ACCY 411 Exam 3

Dawn was properly admitted as a partner in the ABC Partnership after purchasing Jim's partnership interest. Jim immediately withdrew. The partnership agreement states that the partnership will continue on the withdrawal or admission of a partner. Unless the partners otherwise agree,

Dawn's personal liability for existing partnership debts will be limited to Dawn's interest in partnership property.

Which of the following statement(s) is (are) usually true regarding general partners' liability? I. All general partners are jointly and severally liable for partnership torts. II. All general partners are liable only for those partnership obligations they actually authorized.

I only.

Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner. After the assignment, Bean may assert the rights to I. Participation in the management of TLC II. Cobb's share of TLC's partnership profits

II only.

Under the Revised Uniform Partnership Act, which of the following statements, if any, are correct regarding the effect of the assignment of an interest in a general partnership? I. The assignee is personally responsible for the assigning partner's share of past and future partnership debts. II. The assignee is entitled to the assigning partner's interest in partnership profits and surplus on dissolution of the partnership.

II only.

Major Supply, Inc., is seeking a judgment against Les Danforth on the basis of a representation made by Dirk Coleman, in Danforth's presence, that they were in partnership together doing business as the D & C Trading Partnership. Major Supply received an order from Coleman on behalf of D & C and shipped $800 worth of goods to Coleman. Coleman has defaulted on payment of the bill and is insolvent. Danforth denies he is Coleman's partner and that he has any liability for the goods. Insofar as Danforth's liability is concerned, which of the following is true?

If Major Supply gave credit in reliance upon the misrepresentation by Coleman, Danforth is a partner by estoppel.

Stanley and Martin formed a partnership to engage in the trucking business. Stanley contributed the capital and Martin was to contribute the labor. However, Stanley did not want his name associated with the partnership due to interests in other trucking businesses. Martin was involved in an accident while carrying goods on behalf of the partnership. Which of the following would Stanley not be liable for as a result of the accident?

Illegal drug activities when Martin was also carrying illegal drugs in the truck unknown to Stanley.

Generally, a corporation's articles of incorporation must include all of the following except the

Quorum requirements.

When a party deals with a partner who lacks actual or apparent authority, a general partnership will be bound by the resulting contract if the other partners

Ratify the Contract: Yes Amend the Partnership Agreement: No

The board of directors of Wilcox, Inc., has noted a 7% drop in the market price of its preferred stock and decides to purchase 100,000 shares of the stock for an amount below the redemption price of the stock. Under these circumstances, which of the following is a true statement?

Such shares may be purchased by the corporation to the extent of unreserved and unrestricted retained earnings.

Under the RUPA, unless otherwise provided in a general partnership agreement, which of the following statements is true when a partner dies?

The Deceased Partner's Executor Would Automatically Become a Partner: No The Deceased Partner's Estate Would be Free from Any Partnership Liabilities: No The Partnership Would be Dissolved Automatically: No

D, E, F, and G formed a general partnership. Their written partnership agreement provides that the profits will be divided so that D will receive 40%; E, 30%; F, 20%; and G, 10%. There is no provision for allocating losses. At the end of its first year, the partnership has losses of $200,000. Before allocating losses, the partners' capital account balances are D, $120,000; E, $100,000; F, $75,000; and G, $11,000. G refuses to make any further contributions to the partnership. Ignore the effects of federal partnership tax law. What is G's share of the partnership losses?

$20,000

Which of the following must take place before a corporation may be voluntarily dissolved?

Passage by the board of directors of a resolution to dissolve.

Which one of the following conditions will prevent a corporation from qualifying as an S corporation?

A corporation that has nonresident aliens as shareholders.

Chester Michaels appointed Regina Fairfax as his agent. The appointment was in writing and clearly indicated the scope of Regina Fairfax's authority and also that Fairfax was not to disclose that she was acting as an agent for Michaels. Under the circumstances,

Fairfax has the implied authority of an agent but not apparent authority.

Which of the following statements best describes the effect of the assignment of an interest in a general partnership?

The assignment transfers the assignor's interest in partnership profits and losses and the right to distributions.

Which one of the following will render a corporation ineligible for S corporation status?

The corporation has 117 shareholders.

Which of the following statements regarding the termination of an S corporation election is true?

The election may be revoked with the consent of shareholders who, at the time the revocation is made, hold more than 50% of the number of issued and outstanding shares.

Jim entered into an oral agency agreement with Sally in which he authorized Sally to sell his interest in a parcel of real estate, Blueacre. Within 7 days, Sally sold Blueacre to Dan, signing the real estate contract on behalf of Jim. Dan failed to record the real estate contract within a reasonable time. Which of the following most likely is true?

The real estate contract is unenforceable against Jim because Sally's authority to sell Blueacre was oral.

A parent and children currently own and operate a farm as equal partners. Under the Revised Uniform Partnership Act, what effect would the death of the parent have on the partnership?

The surviving partners could continue the partnership.

A company terminated its S corporation status for the current tax year. When can the company reelect S status?

Fifth year from the current tax year.

The S corporation status can be revoked only if the shareholders who collectively own more than what percentage of the outstanding shares in the S corporation's stock consent to its revocation?

50%

Which of the following is not eligible to be a shareholder of an S corporation?

A domestic partnership.

A principal and agent relationship requires a

Meeting of the minds and consent to act.

James Quick was a partner in the Fast, Sure, and Quick Factors partnership. He subsequently died. His will left everything to his wife including a one-third interest in the land and building owned by Fast, Sure, and Quick. Which of the following statements is true?

Mrs. Quick has the right to receive a settlement for her husband's interest in the partnership.

What fiduciary duty, if any, exists in an agency relationship?

The agent owes a fiduciary duty to the principal.

Which of the following actions is required to ensure the validity of a contract between a corporation and a director of the corporation?

The director must disclose the interest to the independent members of the board and refrain from voting.

Hobson, Jones, Carter, and Wolff are medical doctors who have worked together for several years. Their attorney formed a typical professional corporation for them. Which of the following is true?

The state in which they incorporated must have enacted professional corporation statutes.

Swing, Ltd., a limited partnership that supplies sheet music to educational institutions, did not have sufficient profits to make any distributions due to lack of public interest in musical instruments. Wally Worried, a limited partner, is concerned. Which of the following may Wally participate in without jeopardizing his limited partner status?

Voting for removal of the general partner.

A shareholder's right to inspect books and records of a corporation will be properly denied if the shareholder

Wants to use corporate shareholder records for a personal business.

John Watson entered into an agreement to purchase 1,000 shares of the Marvel Corporation, a corporation to be organized. Watson has since had second thoughts. Applying the RMBCA, which of the following is true?

Watson may not revoke the agreement for a period of 6 months.

Young Corp. hired Joe Wilson as a sales representative for 6 months at a salary of $5,000 per month plus 6% of sales. Which of the following statements is true?

Wilson is obligated to act solely in Young's interest in matters concerning Young's business.

ABC Construction decides to use an independent contractor to complete the roof of one of its construction projects. All of the following are true regarding use of the independent contractor except

ABC can avoid strict liability by engaging a contractor to ensure a safe workplace.

To which of the following rights is a shareholder of a public corporation entitled?

The right to a reasonable inspection of corporate records.

Bryan Corporation decided to purchase a plant site. Bill Shephard, a newly elected director, has owned a desirable site for many years. He purchased the property for $60,000, and its present fair value is $100,000. What would be the result if Shephard offered the property to Bryan for $100,000 in an arm's-length transaction with full disclosure at a meeting of the seven directors of the corporation?

The sale would be proper and Shephard would not have to account to the corporation for his profit if the sale was approved by a disinterested majority of the directors.

The corporate veil is most likely to be pierced and the shareholders held personally liable if

The shareholders have commingled their personal funds with those of the corporation.

Which of the following statements is a general requirement for the merger of two corporations?

The shareholders of both corporations must be given due notice of a special meeting, including a copy or summary of the merger plan.

Under the Revised Uniform Limited Partnership Act and in the absence of a contrary agreement by the partners, which of the following events is most likely to dissolve a limited partnership?

Withdrawal of the only general partner.

Which of the following statements, if any, represent a principal's duty to an agent who works on a commission basis? I. The principal is required to maintain pertinent records and pay the agent according to the terms of their agreement. II. The principal is required to reimburse the agent for all authorized expenses incurred unless the agreement calls for the agent to pay expenses out of the commission.

Both I and II.

Forming an agency relationship requires that

Both the principal and agent consent to the agency.

An agency relationship

Can be created by estoppel, i.e., implied as a matter of law.

Which of the following entities is ineligible to be an S corporation shareholder?

Charitable remainder annuity trust.

The Emerson Corporation may elect to be an S corporation if it meets all of the following conditions except

It is a domestic international sales corporation.

Which of the following parties generally has the most management rights?

Member of a limited liability company.

Donald Fisk is a limited partner of Sparta Oil Development. He paid $10,000 for his limited-partnership interest. In addition, he lent Sparta $7,500. Sparta failed to find oil and is in financial difficulty. Upon dissolution and liquidation,

Fisk and all outside general creditors will receive repayment of their loans prior to any other distributions.

Which of the following statements is true with respect to the differences and similarities between a corporation and a limited partnership?

A corporation and a limited partnership may be created only under a state statute, and each must file a copy of its organizational document with the proper governmental body.

Which of the following statements is true with respect to the general structure of a corporation?

A corporation is governed by shareholders who elect a board of directors and approve fundamental changes in its structure.

Under the Revised Model Business Corporation Act (RMBCA), which of the following statements is true regarding corporate officers of a public corporation?

A corporation may be authorized to indemnify its officers for liability incurred in a suit by shareholders.

