indemnification.
Henry, a promoter, signs a five-year lease agreement for office space for Ajax Corp., which has not yet been formed. After formation, Ajax moves into the office space, pays rent and occupies it for six months, but then finds a cheaper location and moves out. Which party is liable on the lease? a. Henry b. Ajax c. No one, since it was a tenancy at will d. Both Henry and Ajax
Both Henry and Ajax
Pogisa is a director at Trendz Corp. After studying and consulting with experts, Pogisa votes to have Trendz sell a tract of land for $500 per acre. Within a year, the land is worth $2,000 per acre, and Trendz shareholders want to sue Pogisa for her vote to sell the land. Under the ____________, Pogisa may be entitled to legal protection. a. Fairness Rule b. Business Judgment Rule c. Insider Trading Rule d. Actual Authority Rule
Business Judgment Rule
Grant wants to know the date of the annual shareholders meeting of Big Co. Which document will contain this information? a. Articles of corporation b. Articles or organization c. Bylaws or regulations d. Operating agreement
Bylaws or regulations
Which of the following is the official authorization of a corporation to do business in a state? a. Articles of incorporation b. Certificate of incorporation c. Articles of organization d. Certificate of authority
Certificate of incorporation
Alan sells merchandise on credit to ABC Co. ABC fails to pay for the merchandise. Alan later discovers that ABC is not a corporation, but a partnership consisting of Alice, Betty, and Charles. Which legal doctrine might shield Alice, Betty, and Charles from personal liability? a. De facto corporation b. De jure corporation c. Corporation by estoppel d. Piercing the corporate veil
Corporation by estoppel
____________ give(s) shareholders more voting control, because this voting method states that each share of stock has as many votes as there are directors to be elected. a. Voting trusts b. Proxy voting c. Pooling agreements d. Cumulative voting
Cumulative voting
Which of the following would be considered a valid informed consent by a court? a. Dr. Ambrose tells her patient in advance about a dangerous procedure and the risk involved, and obtains the patient's informed consent in writing on a form that is signed by the patient. b. Dr. Ambrose tells her patient in advance about a dangerous procedure and the risk involved, and obtains the patient's informed consent in writing on a form that is signed by the patient and witnessed by a third party. c. Dr. Ambrose obtains her patient's oral informed consent, which is witnessed by a third party. d. Dr. Ambrose tells her patient the procedure is mandatory.
Dr. Ambrose tells her patient in advance about a dangerous procedure and the risk involved, and obtains the patient's informed consent in writing on a form that is signed by the patient and witnessed by a third party.
Susan and Stanley are in a partnership called Easy Partnership. Susan purchases a truck with her personal funds with title to the truck naming Easy Partnership. Who owns the truck? a. Susan b. Susan and Stanley c. Easy Partnership only d. Both Susan and Easy Partnership
Easy Partnership only
The first major expansion of the Commerce Clause of the U.S. Constitution was done through which of these? a. The Dodd Frank Act b. Wickard v. Filburn c. Gibbons v. Ogden d. The Securities Exchange Act
Gibbons v. Ogden
____________ is based on the belief that because corporate decision making influences more individuals and groups than just the shareholders and the managers, corporate decisions should be made by an impartial group of corporate outsiders. a. Corporate democracy b. Governmental control c. Shareholder democratic control
Governmental control
Thomas is named "office manager" by Bigger Co., but his precise duties are not described. What type of authority would authorize Thomas to purchase office supplies? a. Express authority b. Implied authority c. Apparent authority d. Operation of law authority
Implied authority
Geoffrey is an agent of Smith's Meat Products Limited. While delivering products, the company's van breaks down. What legal theory, if any, would allow Geoffrey to contract a garage for the repair of the principal's van? a. Express authority b. Actual authority c. Apparent authority d. Incidental authority
Incidental authority
Iris represents Drew, an eccentric billionaire who lives alone on a Pacific Island. Although Drew passes away on May 1st, this fact is not revealed until June 1st. On May 15th, Iris enters into a contract with Peggy on behalf of Drew. What is the legal liability, if any, of Iris to Peggy? a. Iris is liable for a breach of actual warranty of authority. b. Iris is liable for a breach of implied warranty of authority. c. Peggy may enforce the contract since Drew's death was unknown, thus Iris has no liability. d. Peggy may enforce the contract against Iris since she represented a nonexistent principal.
Iris is liable for a breach of implied warranty of authority.
