BLAW 452 Final Exam
Which of the following may not be used as collateral within the scope of UCC Article 9?
A 250-acre farm.
In which of the following cases will the federal accountant-client privilege protect the information from being disclosed?
A civil fraud case involving the IRS.
A landlord's substantial interference with a tenant's use of the property is considered:
A constructive eviction
Inaction is also:
A decision
Which of the following is an example of a purchase money security interest in consumer goods?
A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels.
Ullyses gave his grandfather Huck's prized pocket watch to Nurse Nadine because he expected to die soon. This is:
A gift causa mortis
Which of the following statements is correct?
A prospectus provides disclosure about the offering but does not include as much information as the registration statement, such as information that would be of interest to the SEC but not the typical investor.
Which of the following statements concerning a Chapter 11 reorganization plan is true?
A reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair.
A trust created in a will is:
A testamentary trust
Which of the following is true about wills?
A will can be amended to change specific terms by execution of a codicil
Which of the following occurs when a person uses labor and/or materials to add value to personal property belonging to another?
Accession
If integrity is the foundation of a person's life, what is the cornerstone? It gives teeth to our pledge to live by ethical standards
Accountability
Bill and Kim moved onto some deserted land. After living on the land for ten years (as is required by that state's law), Bill and Kim claimed to be the titled owners by adverse possession. The state court awarded title to Bill and Kim. Their real property consisted of:
All of the above
If the landlord refuses to maintain or repair the leased premises such that the tenant's use or enjoyment of the premises if affected, many states allow the tenant to:
All of the above
Nortron Corporation wants to create an ethical environment in its company. Which of the following has been found to help foster a sense of ethics within an organization?
All of the above alternatives have been used by U.S. companies to create an ethical environment in their organizations.
Which of the following are alternatives in dealing with issues of ethics in advertising?
All of the above are alternatives in dealing with issues of ethics in advertising
An individual engaged in illegal insider trading could be:
All of the above are correct
Which of the following is correct concerning termination statements?
All of the above are correct concerning termination statements.
In order to constitute a valid gift:
All of the above are necessary for a valid gift
E-presto, Inc. has established an EthicsLine. EthicsLine is a toll-free phone number that employees can call any time of the day, any day of the week to discuss ethics and report suspected unethical or improper conduct. Why would E-presto establish the EthicsLine?
All of the above are reasons that would justify establishing an EthicsLine.
Which of the following would be notice of an overdue instrument?
All of the above illustrate overdue instruments
Which of the following actions would prevent a discharge of debts under Chapter 7?
All of the above would prevent a discharge of debts.
Under the 1934 Act, an issuer must register with the SEC if:
All of the above.
Sonny has a negotiable instrument which he gives to Cheryl as a birthday present. Sonny is a holder in due course on the instrument. As it turns out, Cheryl can only collect on the instrument if she has holder in due course status. If Cheryl sues to collect this instrument, what will be the result?
Although Cheryl does not qualify as a holder in due course, she can claim the holder in due course status through Sonny and collect the instrument.
Does ethical behavior maximize profitability?
Although there is no guarantee that ethical behavior pays in the short or long run, there is evidence that the ethical company is more likely to win financially.
Lemuel has the right to drive across Tootsie's land, which is adjacent to Tootsie's property, to reach the ocean front. Lemuel's right to drive across Tootsie's land is called
An easement appurtenant
Tinker owned a lot near a lake. Although she never had permission from the Rupert, owner of the adjoining land, each weekend when she camped on her lot she crossed his land to take her boat to the boat ramp at the lake. If Tinker continued this use of her neighbor's land for the number of years required by local statute, she would have:
An easement by prescription
Under the Uniform Anatomical Gift Act:
An effective donation may be made by an individual in a will or on a witnessed organ-donation card or by family member's after the person's death as long as the person did not indicate a desire not to be a donor
The Grand Theatre has a sign posted at its coatroom that states, "Grand Theatre is not responsible for any loss or damage to customer's coats." This is:
An exculpatory clause
In order to travel extensively and not worry about handling her affairs, Penelope transfers most of her assets into a trust, with her bank serving as trustee. She has created:
An inter vivos trust
An ethical dilemma can be defined as:
An unpleasant choice relating to a moral principle or practice
Under which of the following does the insurer promise to pay the insured a fixed sum, as guaranteed income, when the insured reaches a specified age?