Alice Able, on behalf of Pix Corp., entered into a contract with Sky Corp. by which Sky agreed to sell computer equipment to Pix. Able disclosed to Sky that she was acting on behalf of Pix. However, Able had exceeded her actual authority by entering into the contract with Sky. If Pix does not want to honor the contract, it will nonetheless be held liable if Sky can prove that

Able had apparent authority to bind Pix.

Which of the following statements, if any, is (are) true regarding the methods a target corporation may use to ward off a takeover attempt? I. The target corporation may make an offer ("self-tender") to acquire stock from its own shareholders. II. The target corporation may seek an injunction against the acquiring corporation on the grounds that the attempted takeover violates federal antitrust law.

Both I and II.

Bristol Corp. was formed as a C corporation on January 1, 1985, and elected S corporation status on January 1, 1991. At the time of the election, Bristol had accumulated C corporation earnings and profits that have not been distributed. Bristol has had the same 25 shareholders throughout its existence. In 2018, Bristol's S election will terminate if it

Has passive investment income exceeding 90% of gross receipts in each of the 3 consecutive years ending December 31, 2018.

Laura Lark, a partner in DSJ, a general partnership, wishes to withdraw from the partnership and sell her interest to Ward. All of the other partners in DSJ have agreed to admit Ward as a partner and to hold Lark harmless for the past, present, and future liabilities of DSJ. As a result of Lark's withdrawal and Ward's admission, Ward

Has the right to participate in DSJ's management.

Ted Fein, a partner in the ABC Partnership, wishes to withdraw from the partnership and sell his interest to Ian Gold. All of the other partners in ABC have agreed to admit Gold as a partner and to hold Fein harmless for the past, present, and future liabilities of ABC. A provision in the original partnership agreement states that the partnership will continue upon the death or withdrawal of one or more of the partners. As a result of Fein's withdrawal and Gold's admission to the partnership, Gold

Has the right to participate in the management of ABC.

Many states require partnerships to file the partnership name under laws known as fictitious name statutes. These statutes

Have little effect on the creation or operation of a partnership other than the imposition of a fine or other minor penalty for noncompliance.

Which of the following will prevent a corporation from qualifying as an S corporation?

Having a partnership as a shareholder.

Which of the following statements about the termination or revocation of an election to be taxed as an S corporation is true?

Having passive investment income of more than 25% of gross receipts in its initial year will not result in the termination of a corporation's status as an S corporation.

All of the following will result in the termination of a corporation's status as an S corporation except

Having passive investment income of more than 25% of gross receipts in its initial year.

The key characteristic of an employee is that

His or her physical conduct is controlled or subject to the right of control by the employer.

Which of the following duties is owed by a principal to an agent?

Indemnification.

Which of the following statements about qualifying shareholders of an S corporation is correct?

Individuals, estates, and certain trusts may be shareholders.

Frost's accountant and business manager has the authority to

Insure Frost's property against fire loss.

A limited partner

Is liable for obligations of the partnership to the extent of his or her capital contribution.

A limited liability partnership (LLP)

Is typically adopted by providers of professional services.

Which of the following is a requirement for a small business corporation to elect S corporation status?

It has only one class of stock.

A corporation may elect to be an S corporation if it meets the following test(s):

It is a domestic corporation. It has only one class of stock. It has no more than 100 shareholders. Related taxpayers (and their estates) are treated as one shareholder for this requirement. All other persons are treated as separate shareholders.

Which of the following statements is correct regarding a limited liability company's operating agreement?

It is designed to forestall and resolve disputes among the owners.

Food Corp. owned a restaurant called The Ambers. The corporation's president, T.J. Jones, hired a contractor to make repairs at the restaurant, signing the contract, "T.J. Jones for The Ambers." Two invoices for restaurant repairs were paid by Food Corp. with corporate checks. Upon presenting the final invoice, the contractor was told that it would not be paid. The contractor sued Food Corp. Which of the following statements is correct regarding the liability of Food Corp.?

It is liable because Jones had authority to make the contract.

On February 10, 2018, Ace Corp., a calendar-year corporation, elected S corporation status, and all shareholders consented to the election. There was no change in shareholders in 2018. Ace met all eligibility requirements for S status during the pre-election portion of the year. What is the earliest date on which Ace can be recognized as an S corporation?

January 1, 2018.

Village Corp., a calendar-year corporation, began business in 2014. Village made a valid S corporation election on December 5, 2017, with the unanimous consent of its shareholders. The eligibility requirements for S status continued to be met throughout 2018. On what date did Village's S status become effective?

January 1, 2018.

HDF, a calendar-year corporation, began business in Year 1. HDF made a valid S corporation election on December 1, Year 2. Assuming the eligibility requirements for S corporation status continued to be met throughout Year 3, on which of the following dates did HDF's S corporation status become effective?

January 1, Year 3.

On December 1, Year 1, Raoul, a 55% shareholder in R & B, Inc., an S corporation, elected to terminate R & B's status as an S corporation, effective on January 1, Year 2. It continued to operate as a C corporation. What would be the earliest date that it could again elect S status without IRS consent?

January 1, Year 7.

On January 1, Year 1, Tom, Dick, and Harry were sole and equal shareholders of ABC, Inc., a calendar-year C corporation. On February 1, Year 1, Tom sold all of his interest in the corporation to Dick. On March 1, Year 1, Dick decided to convert the corporation to an S corporation, effective January 1, Year 1. Regarding the desired conversion, which of the following statements is true?

Since Tom, Dick, and Harry were all shareholders as of January 1, Year 1, all three must consent to elect to treat the corporation as an S corporation.

A corporation elected S corporation status. All shareholders gave their written consent, except for a missing shareholder who owns 1% of the outstanding stock. Which of the following statements about this situation is correct?

The election is invalid because all shareholders must give their written consent.

Smith entered an oral agreement hiring and authorizing Jones to sell fraudulent identification cards produced by Smith. Smith and Jones orally agreed to share the proceeds from their enterprise. Later, Jones claimed that no enforceable agency relationship was created. Jones is correct because

The purpose of the agency was contrary to public policy.

The advantage of a limited liability company is

Tax status as a pass-through entity.

Which of the following remedies is available to a principal when an agent fraudulently breaches a fiduciary duty?

Termination of the Agency: Yes Constructive Trust: Yes

All of the following are legal rights of shareholders in U.S. publicly traded companies except the right to

Vote on major management changes.

Under the agent's duty to account, which of the following acts must a gratuitous agent perform?

Commingle Funds: No Account for the Principal's Property: Yes

An LLC's articles of organization most likely do not

Include all names of future members.

All of the following entities are allowed to elect S status except

Domestic international sales corporation (DISC).

In a principal-agent relationship that is not contractual, which of the following remedies is not available to the agent whose principal is guilty of violating a duty owed the agent?

Specific performance.

The essential difference between a stock dividend and a stock split is that a

Stock dividend of newly issued shares will result in a decrease in retained earnings.

Which of the following states a disadvantage of debt financing for a corporation?

Debt must be repaid at fixed times even if the entity is not profitable.

Which of the following is least likely to dissolve an LLC?

Dissociation by any member.

A general partnership must

Have two or more partners.

General partnerships and LLPs vary in terms of

Liability

All of the following distributions to shareholders are considered asset or capital distributions except

Stock splits.

The certificate of limited partnership filed in the public records must contain

The name of the partnership and the names of the general partners.

In general, which of the following statements concerning treasury stock is true?

Treasury stock may be distributed as a stock dividend.

A corporate shareholder is entitled to which of the following rights?

Approve dissolution.

Which of the following is a false statement about the taxation of an LLC?

Single-member LLCs must be taxed as corporations.

Which of the following tax years may an S corporation use for its taxable year beginning after 1986 (assuming no business purpose exists for another year and assuming an election is not made under Sec. 444)?

A calendar year.

Acorn Corp. wants to acquire the entire business of Trend Corp. Which of the following methods of business combination will best satisfy Acorn's objectives without requiring the approval of the shareholders of either corporation?

A cash tender offer, whereby Acorn acquires at least 90% of Trend's shares, followed by a short-form merger of Trend into Acorn.

Smith and James were partners in S and J Partnership. The partnership agreement stated that all profits and losses were allocated 60% to Smith and 40% to James. The partners decided to terminate and wind up the partnership. The following was the balance sheet for S and J on the day of the windup: Cash $40,000 Accounts receivable 12,000 Property and equipment 38,000 Total assets $90,000 Accounts payable $24,000 Smith, capital 30,000 James, capital 36,000 Total liabilities and capital $90,000 Of the total accounts receivable, $10,000 was collected, and the remainder was written off as bad debt. All liabilities of S and J were paid by the partnership. The property and equipment are sold for $32,000. Under the Revised Uniform Partnership Act, what amount of cash was distributed to Smith?

$25,200

D, E, F, and G formed a general partnership. Their written partnership agreement provides that the profits will be divided so that D will receive 40%; E, 30%; F, 20%; and G, 10%. There is no provision for allocating losses. At the end of its first year, the partnership has losses of $200,000. Before allocating losses, the partners' capital account balances are D, $120,000; E, $100,000; F, $75,000; and G, $11,000. G refuses to make any further contributions to the partnership. Ignore the effects of federal partnership tax law. After losses are allocated to the partners' capital accounts and all liabilities are paid, the partnership's sole asset is $106,000 in cash. How much will E receive on dissolution of the partnership?

$37,000

Zinco Corp. was a calendar-year S corporation. Zinco's S status terminated on April 1, 2018, when Case Corp. became a shareholder. During 2018 (365-day calendar year), Zinco had nonseparately computed income of $310,250. If no election was made by Zinco, what amount of the income, if any, was allocated to the S corporation short year for 2018?