Jack has an auto accident while on business for Small Enterprises, an RLLP consisting of Jack and Alex. Who is liable for damages resulting from the auto accident? a. Small Enterprises only b. Jack only c. Jack and Alex only d. Small, Jack, and Alex
Jack only
Jackie is interested in the property of the Big Partnership, in which Jackie is a full partner. She wants to mortgage the property in order to collateralize loans for the organization. However, not all the partners agree with Jackie. What is Jackie's legal position with regard to the mortgage under UPA? a. Her partners' non-agreement is legally irrelevant. b. Jackie's interest in the partnership property cannot be assigned. c. Jackie can mortgage her share of the organization's property. d. UPA does not address this issue, and a court will decide on a case by case basis.
Jackie's interest in the partnership property cannot be assigned.
Smith, an agent, buys and sells used computer equipment on behalf of New Life Technologies, Inc. In the absence of an agreement, which of the following tasks may Smith delegate to Elizabeth? a. The authority to buy and sell used computer equipment. b. Keeping a record of transactions Smith undertakes on behalf of New Life. c. The authority to estimate the fair market value of used computer equipment. d. The authority to fix the selling price of used computer equipment.
Keeping a record of transactions Smith undertakes on behalf of New Life.
The Crown Corp. offers to buy the voting stock of the L&N Corp. with the intention of acquiring L&N and changing its management. To avoid being taken over by Crown, L&N asks the Spendle Corp. to outbid Crown. In this situation: a. L&N is a hostile bidder, Crown is the target, and Spendle is a white knight. b. L&N is a friendly suitor, Crown is a hostile bidder, and Spendle is the target. c. L&N is the target, Crown is a hostile bidder, and Spendle is a white knight. d. L&N is the target, Crown is a friendly suitor, and Spendle is a hostile bidder.
L&N is the target, Crown is a hostile bidder, and Spendle is a white knight.
In a general partnership, which of the following is true of limited partners? a. Limited partners take an active part in the management of the firm. b. A limited partner's nonpartnership property can be used to satisfy any debts owed by the firm. c. Limited partners are nonparticipating investors. d. Limited partners have unlimited liability for the firm's debts.
Limited partners are nonparticipating investors.
Liz, a promoter, hired an office support staff for a corporation that had not yet been incorporated. If there is a novation clause in a subsequent contract with the corporation and the staff, which of these is correct? a. The corporation will not be bound by any of Liz's contracts. b. The office support staff will work without pay until the corporation becomes incorporated. c. Liz will escape potential liability under the novation contract entered into. d. Liz and the corporation will be held equally liable under all contracts entered into.
Liz will escape potential liability under the novation contract entered into.
Tina is a limited partner in Aon Enterprises, a limited partnership, while Mark is a general partner. Tina assumes management duties for three weeks, while Mark is recovering from heart surgery. Most likely, who or what has liability for partnership actions during this period? a. Aon Enterprises only b. Mark only c. Tina only d. Mark and Tina
Mark and Tina
Milton is offered a contract by Marcos and Co. to design condos for a fourteen-story structure. After the condos are completed, Marcos and Co. finds that instead of two cupboards, all the condos have only one cupboard. The error is traced back to Milton's faulty design. The error notwithstanding, the condos are still in absolutely usable condition. What is Milton's liability? a. Milton has to reimburse the client for any extra money spent to fit in an extra cupboard. b. Milton has to pay Marcos and Co. the difference between the market value of the building as it stands and the market value of the intended structure. c. Milton has to pay the tenants the cost for fitting in an extra cupboard. d. Milton has to pay the state a fine for the inconvenience caused to the tenants.
Milton has to reimburse the client for any extra money spent to fit in an extra cupboard.
Morgan, an agent, was instructed to sell Drew's property at a specified "firm" price of $450,000. A month later, the value of the property decreased substantially to $75,000 because of zoning changes. What is the status of the agency relationship? a. Most likely, the agency is terminated because of impossibility. b. It would terminate unless Drew had given Morgan a durable power of attorney. c. It becomes an agency coupled with an interest, and continues unaffected by any change what so ever. d. It requires the agent to compensate the principal with less compensation.
Most likely, the agency is terminated because of impossibility
____________ occurs if the hospital has retained a physician that the governing body of the hospital knew or should have known was incompetent. a. Ostensible authority b. Negligent credentialing c. A staff privilege d. Indifferent testimony
Negligent credentialing
Wolfgang was transported while unconscious from the scene of a motorcycle accident to a local hospital, where he was admitted for emergency treatment. Does the hospital need to be concerned about obtaining written consent to treatment from someone before starting treatment on Wolfgang? a. Yes, informed consent requires a signed document. b. No, it can get consent after the treatment. c. Yes, without consent from the next of kin, there is liability. d. No, general consent is implied, and this is an emergency.