Annuity contract
Asking the question, "How would I like to be treated in this situation?" is an integrity compass for:
Any Situation
Future interests in land:
Are presently existing nonpossessory rights that may or may not develop later
The section of the UCC that governs negotiable instruments is:
Article 3
The Big Four accounting firms spend about what percentage of their revenue on litigation, including settlements and insurance?
Between 10 and 20 percent.
If Rino becomes incompetent to manage his affairs:
Both (a) and (b) are correct
Great State Bank took a security interest in Gresham, Inc.'s meat processing equipment. Gresham defaulted on the loan. Which statement is correct?
Both a and b are courses of action that Great State Bank may follow.
Jessie is the maker of a $1000 promissory note in favor of Tyler. Tyler subsequently indorses the note to Ryan by signing just his name. Ryan in turn indorses it to Breanna by indorsing the back of the note, "Without recourse, Ryan." Breanna then indorses it to Liz, the present holder, with a special indorsement. If the note is dishonored by Jessie after it is properly presented to her for payment by Liz, then Liz, after giving timely notice to Tyler, Ryan, and Breanna, may collect payment under signature liability from:
Breanna and Tyler only
The evening news was full of stories about how Levine sold fraudulent negotiable instruments to investors around the country. Two days later, Brighty, who did not hear the news reports, bought some of the fraudulent negotiable instruments from a swindled investor. Can Brighty claim the position of a holder in due course considering the publicity of the scam?
Brighty can claim to have purchased the instruments in good faith if he subjectively believed the instruments were valid and if objectively his purchase of the instruments was commercially reasonable.
The wealth pie:
Can be enlarged as new technologies and ideas are invented
A check was indorsed as follows: Jessica Hall without recourse Paul Samuels Collection guaranteed Melissa Liston Which of the following will discharge all of the indorsers?
Certification of the check.
Andy's business is not able to pay its debts, and the prospects for its finances to improve are slim. Andy decides not to continue the business. In this case, Andy should file a voluntary petition for which type of bankruptcy?
Chapter 7
People choose their faith, attitude, and ______________.
Character
Rupert has just purchased his first car. His bank, Last Chance Bank, loaned him the money to buy the car and has required him to purchase insurance to protect the car as collateral for the loan. Which types of basic coverage should Rupert buy for his new car to satisfy the bank requirement and to protect himself from the risks of operating an automobile?
Collision, uninsured motorist, comprehensive, and liability coverage
An insurance policy must meet which of the following?
Common law requirements for contracts
Ethics + _____________ is a winning equation.
Competence
Which of the following is not a provision of the Sarbanes-Oxley Act of 2002?
Congress established the American Institute of Certified Public Accountants to develop ethical guidelines in a Code of Professional Conduct.
Lucky loses in a high-stakes poker game to Fat Chance. To pay his debt, Lucky writes a check to Fat Chance, who negotiates the check to Convenient, who then tries to cash the check at Lucky's bank. Lucky has already stopped payment on the check, so the check is not honored by her bank. Convenient then tries to collect the check by suing Lucky. High-stakes poker games are illegal in this state. Which statement is correct?
Convenient will not prevail.
Research points to one essential element in any successful company:
Core Values
Ethics itself is defined as:
Correct decision-making
Which of the following does not act as a revocation of a will?
Destruction of the will by house fire
An exempt security is one which:
Does not need to be registered with the SEC.
Don runs a construction company. He hires people to work on his projects and tells them they are all "independent contractors." Legally, they are not independent contractors since Don tells the workers when to come to work, how long to work, what days to work, what they are to do each day, and so forth. At the end of each week, Don pays his workers in cash rather than with a check. Also, he does not withhold any state, federal or local withholding tax (since he claims the workers are independent contractors). Which statement is correct?
Don has committed both unethical and illegal conduct.
What is fiduciary duty?
Duty of utmost trust
While everyone has his own standards, which change from situation to situation, people's natural inclination is to be:
Easier on themselves while holding others to a higher standard
Waldo owns his house in fee simple. The state wishes to build a much-needed new highway through the center of his house. Waldo does not want to give up his house. The state will be able to take the land through the use of condemnation power, also called:
Eminent domain
Is it better to give starving people fish to eat or teaching them how to fish?
Employing people so they can sustain themselves and others produces greater good in the long run
A strong moral education
Empowers a person to make good ethical choices
A title examination is performed to:
Ensure that the seller of the property actually has valid title to the land
Adam claimed that N & A, its accounting firm, negligently prepared an audit. To hold the accounting firm liable, which of the following elements must be established?
Failure to exercise due care.