$76,500

The S corporation status would terminate at the beginning of 2019 for which of the following?

Incorporated in 1999. First year of S status was 2015. Passive investment income equaled 27% of gross receipts in 2016, 26% in 2017, and 44% in 2018. Subchapter C earnings and profits were $10,000 at the end of each year.

What is the maximum number of shareholders allowable for eligibility as an S corporation in the current year?

100

Corporation B, an S corporation, terminated its status as an S corporation during the current year. Generally, how many tax years must it wait before it can become an S corporation again?

5

If a corporation's status as an S corporation is revoked or terminated after January 1, 2018, how many years is the corporation required to wait before making a new S election in the absence of IRS consent to an earlier election?

5

An agency coupled with an interest will be created by a written agreement providing that

A borrower will pledge securities to a lender and authorize the lender to sell the securities and apply the proceeds to the loan in the event of default.

Which of the following statements is true with respect to a limited partnership?

A general partner may be a secured creditor of the limited partnership.

Absent any contrary provisions in the agreement, under which of the following circumstances will a limited partnership be dissolved?

A general partner retires and all the remaining general partners do not consent to continue.

What business entity can be voluntarily dissolved and terminated without filing a dissolution document with the state of organization?

A general partnership.

What type of business organization may generally be formed without filing an organizational document or certificate with a state government agency or office?

A general partnership.

The most significant distinction between a general partner and a joint venturer is that

A joint venturer has less apparent authority.

In general, which of the following statements is true with respect to a limited partnership?

A limited partner has the right to obtain from the general partner(s) financial information and tax returns of the limited partnership.

In which of the following situations will a limited partner most likely lose limited liability status?

A limited partner participates in control of the partnership by serving as its agent.

Which of the following statements is true regarding the fiduciary duty?

A majority shareholder as such may owe a fiduciary duty to fellow shareholders.

Under the Revised Model Business Corporation Act (RMBCA), following what type of corporate acquisition does the acquiring corporation automatically become liable for all obligations of the acquired corporation?

A merger.

An S corporation must adhere to all of the following conditions except having

A nonresident alien as a shareholder.

What term is used to describe a partnership without a specified duration?

A partnership at will.

All of the following entities would qualify as shareholders of an S corporation except

A partnership.

Unless otherwise provided in the limited partnership agreement, which of the following statements is true?

A person may own a limited partnership interest in the same partnership in which (s)he is a general partner.

Under agency law, which of the following statements best describes ratification?

A principal's affirmation of an agent's unauthorized act.

Under the Revised Model Business Corporation Act (RMBCA), which of the following conditions is necessary for a corporation to achieve a successful voluntary dissolution?

A recommendation of dissolution by the board of directors and approval by a majority of all shareholders entitled to vote.

Traditional concepts applicable to large publicly held corporations often do not meet the needs of closely held ones. Accordingly, the RMBCA addresses these needs. Under the RMBCA,

A shareholder may have power to dissolve a close corporation that is similar to a partner's.

Golden Enterprises, Inc., entered into a contract with Hidalgo Corporation for the sale of its mineral holdings. The transaction proved to be ultra vires. Which of the following parties may properly assert the ultra vires doctrine and why?

A shareholder of Golden Enterprises to enjoin the sale.

Which of the following statements is true regarding sole proprietorships?

A sole proprietorship located and registered in Florida also may operate in Nevada and Michigan without having to register formally in those states.

Which of the following statements is correct regarding the declaration of a stock dividend by a corporation having only one class of par value stock?

A stock dividend is a corporation's ratable distribution of additional shares of stock to its stockholders.

All of the following will result in the termination of a corporation's S corporation status in the current year except

Acquiring 80% of an operating subsidiary.

In a general partnership, which of the following acts must be approved by all the partners?

Admission of a partner.

B approached L and proposed they form a partnership to exploit a profitable idea of B's. L declined, citing the risk of unlimited liability. B then proposed that L lend B $50,000 and that B go into the business as a sole proprietor. L would receive half the profits and the right to veto any of B's decisions. The debt would have a long-term maturity date to facilitate operation of the business during its development stage. If L accepts the above proposition, the likely result is that

B and L have formed a partnership even if they did not intend to.

When an agent acts for an undisclosed principal, the principal will not be liable to third parties if the

Agent acts outside the grant of actual authority.

Under the Restatement (Second) of the Law of Agency, an agency relationship generally is terminated by operation of law in all of the following situations except the

Agent's renunciation of the agency.

Harry, Harriet, and Horance operate the Triple H used car lot as a general partnership. Pursuant to their agreement, each drives a Triple H vehicle to and from work, makes various business trips about the city either from home or the lot, and keeps a "for sale" sign displayed in the vehicle's windshield. Each car is for sale at all times of the day and night and at any location. One afternoon, Harriet was driving on a business trip when her car collided with one driven by Paine, who was seriously injured. Harriet's conduct was found to be criminally negligent. In a tort action by Paine against Harry, Harriet, and Horance, both as individuals and as the Triple H partnership, who is liable?

All defendants because Harriet was acting within the ordinary course of the partnership business.

Dowling is a promoter and has decided to use a limited partnership for conducting a securities investment venture. Which of the following is unnecessary to form the partnership?

All limited partners' capital contributions must be paid in cash.

The assignee of a partnership interest (limited or general) may become a limited partner if

All partners agree.

Armer, Ltd. is a limited partnership that invests in pork bellies. To obtain additional capital, the general partners want to admit additional limited partners. Some of the existing limited partners are unhappy with their investments and want to sell their interests. The certificate and agreement of limited partnership provide no guidelines. Which of the following statements is true?

All partners must unanimously consent to admitting additional limited partners.

Which of the following partners of a limited liability partnership (LLP) may avoid personal liability when a partner commits a negligent act?

All the partners other than the negligent partner and his or her supervisor.

On March 15, Ken Karmel received an oral offer to work as an account executive for Wonder Stock Brokerage Company. Ken orally accepted the offer on April 1, and agreed to begin work on May 1. The duration of the contract was one year from May 1, and provided a $24,000 salary plus a bonus based on commissions earned. Under these circumstances, which of the following is true?

Although Ken's contract is silent on the point, Ken has an implied right to reimbursement for the reasonable and necessary expenses incurred on behalf of Wonder.

Absent a specific provision in its articles of incorporation, a corporation's board of directors has the power to do all of the following except

Amend the articles of incorporation.

Wok Corp. has decided to expand the scope of its business. In this connection, it contemplates engaging several agents. Which of the following agency relationships is within the statute of frauds and thus should be contained in a signed writing?

An agency for the forthcoming calendar year entered into in mid-December of the prior year.

Under the (Third) Restatement of the Law of Agency, which of the following does not terminate an agency relationship?

An agent's act of filing a bankruptcy petition.

A joint venture is

An association of persons engaged as co-owners in a single undertaking for profit.

Which act, if committed by an agent, will cause a principal to be liable to a third party?

An employee's failure to notify the employer of a dangerous condition that results in injury to a third party.

Which shareholders must consent to have a corporation's S election revoked?

Any shareholder or group of shareholders owning more than 50%.

Under the Restatement of the Law Third, Agency,

Apparent authority may still exist after constructive notice of the termination.

Which of the following provisions must a for-profit corporation include in its articles of incorporation to obtain a corporate charter? I. Provision for the issuance of voting stock II. Name of the corporation

Both I and II.

Generally, officers of a corporation

Are agents and fiduciaries of the corporation, having actual and apparent authority to manage the business.

Bob decides to start a bicycle repair shop. He is the sole owner and raises additional capital by borrowing from a local bank. Which of the following may become at risk if Bob defaults on the repayment of the loan?

Assets of the Bicycle Repair Shop: Yes Bob's Equity Capital Invested: Yes Bob's Personal Assets: Yes

Unless prohibited by the documents creating the organization, a shareholder in a publicly held corporation or the owner of a limited partnership interest has the right to

Assign his or her interest in the business.

A partner's interest in specific partnership property is

Assignable to the Partner's Individual Creditors: No Subject to Attachment by the Partner's Individual Creditors: No

Walter Able, as agent for Baker, an undisclosed principal, contracted with Safe to purchase an antique car. In payment, Able issued his personal check to Safe. Able could not cover the check but expected Baker to give him cash to deposit before the check was presented for payment. Baker did not do so and the check was dishonored. Baker's identity became known to Safe. Safe may not recover from

Baker individually on the check.

The rights of the general and limited partners regarding the assignment of their partnership interests are

Basically the same with respect to both types of partners.

Which of the following statements is (are) true regarding the relationship between an agent and an undisclosed principal? I. The principal is required to indemnify the agent for any contract entered into by the agent within the scope of the agency agreement. II. The agent has the same actual authority as if the principal had been disclosed.

Both I and II.

Blue, a used car dealer, appointed Gage as an agent to sell Blue's cars. Gage was authorized by Blue to appoint subagents to assist in the sale of the cars. Vond was appointed as a subagent. To whom does Vond owe a fiduciary duty?

Both Blue and Gage.

Boyle, as a promoter of Delaney Corp., signed a 9-month contract with Austin, a CPA. Prior to the incorporation, Austin rendered accounting services pursuant to the contract. After rendering accounting services for an additional period of 6 months pursuant to the contract, Austin was discharged without cause by the board of directors of Delaney. Absent agreements to the contrary, who will be liable to Austin for breach of contract?

Both Boyle and Delaney.

Under modern statutes, the two general prerequisites to the declaration of a dividend are I. Corporate solvency. II. A resolution by the directors to declare a dividend.

Both I and II.