No, general consent is implied, and this is an emergency.
John knows that The Franklin Enterprises Partnership, in which John is a partner, is interested in purchasing a particular tract of land for a business location. Can John lawfully have his aunt buy the land, so that she may resell the land to Franklin Partnership? a. No, it violates John's duty of care. b. Yes, assuming the price to Franklin was a fair market price. c. No, it violates John's duty of loyalty. d. Yes, the aunt is not a Franklin partner and has no loyalty to it.
No, it violates John's duty of loyalty.
Ajax Co. has six directors. Three of the directors favor corporate expansion and three directors want to keep Ajax at its current size and distribute the surplus profit. How will a court likely resolve this deadlock? a. Appoint a seventh director to break the tie. b. Appoint an arbitrator. c. Order an involuntary dissolution of Ajax. d. Order the directors to make an agreement or be in contempt of court.
Order an involuntary dissolution of Ajax.
Vivian, owner of Titan Corp., uses Titan Corp. as a way to order merchandise for her personal benefit and fails to pay for the merchandise. Creditors who have shipped merchandise to Titan want to sue Vivian personally. Which of the following legal doctrines would allow a personal suit against Vivian? a. Corporation by estoppel b. Piercing the corporate veil c. De facto corporation d. De jure corporation
Piercing the corporate veil
Jim tells his independent accountant, Rachelle, to prepare a financial statement for his business associate, Mel. If Rachelle is negligent in her preparation of this financial statement,: a. Rachelle will be liable if Mel suffers actual financial loss due to her negligence. b. Jim will be liable if Mel suffers actual financial loss due to Rachelle's negligence. c. Rachelle will still not be liable to Mel. d. Mel will not recover any money for financial loss due to her negligence because the business associate is not an actually named third party.
Rachelle will be liable if Mel suffers actual financial loss due to her negligence.
The ____________ Act specifically addresses promotional allowances. a. Clayton b. Robinson-Patman c. Federal Trade Commission d. Sherman
Robinson-Patman
___________ elect the ____________, who take whatever actions are appropriate and in the best interests of the corporation. a. Shareholders; officers b. Officers; board of directors c. Stakeholders; board of directors d. Shareholders; board of directors
Shareholders; board of directors
The ___________ Act prohibits contracts, combinations, and conspiracies in restraint of trade. a. Robinson-Patman b. Federal Trade Commission c. Sherman Antitrust d. Clayton
Sherman Antitrust
Betty, the manager of The Great Retail Store, purchases a variety of merchandise on credit. When Betty quits, what notice must The Great Retail Store provide to its creditors? a. The Great Retail Store can send a notice to all businesses in Betty's area. b. The Great Retail Store should place a classified advertisement notice in a newspaper of general circulation. c. The Great Retail Store should send an actual notice to parties Betty has done credit business with and place an advertised notice in a newspaper of general circulation to the rest of the public. d. The Great Retail Store is not required to provide a notice to anyone.
The Great Retail Store should send an actual notice to parties Betty has done credit business with and place an advertised notice in a newspaper of general circulation to the rest of the public.
Which of the following statements is true about the "true locality" rule (TLR)? a. The TLR requires the court to look at the standard of care used in the exact locality of the physician. b. The TLR permits the court to judge the actions of a local physician against those of a physician in a community of comparable size and socioeconomic character. c. The TLR ignores the socioeconomic character of the physician's home base and concentrates instead on the geographical limits of a state border. d. The TLR permits general practitioners to be judged by one criterion and specialists by another.
The TLR requires the court to look at the standard of care used in the exact locality of the physician.
Henry owns a movie production house which is represented by a BigLaw Firm. He also owns a shipping agency which is represented by Chase Bank. The agency relationships will be terminated by the bankruptcy of which of the parties? a. The bankruptcy of Henry will terminate the agency relationship. b. The bankruptcy of the law firm will terminate the agency relationship. c. Both Henry and Chase must be bankrupt to terminate the agency. d. The bankruptcy of the movie production house will terminate the agency relationship.
The bankruptcy of Henry will terminate the agency relationship.