In studying the legal environment of business, Prof. Huckabee's students review ethics in a business context. Ethics includes the study of what constitutes:
Fair or just behavior
A bailment arrangement can be created with respect to both real and personal property.
False
A person cannot be held liable on a negotiable instrument unless that person has signed the instrument.
False
Bagsby owns a business selling insects for organic gardening. Bagsby is seeking a loan from First Natural Bank. The loan officer is asking that the loan be secured by Bagsby's inventory of insects, now owned or hereafter acquired. In order to do this, a new security agreement will need to be signed each time Bagsby gets new insects or sells his insects.
False
Chapter 7 bankruptcy petitions may only be filed voluntarily..
False
Chapters 11 and 13 are liquidation chapters.
False
Francesca cannot serve as a trustee in a bankruptcy case because she is not a lawyer.
False
In January, Erwin told David, that he would give him a car when he graduates from college. David graduated in May. If Erwin refuses to give David a car, David can sue him for breach of inter vivos gift.
False
Margo is in possession of a check issued to her by Felix. The check states, "Pay to the order of Margo." If Margo wishes to transfer the check to Pete to pay a debt she owes him, all she needs to do is strike out her name on the front of the check, write in Felix's name and give it to him.
False
Norm wants to give his niece, Penelope, a piece of jewelry as a gift. Norm gives his agent, the bracelet to take to Penelope. The delivery element of making a gift has been completed.
False
Personal and real defenses are valid against an ordinary holder, only real defenses can be used against a holder in due course
False
Revised Article 9 of the UCC only applies to goods and does not include intangibles such as accounts or chattel paper.
False
Sandy may be charged a fee, but will not face criminal penalties for writing checks on an account with insufficient funds to pay them.
False
Suppose that Emmett impersonates a famous clown. He goes into an advertising agency and convinces the manager to issue a check to him in the name of the famous clown, purportedly as part of a fund-raising campaign for a nursing home for old retired clowns. If Emmett negotiates the check to a check-cashing store by forging the name of the famous clown, then the ad agency will be able to argue that the bank must reimburse the account because the bank paid a check on a forged signature.
False
The difference between an inter vivos gift and a gift causa mortis is that the inter vivos gift is made during the donor's lifetime and a gift causa mortis made after the donor's lifetime by the donor's estate.
False
Tyron purchased a $2900 promissory note from Jared for the discounted amount of $2500. Tyron paid value, in good faith and without notice of any outstanding claims against this promissory note that read, "Pay to the order of Jared $2900 on July 1, 2009, for the purchase of a 2001 Ford Taurus provided no major problems with the car arise prior to said payment date." Tyron is a holder in due course of a negotiable note.
False
Warranty liability is the liability of someone who gives payment on a negotiable instrument.
False
While shopping at the mall, Shelby's wallet fell out of his pocket. Jon found the wallet. The wallet is abandoned property and Jon may keep it.
False
While trying to get into a class at Taurontauris University, Waldo forgot his calculator in the dean's outer office. Theresa, another student, found the calculator. The calculator is treasure trove and theresa may keep it.
False
Gilbert is a wealthy man. Out of kindness of his heart, he transfers a piece of real property to his church, "for as long as the property is used for church purposes." Gilbert has created which of the following ownership interests?
Fee simple defeasible in the church; possibility of reverted to Gilbert
Sprock is a holder in due course on an instrument issued by Klingon. Which of the following defenses could be successfully raised by Klingon?
Forgery
Francenie has a checking account at Corner Bank. She wants tickets to an upcoming concert. She writes a check to Ticketmaster for the cost of two tickets. In this scenario:
Francenie is the drawer, Corner Bank is the drawee, and Ticketmaster is the payee
Florence borrows $1,500 from Fremont, leaving her gold necklace with Fremont as collateral. Two weeks earlier, Florence had borrowed $1,000 from Corner Bank. Florence signed a security agreement and a financing statement giving Corner Bank a security interest in the same gold necklace. The financing statement is filed in the appropriate location. If Florence defaults on both loans, which creditor has the superior rights to the necklace?
Fremont, because possession takes priority over filing.
Grandpa Festis owns a farm. Grandpa gave Sue the irrevocable right to use a road on his farm so that Penelope could more easily reach her property. What kind of interest in land did Grandpa give to Penelope?