Under the Revised Model Business Corporation Act (RMBCA), which of the following actions by a corporation would entitle a shareholder to dissent from the action and obtain payment of the fair value of his or her shares? I. An amendment to the articles of incorporation that materially and adversely affects rights in respect of a dissenter's shares because it alters or abolishes a preferential right of the shares II. Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan

Both I and II.

Under the Revised Uniform Partnership Act (RUPA), which of the following statements concerning the powers and duties of partners in a general partnership is(are) true? I. Each partner is an agent of every other partner and acts as both a principal and an agent in any business transaction within the scope of the partnership agreement. II. Each partner is subject to joint and several liability on partnership debts and contracts.

Both I and II.

Blanche was vice president of the Jupiter Corporation, a major weapons dealer. She used corporate funds to bribe a government official of a small European country. Blanche also caused advertisements to be published in the U.S. press that defamed Jupiter's chief competitor. What is the legal effect of Blanche's actions?

Both Jupiter and Blanche are liable in tort and guilty of a crime.

The Larkin Corporation is contemplating a two-for-one stock split of its common stock. Its $4 par value common stock will be reduced to $2 after the split. It has two million shares issued and outstanding out of a total of three million authorized. The distribution of the additional shares to the shareholders requires

Both authorization by the board of directors and approval by the shareholders.

The principle that protects corporate directors from personal liability for acts performed in good faith on behalf of the corporation is known as the

Business judgment rule.

The president of a company has signed a $10 million contract with a construction company to build a new corporate office. Which of the following corporate documents sets forth the scope of authority under which this transaction is governed?

Bylaws.

Which of the following documents would most likely contain specific rules for the management of a business corporation?

Bylaws.

Chuck Borris invested $250,000 for a limited partnership share in Kong-Foo, a company that distributes antique furniture. Which of the following statements is correct?

Chuck's liability for partnership debts is limited to $250,000.

Marshall formed a limited partnership for the purpose of engaging in the export-import business. Marshall obtained additional working capital from Franklin and Lee by selling them each a limited partnership interest. Under these circumstances, the limited partnership

Can exist as such only if it is formed under the authority of a state statute.

Donald Walker is a dissident shareholder of the Meaker Corporation, which is listed on a national stock exchange. Walker is seeking to oust the existing board of directors and has notified the directors that he intends to sue them for negligence. Under the circumstances, Walker

Can insist that the corporation mail out his proxy materials as long as he pays the cost.

Fox, Harrison, and Dodge are the general partners of a limited partnership. If the limited partnership certificate is silent on these matters, the general partners

Cannot admit additional limited partners absent unanimous written consent or ratification by the limited partners.

Under the Revised Model Business Corporation Act, the appraisal right of a dissenting shareholder of an acquiree entity generally applies to which of the following corporate actions?

Compulsory Share Exchanges: Yes Short-Form Mergers: Yes

Which of the following characteristics can disqualify a corporation from S corporation status?

Corporation T has as its shareholders an individual, an estate, and a partnership.

Which of the following may not own shares in an S corporation?

Corporations.

Bo Borg is the vice president of purchasing for Crater Corp. He has authority to enter into purchase contracts on behalf of Crater, provided that the price under a contract does not exceed $2 million. Dent, who is the president of Crater, is required to approve any contract that exceeds $2 million. Borg entered into a $2.5 million purchase contract with Shady Corp. without Dent's approval. Shady was unaware that Borg exceeded his authority. Neither party substantially changed its position in reliance on the contract. What is the most likely result of this transaction?

Crater will be bound because of Borg's apparent authority.

What is a possible disadvantage of forming a limited liability partnership (LLP) as opposed to remaining a general partnership?

Creation and continuation require compliance with statutory provisions.

The shareholders of Hope, Inc., an S corporation, wish to revoke its S election effective at the end of the current year. The total number of shares issued and outstanding at the time of the election is 100,000 shares. Which of the following shareholders are required to consent to have the S corporation election revoked? Bob owns 20,000 shares. Dana owns 50,000 shares. Sally owns 30,000 shares.

Dana and one other shareholder.

Dart Corp., a calendar-year S corporation, had 60,000 shares of voting common stock and 40,000 shares of nonvoting common stock issued and outstanding. On February 23, 2018, Dart filed a revocation statement with the consent of shareholders holding 30,000 shares of its voting common stock and 5,000 shares of its nonvoting common stock. Dart's S corporation election

Did not terminate.

An agent will usually be liable under a contract made with a third party when the agent is acting on behalf of a

Disclosed Principal: No Undisclosed Principal: Yes

Corporate shareholders are entitled to

Dissent from decisions on fundamental changes, demand dissenters' rights, and receive the value of their stock in cash.

Dora Dolby was employed as an agent for Ace Used Car Company to purchase newer-model used cars. Her authority was limited by a $3,000 maximum price for any car. A wholesaler showed her a 1938 classic car that was selling for $5,000. The wholesaler knew that Ace only dealt in newer-model cars and that Dolby had never paid more than $3,000 for any car. Dolby bought the car for Ace, convinced that it was worth at least $7,000. When she reported this to Ted Williams, Ace's owner, Williams was furious but nevertheless authorized processing of the automobile for resale. Williams also began pricing the car with antique car dealers who indicated that the current value of the car was $4,800. Williams called the wholesaler to state that Dolby had exceeded her authority, that he was returning the car, and that he was demanding repayment of the purchase price. What is the wholesaler's best defense in the event of a lawsuit?

Dolby's purchase was effectively ratified by Ace.

Nevertoolate Corporation was established on January 1, Year 1. One hundred percent of the shareholders elected to adopt S status for the company and properly completed IRS Form 2553. However, the company's tax accountant did not file the form. On July 1, Year 1, the new accountant discovered the filing omission. Select the best available remedy for the corporation to elect S status from the following:

File the original Form 2553, on or before the due date of the initial return "pursuant to Rev. Proc. 2013-30" and show cause as to why the election is being filed late.

Kate, an agent of Gator Supplies, Inc., is responsible for performance of a specified task. However, the instructions are unclear, and Kate must act in a reasonable manner considering the circumstances. This is an example of an exception to which duty owed to the principal?

Duty of obedience.

Which of the following statements is false regarding the formation of a principal-agent relationship?

Each element of a contract must be present for the relationship to exist.

Which of the following statements is true concerning the similarities between a limited partnership and a corporation?

Each is created under a statute and must file a copy of its organizational document with the proper state authorities.

Generally, a disclosed principal will be liable to third parties for its agent's unauthorized misrepresentations if the agent is an

Employee: Yes Independent Contractor: Yes

Which of the following terms best describes the relationship between a corporation and the CPA it hires to audit corporate books?

Employer and independent contractor.

All of the following are powers that a corporation possesses except the right to

Engage in activities beyond its implied powers.

Which of the following statements is true regarding the division of profits in a general partnership when the written partnership agreement only provides that losses be divided equally among the partners? Profits are to be divided

Equally among the partners.

A corporation that intends to make an election to become an S corporation seeks advice. An accountant would most appropriately make which of the following recommendations?

Evaluate the eligibility of all shareholders.

Futterman operated a cotton factory and employed Dana Marra as a general purchasing agent to travel through the southern states to purchase cotton. Futterman telegraphed Marra instructions from day to day as to the price to be paid for cotton. Marra entered a cotton district in which she had not previously done business and represented that she was purchasing cotton for Futterman. Although directed by Futterman to pay no more than $0.25 per pound, Marra bought cotton from Anderson at $0.30 per pound, which was the prevailing offering price at that time. Futterman refused to take the cotton. Under these circumstances, which of the following is true?

Futterman is liable on the contract.

Gillie, Taft, and Dall are partners in an architectural firm. The partnership agreement is silent about the payment of salaries and the division of profits and losses. Gillie works full-time in the firm, and Taft and Dall each work half-time. Taft invested $120,000 in the firm, and Gillie and Dall invested $60,000 each. Dall is responsible for bringing in 50% of the business, and Gillie and Taft 25% each. How should profits of $120,000 for the year be divided?

Gillie: $40,000 Taft: $40,000 Dall: $40,000

Dave Bing was employed as a taxi driver by Speedy, Inc. While acting in the scope and course of his employment with Speedy, Bing collided with a van driven by Hart. Hart was an independent contractor making a delivery for Troy Corp. The collision was caused solely by Bing's negligence. As a result of the collision, both Bing and Hart suffered permanent injuries. Speedy and Troy were both in compliance with the state's workers' compensation statute. If Hart commences an action against Bing and Speedy for negligence, which of the following statements is true?

Hart is entitled to recover damages from Bing or Speedy.

Opal Corp. declared a 9% stock dividend on its common stock. The dividend

Has no effect on Opal's earnings and profits for federal income tax purposes.

Ms. Wall is a limited partner of the Amalgamated Limited Partnership. She is insolvent, and her debts exceed her assets by $28,000. Goldsmith, one of Wall's largest creditors, is resorting to legal process to obtain the payment of Wall's debt to him. Goldsmith has obtained a charging order against Wall's limited partnership interest for the unsatisfied amount of the debt. As a result of Goldsmith's action, which of the following will happen?

Goldsmith becomes in effect an assignee of Wall's partnership interest.

Green entered into an oral agency agreement to purchase real estate on behalf of Smith. Subsequently, Green entered into a written contract to buy land from Davis without disclosing the relationship with Smith. Which of the following is Smith's best legal defense if Smith does not want the land?

Green failed to get the agency agreement in writing.

Unless otherwise provided in the certificate of limited partnership, which of the following is true if Grey, one of the limited partners, dies?

Grey's personal representative will have all the rights of a limited partner for the purpose of settling the estate.