In terms of the steps in the incorporation process, which of the following occurs after the charter is issued? a. A statutory agent is appointed. b. The organizational meeting is held. c. Filing fees are paid. d. Promoters do preliminary work.
The organizational meeting is held.
Which of the following is an advantage of a sole proprietorship? a. The owner of a sole proprietorship has no liability. b. The owner of a sole proprietorship has complete control over the business. c. The sole proprietorship's existence does not depend entirely upon the sole proprietor. d. Owners of sole proprietorships can raise a lot of cash quickly for expansion purposes.
The owner of a sole proprietorship has complete control over the business.
Bill employs Charles as a real estate agent to sell his house. The house is destroyed by fire. What is the status of the agency relationship? a. The relationship is applied to the next property Bill sells. b. It requires Bill to compensate Charles for what he would have received for selling the house. c. The relationship is automatically terminated. d. It depends on what is considered reasonable.
The relationship is automatically terminated.
The Titanic Partnership's loan from Big Bank is structured so that payments on the loan are made out of profits and the amounts of the payments vary according to profitability. Which of these best describes this arrangement? a. This is evidence of a partnership between Titanic and Big Bank; additional evidence may overcome this assumption. b. This is conclusive evidence of a partnership between Titanic and Big Bank. c. This may be evidence of a partnership between Titanic and Big Bank. d. This is not evidence of a partnership between Titanic and Big Bank.
This is not evidence of a partnership between Titanic and Big Bank.
Thomas invests $10,000 in the Thomas and Trudy partnership named Tremendous Enterprise. Thomas needs $2,000 for medical expenses and insists that he is entitled to withdraw that amount immediately from what he has invested. Trudy asserts that the $10,000 investment is partnership property. Under the RUPA, who owns the $10,000? a. Tremendous Enterprise b. Thomas only c. Thomas individually and Trudy individually d. The $10,000 is owned by no one, but is merely a future interest of Thomas
Tremendous Enterprise
In which of the following situations can an agent legally appoint a subagent? a. When the case involves co-agents b. When the appointment is implied from the nature of the employment c. When the situation involves a nondelegable duty d. When the co-agent demands such an appointment
When the appointment is implied from the nature of the employment
Gordon employs Josh as an agent to sell Gordon's house. When does this agency end if the agreement is silent? a. When the house is sold b. When Josh locates a possible buyer c. When Josh decides to look for other employment d. When Gordon decides to look for another agent
When the house is sold
The ____________ case held that a farmer's production of wheat for use only on his own farm was held to impact interstate commerce. a. Gibbons v. Ogden b. Wickard v. Filburn c. Hughes v. Wendel d. Mangus v. Miller
Wickard v. Filburn
Greta, an agent, receives money from clients of Wayne, her principal, on the fifteenth of each month. In the absence of an agreement, how frequently must Greta account to Wayne for the money she receives? a. Typically during the financial year end b. Immediately upon receiving the money c. Within a year of receiving the money d. Within a reasonable period of time after the money is received
Within a reasonable period of time after the money is received
Alan and Baker are disappointed in the profitability of their A and B Partnership. They want to join their partnership with the X and Y Partnership. Is it possible for a partnership to be a partner? a. Yes b. No c. Yes, if the partners agree to personally guarantee the debts of the new partnership d. No, because a partner must be an entity
Yes
Corazon employs Josefina, a C.P.A., to represent her in tax liability negotiations with the IRS. Josefina is busy with other clients and delegates the negotiation to Lillian, a non-C.P.A. member of her office. Has Corazon impliedly agreed to this delegation? a. Yes, Corazon is relying on Josefina's skill and integrity. b. No, Lillian is a member of Josefina's office. c. Yes, Corazon must approve in writing any delegation of authority. d. No, delegations within offices happen regularly.
Yes, Corazon is relying on Josefina's skill and integrity.
Carlos instructs his sales agent, Edgar, not to sell on credit to Andrew because Carlos has experienced problems collecting from Andrew for prior purchases. Edgar sells on credit to Andrew, who pays properly. Has Edgar violated any obligation to Carlos? a. No, Edgar has not violated any obligation since Andrew paid properly. b. Yes, Edgar has violated the duty to exercise reasonable judgment. c. Yes, Edgar has violated the duty to obey all instructions of the principal.
Yes, Edgar has violated the duty to obey all instructions of the principal.