Grant easement
Kantian ethics
Holds individuals should evaluate their actions in light of the consequences that would follow if everyone acted in a similar manner
Lying on her hospital bed one night, Phyllis grabs a pen and paper. With the last of her strength, she wrote her last will and testament leaving all her worldly possessions to her next-door neighbor Clyde. This type of will is:
Holographic will
Sammy transfers real property to "Homer for his life, then to Wilma in fee simple." Which of the following best describes the result of the transfer?
Homer has a life estate and Wilma has a remainder
Men and women must first be ______ with themselves before they can be honest with others
Honest
What is an integrity guideline for any situation?
How would I like to be treated in this situation
The Washington Post test means:
How would you decide if you knew your business decision was to be reported in the media
Why is the Golden Rule a win-win philosophy?
If I treat you as well as I desire to be treated, I win. If you treat me likewise, I win
Rufus had two children, Cheryl and Pete, who predeceased him. Cheryl had three children and Pete had one child. Rufus died testate. Which of the following is true?
If Rufus' will indicates that the issue are to inherit per stirpes, Pete's child will receive one half of Rufus' estate
What is the problem with an ethical flea dip?
If the environment -systems and goals—of an organization encourage and reward unethical behavior, addressing individual employee actions will not improve the situation
The requirement that a landlord meet local building standards or that the premises be fit for human habitation is called the:
Implied warranty of habitability
A version of the Golden Rule exists:
In many cultures
Bud Fox uses the phrase several times "nobody gets hurt", but what does it actually mean in today's business vernacular?
In the short term nobody may be injured, but the long term may produce foreseeable harm to others
Rewards in business:
Incentivize workers to team with others to make money while producing goods and services consumers want
Ethics is:
Independent and immutable
It doesn't matter whether you're talking about lying to your neighbor or defrauding a big corporation, any action ultimately impacts _______ for better or worse
Individual people
Liability policies, such as personal liability, professional malpractice, or business liability insurance, do not protect the insured against:
Intentional torts
Ethics:
Is ethics—you live by one standard across the board
When a person feels conflicted, the Blanchard-Peale ethical model for decision-making poses three core questions that should be asked when facing every ethical dilemma: Is it legal, ___________, and ____________.
Is it fair and balanced, and how does it make me feel about myself?
The reason greed is unethical is:
It is not necessarily unethical; in controllable amounts it can be a positive force
John discovered his company's accountant was "skimming" money from the business. The accountant agreed to pay John a one-time payment of $25,000 not to report the skimming to company officials. The accountant promised she would pay the money back when she could. John accepted the money and never reported what he knew. A year later the accountant was fired when the embezzlement was discovered. She was also prosecuted for theft. The payment to John was never discovered. Which statement is correct?
John's act was unethical and illegal.
Insurance obtained by a limited partnership on the life of a general partner is called:
Key-person insurance, because the general partner is a key person, contributing a great deal to making the business successful
Great State Bank claimed that Wiles Accounting committed fraud in the preparation of an audit. To hold the accounting firm liable, which of the following elements must be established?
Knowledge or reckless disregard of the truth.
Personal property means all property other than:
Land and all things permanently attached to the land
Soiya is a holder in due course of a check. Soiya goes to the drawee bank, Last Chance Bank, to cash the check. What is the liability of Last Chance?
Last Chance Bank is not primarily liable on the check until it accepts the check.
Greed is:
Like most things, a little greed can be a good thing—it incentivizes people to work hard
Many people believe that embracing ethics _______ their options in business.
Limits
Lois is running for political office. She trails the incumbent and decides to start running a series of "attack ads." The attack ads are very effective and one week before the election it appears that she has drawn even with her opponent. Lois admits that the attack ads were exaggerations and contained some distortions. Which statement is correct?
Lois has engaged in unethical behavior.
People always ______ when they live without ethics.
Lose
In Ethics 101, Dr. Joseph Fletcher says______ is the only viable standard for determining right from wrong.
Love
Mack writes a check to his maid, Marianne, in payment for services rendered. Marianne indorses the check in blank and gives the check to her masseuse, Janet, in exchange for a neck massage. Without indorsing the check, Janet gives the check to Martin, her newspaper carrier in payment for the next four month's delivery charges. Martin indorses with a special indorsement and negotiates the check to his church, St. Mark. The church indorses the check and deposits it in its bank account. If Mack's bank later dishonors the check, to whom may St. Mark's look for recovery?
Mack, Marianne, and Martin.