Bonanza Real Estate Ventures was formed under a state's version of the Revised Uniform Limited Partnership Act. It has three general partners and 1,100 limited partners. The limited partnership interests were offered to the general public at $5,000 per interest. Julie Kay purchased a limited-partnership interest. As such, she

Must include her share of partnership profits in her taxable income even if she withdraws nothing.

A major characteristic of the corporation is its status as a separate legal entity. Thus, it must withstand attempts to pierce the corporate veil. The corporation that is least likely to withstand such attempts successfully is one that

Holds assets only to defraud creditors.

Seymore was recently invited to become a director of Buckley Industries, Inc. If Seymore accepts and becomes a director, Seymore, along with the other directors, will not be personally liable for

Honest errors of judgment.

An organization that is neither a de jure nor a de facto corporation has attempted to exercise corporate powers. It may be treated as a corporation if I. The other party demonstrates fair and equitable conduct. II. Injustice can be avoided only by treating the business as a corporation. III. A good-faith but unsuccessful effort to comply with the incorporation statute has been made.

I and II only.

An LLC may be formed when I. One person files articles of organization with the appropriate secretary of state. II. Two or more persons file articles of organization with the appropriate secretary of state.

I and II.

An LLC must maintain which of the following contacts with the state where it was formed? I. An agent for service of process II. An attorney for representation in lawsuits III. An office

I and III only.

Under the Revised Model Business Corporation Act (RMBCA), which of the following statements regarding a corporation's bylaws is (are) true? I. A corporation's initial bylaws shall be adopted by either the incorporators or the board of directors. II. A corporation's bylaws are contained in the articles of incorporation.

I only.

Direct liability results if the principal does which of the following? I. Fails to supervise the agent II. Negligently selects an agent III. Fails to give proper orders

I, II, and III.

Which of the following is necessary content of the limited partnership certificate? I. The name of the limited partnership II. The address of its office III. The latest date upon which the limited partnership is to dissolve

I, II, and III.

Johns owns 400 shares of Abco Corp. cumulative preferred stock. In the absence of any specific contrary provisions in Abco's articles of incorporation, which of the following statements is true?

If Abco declares a cash dividend on its preferred stock, Johns becomes an unsecured creditor of Abco.

Smith was an officer of CCC Corp. As an officer, the business judgment rule applied to Smith in which of the following ways?

If Smith makes, in good faith, a serious but honest mistake in judgment, Smith is generally not liable to CCC for damages caused.

Stanley is a well-known retired movie personality who purchased a limited partnership interest in Terrific Movie Productions upon its initial syndication. Which of the following is true?

If Stanley permits his name to be used in connection with the business and is held out as a participant in the management of the venture, he will be liable as a general partner.

Eric Farber, a principal, engaged Ethel Waters for 6 months as his exclusive agent to sell specific antiques.

If the principal sells the antiques through another agent, he will be liable to Waters for damages.

Which of the following is a true statement about an LLC's operating agreement?

It may address matters such as profit sharing, voting rights, and dissolution.

Noll gives Carr a written power of attorney. Which of the following statements is true regarding this power of attorney?

It may limit Carr's authority to specific transactions.

Which of the following is not an essential element of an agency relationship?

It must be created by contract.

Which of the following statements about the form of a general partnership agreement is true?

It must be in writing if the partnership is to last for longer than 1 year.

Long was a purchasing agent for Frost, a sole proprietor. Long had express authority to place purchase orders with Frost's suppliers. Long conducted business on the Internet and had little contact with Frost. After Frost was declared incompetent in a judicial proceeding, Long placed an order with Grant Corp. on Frost's behalf. Both Long and Grant were unaware of Frost's incompetence. Will Frost or Frost's legal representative be liable to Grant?

No, because Long did not have authority to enter into the contract.

Ace Corporation engaged Kosier, CPA, to perform a consulting engagement. While driving to Ace's office, Kosier was involved in an automobile accident in which Norton was injured. The accident was solely Kosier's fault. If Norton sues both Ace and Kosier for the injuries Norton sustained, what will be the result?

Kosier will be liable, and Ace will not be liable because Kosier is an independent contractor.

Stanton exceeded her actual authority when she concluded an agreement with Nilworth Corp. on behalf of Lax Corp. If Lax wishes to ratify the contract with Nilworth, which of the following statements is true?

Lax must have knowledge of all material facts relating to the contract at the time it is ratified.

Lee repairs high-speed looms for Sew Corp., a clothing manufacturer. Which of the following circumstances best indicates that Lee is an employee of Sew and not an independent contractor?

Lee is paid weekly by Sew.

Wichita Properties is a limited partnership created in accordance with the provisions of the Uniform Limited Partnership Act. The partners have voted to dissolve and settle the partnership's accounts. Which of the following will be the last to be paid?

Limited and general partners in respect to their undistributed profits.

Jones, Smith, and Bay wanted to form a company called JSB Co. but were unsure about which type of entity would be most beneficial based on their concerns. They all desired the opportunity to make tax-free contributions and distributions when appropriate. They wanted earnings to accumulate tax-free. They did not want to be subject to personal holding company tax and did not want double taxation of income. Bay was going to be the only individual giving management advice to the company and wanted to be a member of JSB through his current company, Channel, Inc. Which of the following would be the most appropriate business structure to meet all of their concerns?

Limited liability partnership.

The XYZ Limited Partnership has two general partners: Smith and Jones. A provision in the partnership agreement allows the removal of a general partner by a majority vote of the limited partners. The limited partners vote to remove Jones as a general partner. Which of the following statements is true?

Limited partners may vote to remove a general partner without losing their status as limited partners.

Which of the following is a legal entity separate from its owners?

Limited partnership. LLP LLC

Lobo Manufacturing, Inc., is incorporated under the laws of New Mexico. Its principal place of business is in California, and it has permanent sales offices in several other states. Under the circumstances, which of the following is true?

Lobo must obtain a certificate of authority to transact business in California and the other states in which it does business.

Which one of the following is not a requirement to make an S corporation election?

The corporation must have no trusts as shareholders.

Starr is an agent of a disclosed principal, Maple. On May 1, Starr entered into an agreement with King Corp. on behalf of Maple that exceeded Starr's authority as Maple's agent. On May 5, King learned of Starr's lack of authority and immediately notified Maple and Starr that it was withdrawing from the May 1 agreement. On May 7, Maple ratified the May 1 agreement in its entirety. If King refuses to honor the agreement and Maple brings an action for breach of contract, Maple will

Lose. King notified Starr and Maple of its withdrawal prior to Maple's ratification.

Baker sold an automobile to Bob's Old Autos, where Fuller is a manager. Fuller took $100 from Baker for encouraging the sale. What duty to Bob's Old Autos did Fuller violate?

Loyalty.

Jim Wallace, an agent for Lux, made a contract with Doolittle that exceeded Wallace's authority. If Lux wishes to hold Doolittle to the contract, Lux must prove that

Lux ratified the contract before withdrawal from the contract by Doolittle.

Case Corp. is incorporated in State A. Under the Revised Model Business Corporation Act, which of the following activities engaged in by Case requires that Case obtain a certificate of authority to do business in State B?

Maintaining an office in State B to conduct intrastate business.

The business judgment rule is a rule that immunizes corporate

Management from liability for actions that result in corporate losses or damages if the actions are undertaken in good faith and are within both the power of the corporation and the authority of management to make.

Mary and Paul are plumbers. They went into business together and decided that the corporation structure would be in their best interest. On January 1, 2018, they formed the M & P Corp. They did not file a Form 2553. Mary and Paul filed an 1120S return at the end of the year and paid self-employment tax on their respective shares of the income. All of the following statements are true except

Mary and Paul have until March 15, 2019, to make a valid election for 2018.

Which of the following statements is true regarding the apparent authority of a partner to bind the partnership in dealings with third parties? Under the RUPA, the apparent authority

May allow a partner to bind the partnership to representations made in connection with the sale of goods.

Jeri Fairwell is executive vice-president and treasurer of Wonder Corporation. She was named as a party in a shareholder derivative action in connection with certain activities she engaged in as a corporate officer. In the lawsuit, she was held liable for negligence in performance of her duties. Fairwell seeks indemnity from the corporation. The board of directors would like to indemnify her, but the articles of incorporation do not contain any provisions regarding indemnification of officers and directors. Indemnification

May be permitted by court order although Fairwell was found to be negligent.

One form of business organization is the limited liability company (LLC). In accordance with many state statutes, an LLC

May have a tax status similar to that of a partnership.

A valid limited partnership

May have an unlimited number of partners.

Anker wishes to give Mix power of attorney. In general, the power of attorney

May limit Mix's authority to specific transactions.

General partners have a fiduciary relationship with each other. Accordingly, a general partner

May not earn a secret profit in dealings with the partnership or partners.

A limited partner

May not withdraw his or her capital contribution absent sufficient limited-partnership property to pay all general creditors.

The CPA was preparing the financial statement for a limited liability company. To which of the following would the CPA's report be addressed?

Member.

Under the Revised Model Business Corporation Act, which of the following items of information must be included in a corporation's articles of incorporation (charter)?

Name and address of the corporation's incorporator.

Neal, an employee of Jordan, was delivering merchandise to a customer. On the way, Neal's negligence caused a traffic accident that resulted in damages to a third party's automobile. Who is liable to the third party?

Neal: Yes Jordan: Yes

Vicki Trent was retained in writing to act as Post's agent for the sale of Post's memorabilia collection. Which of the following statements is true? I. To be an agent, Trent must be at least 21 years of age. II. Post would be liable to Trent if the collection was destroyed before Trent found a purchaser.

Neither I nor II.

Which of the following statements regarding a limited partner is(are) usually true? I. The limited partner is subject to personal liability for partnership debts. II. The limited partner has the right to take part in the control of the partnership.