Claus tells CPA Vernon that he needs an audit to borrow money from Big Bank. Claus pays Vernon, and Claus takes Vernon's audit to Big Bank who makes the loan. When Claus defaults on the loan, Big discovers numerous liabilities that the audit did not reveal. Can Big Bank sue Vernon for negligence in a state that recognizes the near-privity rule? a. Yes, because Vernon breached the trust that Claus had placed in him. b. No, because Big and Vernon did not have a contract. c. Yes, because Big was an actually named third party. d. No, because Vernon does not guarantee the collection of Big's loans.
Yes, because Big was an actually named third party.
Linda, a manager and a currency trader for United Traders, has specific instructions from the CEO not to take a position on any currency in excess of $1 million. Linda sees what she believes to be a sure thing and takes a $20 million position. Unfortunately, the transaction goes bad and costs United $60 million. Does Linda have any liability to United? a. Yes, because Linda violated specific instructions and is, therefore, liable for the company's loss. b. No, Linda's actions are a normal market practice. c. Yes, because Linda engaged in insider trading. d. No, Linda is protected by the business judgment rule.
Yes, because Linda violated specific instructions and is, therefore, liable for the company's loss.
Charlotte is declared mentally incompetent by a court and is unable to participate as a partner in AMLAP Enterprises. Charlotte wants to leave the AMLAP partnership, but is contractually obligated for three more years. Can Charlotte leave the AMLAP partnership? a. Yes, she can do so without any liability to the partnership. b. No, there is no right to leave. c. Yes, she has a right to leave, but is liable for breach of contract. d. No, there is no right to leave unless all the partners agree.
Yes, she can do so without any liability to the partnership.
When forming a limited partnership, it is critical to know that: a. general partners have limited liability for the firm's debts. b. a certificate of limited partnership must be filed with the Secretary of State's office. c. limited partners are participating investors. d. general partners can only take a limited part in the management of the firm.
a certificate of limited partnership must be filed with the Secretary of State's office.
For most business decisions, the quorum, or minimum number of directors necessary to conduct business, is usually ____________ of the total number of directors. a. three-quarters b. two-thirds c. one-half d. a majority
a majority
A(n) ____________ is an exception to the rule that says that either the principal or the agent may terminate an agency relationship at any time. a. agency by estoppel b. agency by mutual agreement c. agency coupled with an interest d. notice of reimbursement
agency coupled with an interest
A(n) ____________ is an examination of the _______ records of an organization to determine whether the records are a fair representation of the actual financial health of the organization. a. audit, financial b. appraisal, legal c. review, appraisal d. audit, dissolution
audit, financial
Dan is an accountant with Miller & Co. The financial condition of Miller & Co. is not so good, but Dan shows it to be very healthy while preparing its financial statement, knowing that Miller & Co. will show the statement to Chase in seeking financing for its new project. Dan will ____________ personally liable to Chase if the new project goes bankrupt, and Chase will be able to recover against Miller based on the liability theory of ____________. a. not be; general consent b. be; attorney-client privilege c. not be; breach of contract d. be; actually named third parties
be; actually named third parties
State security statutes are commonly called ____________ laws a. exchange b. third party c. common d. blue sky
blue sky
In order to bring a derivative suit, a shareholder must own stock: a. at the time of the injury only. b. at the time of the suit only. c. both at the time of the injury and at the time of the suit. d. at the time of the injury, suit, and trial.
both at the time of the injury and at the time of the suit.
Michelson was chairman of the board and chief executive officer of a computer manufacturing firm. When considering whether to purchase CompuPrint, the manufacturer of computer printers, Michelson examined CompuPrint's financial records, consulted with legal and financial experts, and conducted an in-depth study of the marketplace and decided that it would be profitable for his corporation to purchase CompuPrint. If CompuPrint turns out to be a poor investment, and a court hears a case challenging Michelson's decision, the court will most likely analyze his conduct based on the ____________ rule. a. business judgment b. insider trading c. fairness d. shareholder protection
business judgment
Dr. Samuel, a physician, is being sued for medical malpractice. If the "true locality" rule was applied in his case, the court would judge Dr. Samuel's actions: a. against those of a physician in a community of similar size and socioeconomic character. b. by concentrating on the geographical limits of a state border. c. by looking at the standard of care used in the same exact locality as Samuel. d. on the basis of expert testimony provided from his locality.
by looking at the standard of care used in the same exact locality as Samuel.