Professor Huck is displeased with his son's lifestyle choices and, instead of dividing his estate, Prof. Huck wants to leave all his property to his cat, Farticus with Last Bank & Trust as trustee. Prof. Huck:
May disinherit his son for any reason as long as prof. Huck indicates in the will that the son was omitted on purpose
Micah signed a check in the lower right-hand corner and Andrew signed on the back. The presumption is that:
Micah is the issuer
The observation that "The one and only social responsibility of business is to increase its profits" can be attributed to:
Milton Friedman
Rhonda is a server in a restaurant. One day she finds a purse while clearing a table. Which of the following best describes the purse? The purse is most likely:
Mislaid property
Talmidge took a seat at Wonderful Waldo's Diner. Between the salt and pepper shakers, Talmidge noticed something glittering. It was a diamond ring. The ring is:
Mislaid property
What is a compass forever fixed and forever true—that is as important in business as in the classroom?
Moral principle
The bank who loans money in exchange for a mortgage on the borrower's house is considered to be the
Mortgagee
CAN PROFIT MAKE PRODUCERS PERFORM BETTER AS OPPOSED TO NONPROFIT ENTERPRISES?
Most often yes
Most people rate themselves:
Mostly Ethical
On April 10, Amy agreed to buy a riding lawn mower from Mowers Plus, signing a promissory note and security agreement giving Mowers Plus a security interest in the mower. On April 15, Amy took delivery of the mower. On May 1, Mowers Plus filed a financing statement. Which of the following is correct?
Mowers Plus has attachment of a security interest in Amy's mower.
IS ETHICS SUBORDINATE TO PROFIT AND LEGALITY?
Never
Is making large amounts of money when others have so little inherently unethical?
No
Link negligently ran his car into John, causing $50,000 in injuries. Link was intoxicated at the time of the accident. Can Link discharge this debt in bankruptcy?
No, such claims are not dischargeable in bankruptcy
Kylie filed a Chapter 7 bankruptcy petition in which she exempted her home, valued at $125,000. Kylie can exempt her entire home from all creditors if:
None of the above.
What is a tender offer?
Offer to buy shares belonging to another for a set price different from the stock market price, usually with intent to gain a controlling or significant stake in a business
Maia wrote a check which said, "Pay to the order of Kevin Mathews $10.97." The next line of the check stated, "One thousand ninety-seven Dollars." In applying the rules of interpretation, how much should the drawee pay?
One thousand, ninety-seven dollars or $1,097.00. Words control over numbers.
Paul decided he did not want the new jeans he had purchased from a large discount department store. He had worn them three times and decided he just did not like them. The jeans fit him fine and there is nothing wrong with them. He loaned them to his twin brother who used them for a week and then returned them. Paul takes the jeans back to the store and, as is its policy, the store gave him a full refund of his money. Which statement is correct?
Paul's conduct was unethical
People who fail to develop __________________ are often tempted to cheat to keep up.
Personal discipline
To be accounted trustworthy, a person must be
Predictable
What undermines the Golden Rule?
Pressure, pride, and pleasure
What is at the bottom of all great mistakes?
Pride
Business most often:
Produces competition which results in better products at lower prices for consumers
Robber barons in America:
Provided better products at cheaper prices which brought them wealth
What is insider trading?
Purchase and/or sale of stock based on illegally obtained information not available to the public
The purpose of recording a deed or other real estate transaction is to:
Put the rest of the world on notice that the transaction occurred between the grantor and the grantee
The right of the tenant to the undisturbed possession of leased property is known as:
Quite enjoyment
Under what type of securities offering must the issuer determine if the investor is an accredited, sophisticated, or unaccredited investor?
Regulation D offering.
What theory of ethics is Gordon Gekko practicing in the movie "Wall Street"?
Relativism
What does the Sarbanes-Oxley Act require?
Reporting suspected illegal or unethical auditing or accounting practices to the CEO, CFO, or auditing committee
What "should" a business person's most valuable commodity be?
Reputation
American bicyclist Lance Armstrong admitted to cheating in international races violating rules by use of unauthorized drugs. He was subsequently stripped of his awards and first place finishes by the Tour de France and other sanctioning bodies. Commercial sponsors had previously paid him large sums of money based on his legitimately winning those races. Now their product and advertising endorser is exposed and disgraced. They demand return of their payments claiming he defrauded them and the public by his cheating. Armstrong should:
Return the payments because he represented and received them under false pretenses
Rick prepared financial statements for MegaCorp knowing that it was going to use his statements to apply for a loan with Big Bank. When Big Bank turned MegaCorp down, it applied to Fourth Bank for a loan. MegaCorp presented the statements prepared by Rick to Fourth Bank which gave the company a loan. It was discovered that Rick was negligent in preparing the statements, and Fourth Bank sued Rick. Under which of the following tests is Rick liable?