Neither I nor II.

Lindal Corporation, organized in 2018, immediately filed an election for S corporation status under the rules of Subchapter S. What is the maximum amount of passive investment income that Lindal will be allowed to earn and still qualify as an S corporation?

No limit on passive investment income.

Fil and Breed are 50% partners in F&B Cars, a used-car dealership. F&B maintains an average used-car inventory worth $150,000. On January 5, National Bank obtained a $30,000 judgment against Fil and Fil's child on a loan that Fil had cosigned and on which Fil's child had defaulted. National sued F&B to be allowed to attach $30,000 worth of cars as part of Fil's interest in F&B's inventory. Will National prevail in its suit?

No, because the judgment was not against the partnership.

Regarding a corporation's election for S status, which of the following statements is true?

None of the answers are correct.

North, Inc., hired Sutter as a purchasing agent. North gave Sutter written authorization to purchase, without limit, electronic appliances. Later, Sutter was told not to purchase more than 300 of each appliance. Sutter contracted with Orr Corp. to purchase 500 tape recorders. Orr had been shown Sutter's written authorization. Which of the following statements is true?

North will be liable to Orr because of Sutter's actual and apparent authority.

Unless otherwise provided for in the partnership agreement, the assignment of a partner's interest in a general partnership will

Not affect the assigning partner's liability to third parties for obligations existing at the time of the assignment.

Young was a purchasing agent for Wilson, a sole proprietor. Young had the express authority to place purchase orders with Wilson's suppliers. Young conducted business through the mail and had little contact with Wilson. Young placed an order with Vanguard, Inc., on Wilson's behalf after Wilson was declared incompetent in a judicial proceeding. Young was aware of Wilson's incapacity. The applicable law is based on the Restatement (Second) of the Law of Agency. With regard to the contract with Vanguard, Wilson (or Wilson's legal representative) will

Not be liable because Young did not have authority to enter into the contract.

Top Corp., which has been operating since 1999, has an October 31 year end, which coincides with its natural business year. On May 15, 2018, Top filed the required form to elect S corporation status. All of Top's shareholders consented to the election, and all other requirements were met. The earliest date that Top can be recognized as an S corporation is

November 1, 2018.

In general, which of the following must be contained in articles of incorporation?

Number of shares of stock authorized to be issued by the corporation.

A shareholder's fundamental right to inspect books and records of a corporation will be properly denied if the purpose of the inspection is to

Obtain shareholder names for a retail mailing list.

ABC corporation commenced business on July 20, Year 1. What is the final date at which ABC could file an election for S corporation status and be recognized as valid for the Year 1 tax year?

October 3, Year 1.

Thorp was a purchasing agent for Ogden, a sole proprietor, and had the express authority to place purchase orders with Ogden's suppliers. Thorp placed an order with Datz, Inc., on Ogden's behalf after Ogden was declared incompetent in a judicial proceeding. Thorp was aware of Ogden's incapacity. Under the Restatement (Second) of the Law of Agency, which of the following statements is true concerning Ogden's liability to Datz?

Ogden will not be liable because Thorp's agency ended when Ogden was declared incompetent.

Assuming all other requirements are met, a corporation may elect to be treated as an S corporation under the Internal Revenue Code if it has

One hundred or fewer shareholders.

Limited liability of shareholders is one of the advantages of incorporation. Generally, a shareholder is personally liable

Only for his or her investment in the corporation.

The shares actually held by shareholders are best described as

Outstanding shares.

Parc contracted with Furn Brothers Corp. to buy hotel furniture on behalf of Global Motor House, a motel chain. Global instructed Parc to use Parc's own name and not to disclose to Furn that Parc was acting on Global's behalf. Who is liable to Furn on this contract?

Parc: Yes Global: Yes

Park and Graham entered into a written partnership agreement to operate a retail store. Their agreement was silent as to the duration of the partnership or its purposes. Which of the following statements is true?

Park may dissociate from the partnership at any time.

Part agreed to act as Young's agent to sell Young's land. Part was instructed to disclose that Part was acting as an agent but not to disclose Young's identity. Part contracted with Rice for Rice to purchase the land. After Rice discovered Young's identity, Young refused to fulfill the contract. Whom does Rice have a cause of action against?

Part: Yes Young: Yes

Which of the following is an advantage of forming an LLP instead of a general partnership?

Partners are subject to a broad personal liability shield.

Unless the partnership agreement prohibits it, a partner in a general partnership may validly assign rights to

Partnership Property: No Partnership Distributions: Yes

Joe Perone was a member of Caddy, Shack, & Perone, a general trading partnership. He died and the partnership is being liquidated in a bankruptcy proceeding, but Perone's estate is substantial. The creditors of the partnership are seeking to collect on their claims from Perone's estate. Which of the following statements is true insofar as their claims are concerned?

Partnership creditors and Perone's personal creditors are on an equal footing regarding the assets of Perone's estate.

Pell is the principal and Astor is the agent in an agency coupled with an interest. In the absence of a contractual provision relating to the duration of the agency, who has the right to terminate the agency before the interest has expired?

Pell: No Astor: Yes

A limited partner's capital contribution to the limited partnership

Results in the limited partner having an intangible personal property right.

Which of the following rights will a third party be entitled to after validly contracting with an agent representing an undisclosed principal?

Performance of the contract by the agent.

X, Y, and Z have capital balances of $30,000, $15,000, and $5,000, respectively, in the XYZ Partnership. The general partnership agreement is silent as to the manner in which partnership losses are to be allocated but does provide that partnership profits are to be allocated as follows: 40% to X, 25% to Y, and 35% to Z. The partners have decided to dissolve and liquidate the partnership. After paying all creditors, the amount available for distribution will be $20,000. X, Y, and Z are individually solvent. Z will

Personally have to contribute an additional $5,500.

May Phillips was the principal promoter of the Waterloo Corporation, a corporation that was to have been incorporated not later than July 31. Phillips obtained written subscriptions for a total of $1.4 million of common stock from 17 individuals. She hired herself as the chief executive officer of Waterloo at $200,000 for 5 years and leased three floors of office space from Downtown Office Space, Inc. The contract with Downtown was made in the name of the corporation. Phillips had indicated orally that the corporation would be coming into existence shortly. The corporation did not come into existence, through no fault of Phillips. Which of the following is true?

Phillips is personally liable on the lease with Downtown.

Pine, an employee of Global Messenger Co., was hired to deliver highly secret corporate documents for Global's clients throughout the world. Unknown to Global, Pine carried a concealed pistol. While Pine was making a delivery, Pine suspected an attempt was being made to steal the package, drew the gun, and shot Kent, an innocent passerby. Kent most likely will not recover damages from Global if

Pine's weapon was unlicensed and illegal.

Hughes and Brody start a business as a close corporation. Hughes owns 51 of the 100 shares of stock issued by the firm and Brody owns 49. One year later, the corporation decides to sell another 200 shares. Which of the following types of rights would give Hughes and Brody a preference over other purchasers to buy shares to maintain control of the firm?

Preemptive rights.

According to the (Second) Restatement of the Law of Agency, the apparent authority of a general agent for a disclosed principal will terminate without notice to third parties when the

Principal or agent dies.

Sylvia Sims became an agent for Paul with the power to sell goods furnished by Paul but with the requirement that Sims would guarantee payment to Paul for all credit sales made by Sims. Under the circumstances,

Sims is a surety with regard to credit sales she makes on Paul's behalf.

A corporation formed by a political unit to achieve a governmental purpose is best described as

Public.

Which of the following actions may a corporation take without its shareholders' consent?

Purchase 55% of another corporation's stock.

Simpson, Ogden Corp.'s agent, most likely needs a written agency agreement to

Purchase an interest in undeveloped land for Ogden.

An owner of common stock will not have any liability beyond actual investment if the owner

Purchased treasury shares for less than par value.

Which of the following actions requires an agent for a corporation to have a written agency agreement?

Purchasing an interest in undeveloped land for the principal.

Which of the following actions may be taken by a corporation's board of directors without shareholder approval?

Purchasing substantially all of the assets of another corporation.

A consolidation of two corporations usually requires all of the following except

Receipt of voting stock by all shareholders of the original corporations.

Under the Revised Model Business Corporation Act, a merger of two public corporations usually requires all of the following except

Receipt of voting stock by all shareholders of the original corporations.

On December 31, 2018, LS Corporation terminated its S election. LS Corporation had been an S corporation since its inception in 2016. When may LS Corporation reelect S corporation status without IRS consent?

Reelection Date: January 1, 2024

Davis, a director of Active Corp., is entitled to

Rely on information provided by a corporate officer.

Under the Revised Model Business Corporation Act (RMBCA), a corporate director is authorized to

Rely on information provided by the appropriate corporate officer.

Which of the following corporate actions is subject to shareholder approval?

Removal of directors.

Under the law of agency, the ratification doctrine

Requires the principal to ratify the entire act of the agent, and the ratification is retroactive.

What is the doctrine under which a corporation is made liable for the torts of its employees, committed within the scope of their employment?

Respondeat superior.

All of the following events will cause the termination of an S corporation's S election except

Sale of stock to a resident alien.

Ted Simmons, an agent for Jensen, has the express authority to sell Jensen's goods. Simmons also has the express authority to grant discounts of up to 5% of list price. Simmons sold Hemple goods with a list price of $1,000 and granted Hemple a 10% discount. Hemple had not previously dealt with either Simmons or Jensen. Which of the following courses of action may Jensen properly take?

Seek recovery of $50 from Simmons only.

Ace engages Butler to manage Ace's retail business. Butler has no implied authority to

Sell Ace's business fixtures.