A(n) ____________ is a corporation where the outstanding shares of stock and managerial control are held by fewer than ____________ shareholders. a. S corporation; 25 b. close corporation; 50 c. alien corporation; 50 d. shell corporation; 100
close corporation; 50
The Panon Corporation is incorporated in Tennessee, but its corporate headquarters is in Massachusetts. As a result, the Panon Corporation is: a. considered a citizen of only Massachusetts. b. considered a citizen of only Tennessee. c. not considered a citizen of either Massachusetts or Tennessee. d. considered a citizen of both Massachusetts and Tennessee.
considered a citizen of both Massachusetts and Tennessee.
A limited liability company is best thought of as a cross between a partnership and a: a. sole proprietorship b. governmental institution c. limited partnership d. corporation
corporation
A(n) ____________ is one that has been formed properly by incorporators who followed all of the steps outlined by the state incorporation statute. a. corporation by estoppel b. de facto corporation c. de jure corporation d. alien corporation
de jure corporation
In the case United States v. Todd Newman and Anthony Chiasson, the Second Circuit Court of Appeals held that for a ____________ to be ____________, she must have the requisite ____________ to receive a personal benefit in exchange for that information. a. defendant-tippee; criminally liable; mens rea b. defendant-tipper; civilly liable; mens rea c. defendant-tippee; civilly liable; mens rea d. defendant-tippee; criminally liable; actual authority
defendant-tippee; civilly liable; mens rea
Under RUPA, a ____________ takes place whenever a partner is no longer associated with the running of the firm. a. dissolution b. dissociation c. recission d. devolution
dissociation
A partner's ____________ is her share of the ___________ plus any ____________, which is any remaining funds after dissolution. a. vested property right; profits; surplus b. economic interest; profits and losses; surplus c. property; surplus; losses d. economic interest; surplus; vested property rights
economic interest; profits and losses; surplus
Under the RUPA, a partnership: a. has continuity of existence. b. is considered an entity in all situations. c. is no longer viewed as an aggregate in relation to liability. d. has no liability for the obligations made by its partners.
has continuity of existence.
The Model Rules of Professional Conduct for attorneys was established by: a. he American Bar Association. b. the National Conference of Commissioners on Uniform State Laws. c. the American Lawyers' Cooperative System. d. Congress
he American Bar Association.
Jan signs the articles of incorporation for a corporation being formed, and Tom wants to locate possible investors in the new corporation. Jan is a(n): a. incorporator b. promoter c. registered agent d. shareholder
incorporator
Homeruns Co. manufactures baseball bats. It withdrew deals from a few retailers who refused to put a particular price tag, as decided by Homeruns Co, on the bats. This act of Homeruns Co.: a. violates the per se rule. b. is legal under the quasi-RPM arrangement. c. violates the rule-of-reason standard. d. is legal under the RPM agreement.
is legal under the quasi-RPM arrangement.
The Uniform Electronic Transactions Act (UETA): a. is a physical alteration of network components. b. is an establishment of the nature of an electronic agent. c. bans electronic agents for business transactions. d. legitimizes the use of electronic agents.
legitimizes the use of electronic agents.
The four fundamental legal principles that are designed to protect the corporate structure are (1) corporate status as an entity, (2) corporate constitutional rights, (3) corporate citizenship and (4): a. anticipatory repudiation. b. unconscionable contract. c. mutual recession. d. limited liability.
limited liability.
A ____________ might be used by target management if the target owns an irreplaceable piece of property, the sale of which would seriously devalue the overall worth of the target. a. greenmail option b. lockup agreement c. public relations campaign d. targeted shareholder agreement
lockup agreement
If Drake, a shareholder of Sweet Corp., feels that he has been deprived of the right to purchase some of the corporation's newly issued stock, he: a. may bring a derivative suit against Sweet's corporate management. b. may bring a direct suit against Sweet's corporate management. c. may bring both a derivative suit and a direct suit against Sweet's corporate management. d. has no legal recourse against Sweet's corporate management.
may bring a direct suit against Sweet's corporate management.
Cal, an investor, lost $15,000 after purchasing corporate stock based on a false registration statement. Under the Securities Act of 1933, Cal: a. can sue the accountant if he can show the registration statement was misleading about a material matter. b. may sue the accountant who prepared the registration statement under the Securities Exchange Act of 1954. c. may sue the accountant who prepared the registration statement under the Securities Act of 1933. d. may sue the corporation of stock fraud under the Securities Exchange Act of 1934.
may sue the accountant who prepared the registration statement under the Securities Act of 1933.