Rick would be liable under both the foreseeable doctrine and the Restatement doctrine.
Donna defaulted on her loan owed to Second State Savings and Loan. The loan was secured with Donna's car. Donna used the car for personal and family reasons. Which statement is correct?
Second State may take Donna's car without a court order if this can be done without a breach of the peace.
What federal agency is primarily responsible for investigating stock manipulation and fraud?
Securities and Exchange Commission
IN A FREE MARKET, DO YOU GET MORE BY SERVING OTHERS, OR BY RELYING ON FRIENDSHIP, LOVE, AND CHARITY?
Serving others is what inherently motivates people to go the extra mile, causing others to respond positively to such service
When people continually test the edge of ethics:
Shortcuts never pay off in the long run and deeds do catch up with them because truth inevitably does come out
Serving others:
Should be a key component to successful business strategy
Experts say that "vice investing" doesn't work and isn't as profitable as investment in __________ companies.
Socially responsible
IS GREED GOOD FOR AMERICA?
Some degree of greed incentivizes people to work hard and take a personal interest in what they do
Sophie issues a promissory note made "payable to the order of Molly." Molly indorses the note by signing her name and gives the note to Dana. Which of the following is correct?
Sophie issued an order instrument, but Molly changed it to bearer form.
Which of the following cannot file a bankruptcy petition under the Code?
Stan, an American citizen, who refuses to undergo credit counseling.
Terry is renting an efficiency apartment from Huckster. Terry decides to go to Europe for four months and let's his friend, Rupert, live in his apartment while he is away, with the understanding that Rupert will pay the rent. Terry has:
Sublet the apartment, but Terry is still liable for the rent
A tenancy with no fixed duration is a:
Tenancy at will
Which of the following insurance policies continue for a stated period of time with the premiums increasing with the age of the insured?
Term insurance
Darcy buys a life insurance policy on her own life, under which she pays the annual premiums. The insurance is issued for a specific period , but is renewable for similar periods. Darcy is covered only as long as she makes payments. The is NO cash value portion of the policy. Darcy probably owns:
Term life insurance
Which of the following requires companies to file annual reports containing audited financial statements?
The 1934 Act.
Why is the Golden Rule a good, honest standard of ethical behavior to live by?
The Golden Rule is accepted by most people, easy to understand, and a win-win philosophy
Paula is a sales agent for The Rock Insurance Company. Paula accepts a check from a customer made payable to her in payment for the premium on an insurance policy. Prior to depositing the check in The Rock's bank account, Paula indorses the check as follows: "The Rock Insurance Company, by Paula Beck, agent." Assuming that Paula has authority to indorse company checks, if the check is dishonored, then between Paula, The Rock, and the bank:
The Rock only will be liable.
Which of the following is a requirement for an involuntary Chapter 7 bankruptcy petition?
The debtor must have at least three creditors join in the petition if the debtor has 12 or more creditors. If the debtor has fewer than 12 creditors, any single creditor or group can file a petition.
The element that distinguishes a contract from a gift is:
The element of consideration which is present in a contract, but not in a gift
Great State Bank loans money to Seth, securing the loan with property owned by Seth. Great State Bank is advised by its attorney to file a financing statement. Great State Bank doesn't understand why it should spend the extra money for this filing, since Seth has told them that he has no other creditors. Why should Great State Bank file a financing statement?
The financing statement will protect Great State's priority rights with other creditors by giving notice to other creditors that it claims a security interest in the collateral.
Generally, Rita signs her name using an infinity symbol rather than her legal name. Rita signed an instrument using this symbol. Which statement is correct?
The instrument can be negotiable. Rita intended to indicate her signature.
An instrument is negotiable if it satisfies six standards. Which of the following is a standard of negotiability?
The instrument must state a definite sum of money.
Under what circumstances might the court reject a debtor's Chapter 13 plan?
The plan anticipates paying the unsecured creditors less than what they would get under Chapter 7.
Most of the time, it's not the money itself that draws people across the line ethically. It's __________________________.
The power that comes with it.
Every time people make wrong decisions:
There is an impact and they leave scars
Dr. Frankenstein advises his very ill patients to prepare a living will. The purpose of a living will is?
To express a desire not to have extreme medical treatment that would prolong their lives
A bailee always has a right
To possession of the bailed property. Anyone who interferes with this right is liable to the bailee. Even the bailor himself is liable for wrongful interference with the bailee's possession
Esmeralda is a debtor in a Chapter 7 bankruptcy proceeding. Which of the following is not a duty of Esmeralda under Chapter 7?