Billie Donovan, a partner of Monroe, Lincoln, and Washington, is considering selling or pledging all or part of her interest in the partnership. The partnership agreement is silent on the matter. Donovan may

Sell or pledge her entire partnership interest without causing a dissolution.

The Richards Corporation has a tax year ending June 30. The corporation wishes to elect S corporation status. In order to have the S election effective for the Year 2 tax year beginning July 1, Year 1, before which of the following dates must Form 2553 be filed with the proper IRS Service Center?

September 16, Year 1.

Which of the following statements describes the same characteristic for both an S corporation and a C corporation?

Shareholders can contribute property into a corporation without being taxed.

An S corporation has 30,000 shares of voting common stock and 20,000 shares of nonvoting common stock issued and outstanding. The S election can be revoked voluntarily with the consent of the shareholders holding, on the day of the revocation,

Shares of Voting Stock: 10,000 Shares of Nonvoting Stock: 16,000

For several years, Joe Skipper was the principal shareholder, director, and chief executive officer of the Canarsie Grocery Corporation. Canarsie is in bankruptcy. Several creditors are seeking to hold Skipper personally liable as a result of his stock ownership and as a result of his being an officer-director. Skipper in turn filed with the bankruptcy judge a claim for $1,400 salary due him. Which of the following is true?

Skipper has no personal liability to the creditors as long as Canarsie is recognized as a separate legal entity.

Jay White, an engineer, entered into a contract with Sky, Inc., agreeing to provide Sky with certain specified consulting services. After performing the services, White was paid pursuant to the contract, but Social Security taxes were not withheld from his check since Sky considered White an independent contractor. The IRS has asserted that White was an employee and claims that a deficiency exists because of Sky's failure to withhold and pay Social Security taxes. Which of the following factors is most likely to support the IRS's position that White is an employee?

Sky supervised and controlled the manner in which White performed the services.

Generally, a merger of two corporations requires

That a special meeting notice and a copy of the merger plan be given to all shareholders of both corporations.

When a valid contract is entered into by an agent on the principal's behalf in an undisclosed principal situation, which of the following statements concerning the principal's liability is true?

The Principal May Be Held Liable Once Disclosed: Yes The Principal Must Ratify the Contract to Be Held Liable: No

Under the Revised Model Business Corporation Act (RMBCA), when a corporation's bylaws grant shareholders preemptive rights, which of the following rights is (are) included in that grant?

The Right to Purchase a Proportionate Share of Newly Issued Stock: Yes The Right to a Proportionate Share of Corporate Assets Remaining on Corporate Dissolution: No

Which of the following statements is false about making an election to be taxed under Subchapter S?

The S corporation election can be filed only in the first 2 1/2 months of the tax year.

Which of the following events could cause an S corporation to cease to qualify as an S corporation?

The S corporation transfers its stock to a corporation or partnership.

Edgar Winter is a sales agent for Magnum Enterprises. Winter has assumed an obligation to indemnify Magnum if any of Winter's customers fail to pay. Under these circumstances, which of the following is true?

The above facts describe a del credere agency relationship, and Winter will be liable in the event his customers fail to pay Magnum.

An agent who acts within the scope of actual or apparent authority most likely is contractually liable to a third party when

The agent guaranteed the principal's performance.

Rivers and Lee want to form a partnership. For the partnership agreement to be enforceable, it must be in writing if

The agreement cannot be completed within 1 year from the date of its formation.

Under the Restatement (Second) of the Law of Agency, after which of the following situations would it usually not be necessary to notify third parties of the termination of an agency's existence?

The destruction of the subject matter of the agency.

A corporate director commits a breach of duty if

The director's action, prompted by confidential information, results in an abuse of corporate opportunity.

Easy Corp. is a real estate developer and regularly engages real estate brokers to act on its behalf in acquiring parcels of land. The brokers are authorized to enter into such contracts but are instructed to do so in their own names, without disclosing Easy's identity or relationship to the transaction. If a broker enters into a contract with a seller on Easy's behalf,

The broker will have the same actual authority as if Easy's identity had been disclosed.

The owner of cumulative preferred stock has the right to

The carryover of fixed dividends to subsequent periods from years in which they were not paid.

Which of the following conditions will prevent a corporation from qualifying as an S corporation?

The corporation has both common and preferred stock.

Under the Revised Model Business Corporation Act (RMBCA), which of the following must be contained in a corporation's articles of incorporation?

The number of shares the corporation is authorized to issue.

Which of the following will cause the dissolution of a limited partnership?

The occurrence of the time specified in the partners' agreement.

Which of the following statements best describes an advantage of the corporate form of doing business?

The operation of the business may continue indefinitely.

Under the RUPA, in which of the following situations will a partner in a limited liability partnership (LLP) most likely be personally liable?

The partner who personally incurs an obligation in the conduct of partnership business.

Berry, Drake, and Flanigan are partners in a general partnership. The partners made capital contributions as follows: Berry, $150,000; Drake, $100,000; and Flanigan, $50,000. Drake made a loan of $50,000 to the partnership. The partnership agreement specifies that Flanigan will receive a 50% share of profits and that Drake and Berry each will receive a 25% share of profits. Under the Revised Uniform Partnership Act and in the absence of any partnership agreement to the contrary, which of the following statements is correct regarding the sharing of losses?

The partners will share in losses according to the allocation of profits specified in the partnership agreement.

Which statement is false regarding the principal's duties to the agent?

The principal has a general duty of due care but is not liable for negligence to the agent.

Which of the following is a prerequisite for the creation of an agency relationship?

The principal must have capacity.

Which of the following conditions must be met to form an agency?

The principal must possess contractual capacity.

An agent appoints a subagent. According to the law of agency,

The principal's intention to permit an agent to delegate authority may be indicated by the character of the business.

A parent corporation owned more than 90% of each class of the outstanding stock issued by a subsidiary corporation and decided to merge that subsidiary into itself. Under the Revised Model Business Corporation Act, which of the following actions must be taken?

The subsidiary corporation's dissenting shareholders must be given an appraisal remedy.

G&L, Inc., owns and operates a fast food restaurant under a franchise agreement with Foodco, Inc., a large national franchisor. Eighty percent of all Foodco Restaurants are owned by franchisees. The Foodco restaurants uniformly use the same name, building design, colors, signs, advertising, promotions, employee work apparel, menus, and prices. The strategy stated in the franchise materials is that the public must believe that Foodco is "a chain that sells a product across the nation." Foodco requires G&L to follow standardized methods of operation, deal exclusively with the franchisor for supplies, and pay a stated percentage of sales for the franchise license. A customer injured on the premises through G&L's negligence discovered that G&L is behind in its debts and carries inadequate liability insurance. Which of the following is a true statement about Foodco's possible liability to the injured customer?

The theory of agency by estoppel rather than express agency is a plausible basis for finding an agency relationship resulting in liability of the franchisor for the actions of the franchisee.

Which of the following rights would a limited partner not be entitled to assert?

To be elected as a general partner by a majority vote of the limited partners in number and amount.

Smith has been engaged as a general sales agent for the Victory Medical Supply Company. Victory, as Smith's principal, owes Smith several duties implied as a matter of law. Which of the following duties is owed by Victory to Smith?

To indemnify Smith for liability for acts done in good faith upon Victory's orders.

For what purpose will a shareholder of a publicly held corporation be permitted to file a shareholder derivative suit in the name of the corporation?

To recover damages from corporate management for an ultra vires management act.

All of the following events would cause an S corporation to cease qualifying as an S corporation except

Transferring its stock to a resident alien.

Which of the following statements about the directors of a corporation is true?

Under the Revised Model Business Corporation Act, a corporation may dispense with a board of directors in certain circumstances.

The limited liability of the shareholders of a closely held corporation will most likely be disregarded if the shareholders

Undercapitalized the corporation when it was formed.

Able authorized Brown to enter contracts with third parties on Able's behalf. In which of the following situations must Able provide notice to these third parties to effectively terminate Brown's authority?

When Able has revoked Brown's authority.

A principal will not be liable to a third party for a tort committed by an agent

Unless the tort was committed within the scope of the agency relationship.

Generally, under the Revised Uniform Partnership Act, a partnership has which of the following characteristics?

Unlimited Duration: No Obligation for Payment of Federal Income tax: No

Which of the following acts is most likely to cause a court to pierce the corporate veil?

Using corporate assets for the owner's personal purposes.

Knox, president of Quick Corp., contracted with Tine Office Supplies, Inc., to supply Quick's stationery on customary terms and at a cost less than that charged by any other supplier. Knox later informed Quick's board of directors that Knox was a majority shareholder in Tine. Quick's contract with Tine is

Valid because the contract is fair to Quick.

A principal is most likely to be held criminally liable for the crime of an agent who

Violated a regulatory statute.

Peters owned 500 shares of common stock in Kidsmart, Inc. Accordingly, Peters had the right to

Vote for the election and removal of the board of directors.

William Gladstone has been engaged as sales agent for the Doremus Corporation. Under which of the following circumstances may Gladstone delegate his duties to another?

When an emergency arises and the delegation is necessary to meet the emergency.

Bolt Corp. dismissed Ace as its general sales agent and notified all of Ace's known customers by letter. Young Corp., a retail outlet located outside of Ace's previously assigned sales territory, had never dealt with Ace. Young knew of Ace as a result of various business contacts. After his dismissal, Ace sold Young goods to be delivered by Bolt and received from Young a cash deposit for 20% of the purchase price. It was not unusual for an agent in Ace's previous position to receive cash deposits. In an action by Young against Bolt on the sales contract, Young will

Win because Bolt's notice was inadequate to terminate Ace's apparent authority.