A ____________ means the exclusive control of a market by a business enterprise. a. monopoly b. common enterprise c. trust d. confederation
monopoly
Angela asserts that HIPAA allows her to have copies of the records that result from her psychotherapy sessions with Dr. Xenon. Angela: a. can look through the records along with Dr. Xenon. b. must have Dr. Xenon's permission. c. must have Dr. Xenon's permission and can only look through the records along with Dr. Xenon. d. can have personal copies of these records.
must have Dr. Xenon's permission and can only look through the records along with Dr. Xenon.
Nodest Co., a Delaware corporation, wants to do business in California. Since Nodest is a foreign corporation, it: a. does not need to take any particular action. b. must incorporate in California. c. must obtain a certificate of authority from California. d. must obtain certificates of authority from both California and Delaware.
must obtain a certificate of authority from California.
Miranda, a student in Brad's business law class, asks a hypothetical question that is, in fact, based upon a current problem that her brother, Stan, is having. Brad gives an incorrect answer, and Stan suffers a loss when he acts according to the answer Miranda provided him. Brad has: a. no duty of due care to Stan, but has to Miranda. b. no duty of due care to either Miranda or Stan. c. a duty of due care to both Stan and Miranda. d. a duty of due care to Stan, but not to Miranda.
no duty of due care to either Miranda or Stan.
Aqua, LLC is a member-managed LLC. Andrew, a member, agrees to resolve a dispute with a customer by submitting the claim to binding arbitration. This action by Andrew is: a. legally binding on Aqua. b. not legally binding on Aqua. c. legally binding on Aqua if the claim is under $1,000. d. not legally binding on Aqua until approved by a court.
not legally binding on Aqua.
A promoter can escape liability by having the corporation and the third party create a(n): a. novation b. estoppel c. operating agreement d. certificate of organization
novation
Some jurisdictions consider managers liable only if they exceed their authority and the violation results in negligent or intentional conduct. This duty is referred to as the duty of: a. diligence b. loyalty c. care d. obedience
obedience
Small State has a limited customer base north and south of the interstate highway. Company A and Company Z agree that A will sell north of the interstate highway and Z will sell south of the interstate. This is a ___________ violation of the Sherman Antitrust Act. a. per se b. rule-of-reason c. joint federal and state d. minor
per se
Alan and Delen enter into a partnership agreement with a $10,000 capital contribution. Six months later, Delen loans Alan $1,000. The loan is a: a. partnership capital contribution. b. loan to the partnership, rather than to Alan. c. loan to both the partnership and to Alan. d. personal loan to Alan only.
personal loan to Alan only.
Generally, a ____________ is established as a pre-offer strategy that remains dormant until the right set of circumstances activates its operation. a. greenmail arrangement b. poison pill defense c. public relations campaign d. targeted shareholder agreement
poison pill defense
When shareholders join together in a temporary arrangement, it is called a: a. voting trust b. cumulative voting arrangement. c. shareholder proposal. d. pooling agreement.
pooling agreement.
If Tom is a potential investor in Delta Co., he should receive a ____________ prior to investing. a. contract summary b. prospectus c. closing settlement statement d. registration statement
prospectus
An attorney has a duty of ____________ to protect the client and to make certain that the client receives advice and representation that is free of conflicting interests. a. due care b. loyalty c. proximity d. good faith
proximity
A ____________ refers to the actual document that is used to request the right to vote the other shareholders' votes. a. proxy solicitation b. pooling agreement c. cumulative voting agreement d. voting trust agreement
proxy solicitation
The right to cast another shareholder's vote is called: a. cumulative voting b. proxy voting c. a pooling agreement d. a shareholder proposal
proxy voting
In a ____________, a target corporation uses news releases, advertisements, and press conferences to convince shareholders to retain present management. a. greenmail arrangement b. lockup agreement c. public relations campaign d. targeted shareholder agreement
public relations campaign
Alan, a corporate manager at DollarShopper Corp., decides he would like to pursue a business opportunity he knows DollarShopper would also be interested in. Under the corporate opportunity rule, Alan may: a. pursue the business opportunity only if he offers it to other corporate managers and also allows them to pursue it. b. never pursue the business opportunity as long as he is employed by DollarShopper. c. pursue the business opportunity only if he first offers it to DollarShopper, and the corporation rejects it. d. pursue the business opportunity without informing DollarShopper of it.
pursue the business opportunity only if he first offers it to DollarShopper, and the corporation rejects it.