To provide a repayment schedule for the debt owed to each creditor listed on the creditor list.
In a new era for business, CEOs face a new mandate which is:
Transparency in terms of ethics, values, and goals
The 1933 Act exempts all but which of the following from its registration requirements?
Treasury stock.
What is the platinum rule?
Treat others better than you wish to be treated
A bailment was created for the parties' mutual benefit. This means that the bailee must use ordinary care with the property.
True
According to common law, "treasure trove" property belongs to the person who finds it.
True
Alimony and child support obligations are considered priority claims.
True
Assume that Joel signs a promissory note to Andrew, who in turn negotiates the instrument to Luke. Of the three, Joel is the only person who has primary liability.
True
Brad was having financial difficulties and thought bankruptcy might be in his future. He transferred his sports car to his brother with the agreement that if he didn't file for bankruptcy within the next 18 months, his brother would return the car to him. Brad did file for bankruptcy in ten months. The bankruptcy trustee can bring the car back into Brad's estate for the purpose of providing assets for Brad's creditors.
True
Charlene Brown has possession of a check made out to the order of Charlene Brown (herself) which she received in payment for writing a manuscript for her publisher. Charlene is a holder in due course and the publisher cannot claim any "real" defenses to payment. Charlene has an unconditional right to be paid for the check.
True
Commercial paper is a contract to pay money
True
Creditor claims are divided into classes and the highest class must be satisfied in full before going to the next category.
True
Individual debtors are allowed to keep some assets in a Chapter 7 bankruptcy.
True
Lance indorses a promissory note to Connie in exchange for consideration. Unknown to Lance, the note is not good because the maker's signature was forged. Connie later attempts to present the instrument for payment to the original alleged maker, Lilly, who is able to deny liability for payment due to the forged signature. Connie may later sue Lance for breach of a transfer warranty.
True
Maddie enters into a secured consumer debt transaction with Friendly Bank. When Maddie pays the loan in full, Friendly Bank is required to file a statement indicating that it no longer claims a secured interest in the collateral. This statement must be filed within one month from the date the debt is fully paid.
True
Negotiable instruments are normally issued to fulfill a contract.
True
Rupert enters a restaurant and hangs his coat in an unattended cloakroom near the entrance of the restaurant. It is not a situation where he gives his coat to an employee of the restaurant in order to hold the coat. In this situation, the restaurant is not a bailee of Rupert's coat.
True
Shoe Sunshine, Inc. filed for bankruptcy protection under Chapter 11 and submitted a plan of reorganization within 120 days after filing for relief. Two of the classes of creditors voted against the plan. However, the bankruptcy judge considered the plan to be reasonable, achievable, and fair, and approved it in spite of these creditors' objections. This action by the judge is called a "cramdown."
True
The accidental destruction of a negotiable instrument will not result in its cancellation.
True
Tim wrote a negotiable note. Subsequently, Tim's debts were discharged in bankruptcy. If a holder in due course presents the note for payment, Tim does not have to pay.
True
Under Revised Article 9 of the UCC, electronic chattel paper may be used as collateral in a secured transaction.
True
What is the foundation of leadership?
Trust
A cigarette company's research reveals that its future market growth will most likely come from children and teenagers if advertising is directed toward them. Advertising focused on these age groups is:
Unethical because the user audience is known and the product unhealthy for these age groups
Ralph works in the public relations department of the New Trends Sales Co. His job includes portraying New trends' activities in their best light. In this context, ethics consists of:
Unethical because the user audience is known and the product unhealthy for these age groups
Why do many major corporations actively encourage ethical behavior?
Unethical behavior can quickly destroy a business.
Which of the following opinions indicates that the company's financial statements fairly present its financial condition according to GAAP?
Unqualified opinion.
The desire to be loved and ________ is perhaps the deepest need of every person
Valued
Which of the following is generally covered under casualty insurance?
Vandalism
Wedney, Inc. has a purchase money security interest in one of Yoro Chicken's meat processing machines. Wedney filed a financing statement on the day the machine was delivered, perfecting its interest. Great State Bank already had a security interest in the machine. Which party has superior priority rights in the meat processing machine?
Wedney. A PMSI in collateral other than inventory takes priority over a conflicting security interest if the PMSI is perfected at the time the debtor receives the collateral or within 20 days after he receives it.