Downs, Frey, and Vick formed the DFV General Partnership to act as manufacturers' representatives. The partners agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that the partnership would not terminate for 5 years. After the fourth year, the partners agreed to terminate the partnership. At that time, the partners' capital accounts were as follows: Downs, $20,000; Frey, $15,000; and Vick, $10,000. There also were undistributed losses of $30,000. Under the RUPA, if Frey died before the partnership terminated,

Downs and Vick, as a majority of the partners, would have been able to continue the partnership.

A general partner will not be personally liable for which of the following acts or transactions?

A personal mortgage loan obtained by one of the other partners on his or her residence to which that partner, without authority, signed the partnership name on the note.

The partnership agreement for Owen Associates, a general partnership, provided that profits be paid to the partners in the ratio of their financial contribution to the partnership. Moore contributed $10,000, Noon contributed $30,000, and Kale contributed $50,000. For the year ended December 31, Owen had losses of $180,000. What amount of the losses should be allocated to Kale?

$100,000

Wilson and Thomas are partners. Wilson contributed $150,000 to the partnership, and Thomas contributed $50,000. Wilson does 40% of the work, and Thomas does 60%. They do not have a partnership agreement that addresses the sharing of profits and losses. By the end of the year, the partnership has earned a profit of $200,000. What is Wilson's share of the profit under the Revised Uniform Partnership Act?

$100,000

Downs, Frey, and Vick formed the DFV General Partnership to act as manufacturers' representatives. The partners agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that the partnership would not terminate for 5 years. After the fourth year, the partners agreed to terminate the partnership. At that time, the partners' capital accounts were as follows: Downs, $20,000; Frey, $15,000; and Vick, $10,000. There also were undistributed losses of $30,000. Vick's share of the undistributed losses will be

$9,000

Which of the following statements is correct regarding both debt and common shares of a corporation?

Common shares represent an ownership interest in the corporation, but debt holders do not have an ownership interest.

When parties intend to create a partnership that will be recognized under the Revised Uniform Partnership Act, they must agree to

Conduct a Business for Profit: Yes Share Gross Receipts from a Business: No

The partners of College Assoc., a general partnership, decided to dissolve the partnership and agreed that none of the partners would continue to use the partnership name. Which of the following events will occur on dissolution of the partnership?

Each Partner's Existing Liability Would Be Discharged: No Each Partner's Apparent Authority Would Continue: Yes

Which of the following statements is true concerning liability when a partner in a general partnership commits a tort while engaged in partnership business?

Each partner is jointly and severally liable.

Eller, Fort, and Owens do business as Venture Associates, a general partnership. Trent Corp. brought a breach of contract suit against Venture and Eller individually. Trent won the suit and filed a judgment against both Venture and Eller. Venture then entered bankruptcy. Under the RUPA, Trent will generally be able to collect the judgment in full from

Eller's personal assets.

James Fine is doing business as Fine's Apparels, a sole proprietorship. In the past year Fine had regularly joined with Charles Walters in the marketing of bathing suits and beach accessories. Which of the following factors is the most important in ascertaining whether Fine and Walters have created a partnership relationship?

Fine and Walters divide the net profits equally on a quarterly basis.

Ann Grand, a general partner, retired. The partnership held a testimonial dinner for her and invited 10 of its largest customers. A week later a notice was placed in various trade journals indicating that Grand had retired and was no longer associated with the partnership in any capacity. After the appropriate public notice of Grand's retirement, which of the following best describes her legal status?

Grand has the apparent authority to bind the partnership in contracts she makes with persons unaware of her retirement who have previously dealt with the partnership.

Grey and Carr entered into a written partnership agreement to operate a hardware store. Their agreement was silent as to the duration of the partnership. Grey wishes to dissolve the partnership. Which of the following is true?

Grey may dissociate from the partnership at any time.

Which of the following circumstances may permit the piercing of the corporate veil of a closely held corporation and thus may cause its shareholders to be held personally liable? I. The corporation is thinly capitalized. II. The corporation borrows money from a shareholder without giving the shareholder a security interest in corporate assets.

I only.

In the absence of a specific provision in a general partnership agreement, partnership losses will be allocated

In the same manner as partnership profits.

Under the Revised Uniform Partnership Act, which of the following have the right to inspect partnership books and records?

Inactive partners.

Leslie, Kelly, and Blair wanted to form a business. Which of the following business entities does not require the filing of organization documents with the state?

Joint venture.

The following are nontax-related characteristics of certain business entities: 1. Unless provided otherwise, all owners have management rights. 2. All owners have limited liability. 3. Formation requires a public filing. 4. A transferee of an owner's financial interest does not become an owner. The entities with the foregoing characteristics are

Limited liability partnerships and limited liability companies.

A business entity has the following nontax-related characteristics: 1. Certain owners have no management rights. 2. Death, bankruptcy, or withdrawal of certain owners does not dissolve the entity. 3. Formation of the entity requires public filing. 4. Capitalization is by the resources of owners. The entity with the foregoing characteristics is a

Limited partnership.

The owners of a limited liability company are known as which of the following?

Members.

Surplus of a corporation means

Net assets in excess of stated capital.

Ted Fein, a partner in the ABC Partnership, wishes to withdraw from the partnership and sell his interest to Ian Gold. All of the other partners in ABC have agreed to admit Gold as a partner and to hold Fein harmless for the past, present, and future liabilities of ABC. A provision in the original partnership agreement states that the partnership will continue upon the death or withdrawal of one or more of the partners. The agreement to hold Fein harmless for all past, present, and future liabilities of ABC will

Not affect the rights of partnership creditors to hold Fein personally liable for those liabilities of ABC existing at the time of his withdrawal.

Which of the following will result in a dissolution of a partnership under the RUPA?

Notice to a partnership at will of a partner's express will to withdraw.

Following the formation of a corporation, which of the following terms best describes the process by which the promoter is released from, and the corporation is made liable for, preincorporation contractual obligations?

Novation.

If no provisions are made in an agreement, a general partnership allocates profits and losses based on the

Number of partners.

Lewis, Clark, and Beal entered into a written agreement to form a partnership. The agreement required that the partners make the following capital contributions: Lewis, $40,000; Clark, $30,000; and Beal, $10,000. It was also agreed that, in the event the partnership experienced losses in excess of available capital, Beal would contribute additional capital to the extent of the losses. The partnership agreement was otherwise silent about division of profits and losses. Which of the following statements is true?

Profits are to be divided equally among the partners.

Jackie Daniels, Jess Beal, and Sid Wade agreed to form the DBW Partnership to engage in the import-export business. They had been life-long friends and had engaged in numerous business dealings with each other. It was orally agreed that Daniels would contribute $20,000, Beal $15,000 and Wade $5,000. It was also orally agreed that in the event the venture proved to be a financial disaster all losses above the amounts of capital contributed would be assumed by Daniels and that she would hold her fellow partners harmless from any additional amounts lost. The partnership was consummated with a handshake and the contribution of the agreed-upon capital by the partners. There were no other express agreements. Under these circumstances, which of the following is true?

Profits are to be divided equally.

The formation of a sole proprietorship

Requires a formal "doing business as" filing under state law if the proprietor plans to do business under a fictitious name.

Which of the following is false regarding the taxation of a sole proprietorship?

Sole proprietorships are subject to tax at both the business and individual level.

When the Revised Uniform Partnership Act applies and there is no general partnership agreement, which of the following events, if any, occur(s) when a partner dies?

The Partner is Dissociated: Yes The Deceased Partner's Estate is Free From Any Partnership Liability: No

Which of the following is not a characteristic of both a sole proprietorship and a general partnership?

The death of an owner causes the termination of the business.

The apparent authority of a partner to bind the partnership in dealing with third parties

Will be effectively limited by the filing of a statement of partnership authority.

Three independent sole proprietors decided to pool their resources and form a partnership. The business assets and liabilities of each were transferred to the partnership. The partnership commenced business on September 1, but the parties did not execute a formal partnership agreement until October 15. Which of the following is true?

The partnership began its existence on September 1.

Buster and Rover formed a partnership to invest in real estate. However, Buster also decided to sell TVs on the side. Buster went to Harold, a wholesaler, and purchased 20 TVs on credit in the name of the partnership. Harold knew the partnership was formed for the purpose of investing in real estate because he had been solicited to be one of the partners. If Buster does not pay for the TVs,

The partnership is not liable because it is not a trading partnership.

Under which of the following circumstances would a promoter be relieved of personal liability on contracts entered into while engaged in forming a corporation formation?

When the third party, the corporation, and the promoter enter into an agreement to substitute the corporation for the promoter.

The partnership of Joe Baker, Art Green, and Guy Madison is insolvent. The partnership's liabilities exceed its assets by $123,000. The liabilities include a $25,000 loan from Madison. Green is personally insolvent. His personal liabilities exceed his personal assets by $13,500. Green has filed a voluntary petition in bankruptcy. Under these circumstances, partnership creditors

Will have the first claim to partnership property to the exclusion of the personal creditors of Green.

Locke and Vorst were general partners in a kitchen equipment business. On behalf of the partnership, Locke contracted to purchase 15 stoves from Gage. Unknown to Gage, Locke was not authorized by the partnership agreement to make such contracts. Vorst refused to allow the partnership to accept delivery of the stoves, and Gage sought to enforce the contract. Gage will

Win, because Locke had apparent authority to bind the partnership.

Wind, who has been a partner in the PLW general partnership for 4 years, decides to withdraw from the partnership despite a written partnership agreement that states, "No partner may withdraw for a period of 5 years." Under the Revised Uniform Partnership Act (RUPA), what is the result of Wind's withdrawal?

Wind's withdrawal causes dissociation from the partnership despite being in violation of the partnership agreement.