Patricia holds 150 shares of common stock in a large corporation. Patricia: a. is guaranteed the rights to some of the profits of the corporation. b. is most likely entitled to two votes for each share of stock she holds. c. will not be included in the distribution of capital upon dissolution of the corporation. d. risks whatever money she invested in the 150 shares of common stock.
risks whatever money she invested in the 150 shares of common stock.
Mill enterprises needs to raise a large amount of money. To raise the money, it sells its fractional interest in orange groves, located in Florida, to Sunshine Co. in New York. Sunshine Co. would be ensured a return in investment from the land purchased. Mill enterprises has sold: a. real estate b. debt instruments c. goods d. securities
securities
A ____________ is defined as a coalition of individual outsiders who do not necessarily own stock, but can be affected by corporate decision making. a. corporate director b. special interest group c. stakeholder d. shareholder
special interest group
An attempt at a(n) ____________ occurs when one corporation makes a tender offer to the shareholders of another corporation. a. merger b. consolidation c. stock acquisition d. asset acquisition
stock acquisition
In a(n) ____________, the buyer purchases enough shares in a corporation to gain voting control of that corporation. a. asset acquisition b. stock acquisition c. consolidation d. joint venture
stock acquisition
In a limited partnership, general partners: a. take an active part in management, but have unlimited liability for the firm's debts. b. take an active part in management, but have no liability for the firm's debts. c. take an active part in management, but are nonparticipating investors. d. take no part in management, but contribute cash or property.
take an active part in management, but have unlimited liability for the firm's debts.
Arian is a sole proprietor and owes a number of business creditors. The business creditors may sue to: a. only take Arian's business assets. b. only take Arian's personal assets. c. take both Arian's business and personal assets. d. not take any assets, but only the profits of the business.
take both Arian's business and personal assets.
The RUPA has eliminated: a. all management rights enjoyed by partners. b. the concept of tenancy in partnership. c. partnership entity status. d. each partner's interest in the firm.
the concept of tenancy in partnership.
Under the UPA, a partner in a tenancy in partnership has all the following rights except: a. an equal right to possess and use specific partnership property for partnership purposes, but not for that partner's personal use. b. rights in partnership property that are not subject to attachment for personal debts. c. in the case of a partner's death, the right to have the deceased partner's interest in real property held by the partnership pass to the surviving partners. d. the right to be a co-owner of partnership property with no interest in partnership property which can be transferred, either voluntarily or involuntarily.
the right to be a co-owner of partnership property with no interest in partnership property which can be transferred, either voluntarily or involuntarily.
The status of a de facto corporation can be directly challenged by: a. private citizens. b. the state government. c. both private citizens and the state government. d. neither private citizens nor the state government.
the state government.
An agent's duty of loyalty means she likely cannot act for: a. more than one principal b. two more principals in the same transaction c. more than one year for the same principal d. an undisclosed principal
two principals in the same transaction
Kay, an 80% shareholder of Big Corp., dies leaving her stock to her nephew, Carl. Big Corp. will be: a. unaffected b. reorganized c. dissolved and then reconstituted d. dissolved
unaffected
Some states require that a merger involving an LLC have a ____________, rather than the two-thirds majority required of corporations. a. 51% majority vote b. one-third majority vote c. four-fifths majority vote d. unanimous approval
unanimous approval
EA Games Industries is a manufacturer of home video game machines and home video games. Johnson Department Store wants to market the home video games, but EA refuses to sell the games unless Johnson also agrees to purchase the home video machines. A court will most likely find such a restriction to be a(n): a. interlocking directorate. b. lawful tying agreement. c. unlawful tying agreement. d. per se violation.
unlawful tying agreement.
When auditors conclude that the financial records of the company are an accurate reflection of the company's financial status, they will issue a(n): a. unqualified opinion. b. qualified opinion. c. adverse opinion. d. disclaimer.
unqualified opinion.
Koto, a successful accountant, has been invited to join the board of directors of Big Corp. Koto is concerned that she will face personal liability for her decisions while on the board of Big. Big Corp. can limit Koto's liability at this point in time by including: a. protective measures in its corporate charter. b. voluntary protective measures in its bylaws. c. voluntary protective measures in its articles of organization. d. protective measures in the members' agreement.
voluntary protective measures in its bylaws.
Eva, a Mercy Hospital patient, received medication intended for another patient and, as a result, suffered severe complications. In a malpractice case against Mercy, regarding the administering of the wrong medication to Eva, most likely expert testimony: a. will be required. b. will be required only if it happened once. c. will not be required only if the other patient was in a different area of the hospital. d. will not be required.
will be required.