WHAT DOES UTILITARIANISM ETHICS HOLD?
What produces the greatest good
There are really only two important points when it comes to ethics:
What standard to follow and the will to follow it
A security covered by SEC Acts of 1933 and 1934 is:
Where an investor invents money in a common enterprise and expects to earn a profit from the efforts of others.
Ethics is how we meet the challenge of doing the right thing when that
Will cost more than we want to pay and Will give more than we receive. both a and d
Which of the following is NOT required to create a valid trust:
Witnesses
ARE PEOPLE MOST SATISFIED WHEN THERE IS A GREED ELEMENT IN THEIR WORK?
Yes
DO ETHICS APPLY TO ALL BUSINESS ORGANIZATIONS?
Yes
Is America about competition and rising above the rest?
Yes
Cecilia made a check out to Gideon for $15. Gideon fraudulently changed the check to read $150, and cashed it at Corner Bank. Is Cecilia discharged from liability on the check?
Yes, Cecilia owes nothing unless Corner Bank is a holder in due course in which case she owes the original $15.
Waldo has a 10-year written lease to operate a laundromat. Waldo, properly under the lease, assigns the lease to Penelope for the remaining 7 years. Penelope pays the lease for 1 year and then moves without notice. She disappears and cannot be found. Is Waldo still liable for the balance of the lease payment?
Yes. Waldo, as the assignor of an unexpired lease, remains liable to the landlord unless the landlord has explicitly released him from liability
Morefield Custom Design sends 30 recliners by rail to Danville Furniture. To show where the goods will be shipped and who gets them when they arrive, Morefield will obtain ____, which can be used as collateral in a secured transaction.
a bill of lading.
Landscaper Lottie used her machinery, employee labor, and her expertise to landscape Opal's new guest home. Opal fails to pay for the landscaping because she has run out of money. Lottie files a lien against the real property. This lien is called:
a mechanic's lien; it was created by improving real property.
Check kiting is defined as:
a scheme of overdrawing account A by depositing a check in account B, then overdrawing account B to cover the insufficient funds in account A.
Mona co-signs a promissory note with her daughter Beth so Beth can purchase her first car. Mona will be discharged from her obligation on the note:
a) if Beth pays the obligation in full under the terms of the note. b) if the creditor extends the final due date because of allowing Beth to skip a payment in December. c) Both of the above.
People who engender trust:
all of the above
Real property consists of:
all of the above
The Chief Executive Officer of Ticor, Inc. must decide about the disposal of toxic waste materials. Which of the following considerations should help the CEO reach an ethical business decision?
all of the above
Unethical behavior in an organization can create:
all of the above
When people make unethical choices, they do so because:
all of the above
Whether or not a zoning board will grant a request for a variance depends upon:
all of the above
Which of the following is a primary goal of bankruptcy:
all of the above
Which of the following property is not affected by a will?
all of the above
Which of the following will discharge an instrument?
all of the above
Why should ethics be a concern to business?
all of the above
Zeno, Inc. is considering relocating its manufacturing facility from Illinois to Mexico City. The stakeholders in this decision might include:
all of the above
Sally prepared financial statements for MegaCorp knowing that the company would be using her statements when applying for a loan at Big Bank. It is discovered she was negligent in preparing the statements and Big Bank sued her. Sally is liable under the:
all the above
Section 16 of the 1934 Act prohibits short-swing trading on the part of any person who is:
all the above
Which of the following parties can defeat a perfected security interest?
all the above are correct
With regard to a corporation's delivery of securities documents to investors and to the SEC:
almost all filings with the SEC must be made electronically using the EDGAR system.
An auditor who determines a company is materially misstating certain items on its financial statements should issue:
an adverse opinion.
An accountant is liable for fraud to:
any foreseeable user of her work product who justifiably relied on it.
A "holder" of order paper can be described as:
any person in possession of the instrument if it is payable to or indorsed to him.
Kent Weston wrote a check for $500 payable to the order of Chester Jones. Chester indorsed the back of the check as follows: "Chester Jones." The check is now:
bearer paper.
When a stock underwriter acts as the company's agent in selling stock, it is called a:
best efforts underwriting.
An engagement letter is a written contract:
between an accountant and client.
Ethical companies:
both a and b; tend to earn higher returns than companies that engage in wrong-doing and tend to have more creative employees than companies that engage in wrong-doing.
Wombart Manufacturing sells a machine on credit to Cryslie Printing Co. Wombart insists on a security interest in the machine to:
both a and c
Country Bank, located in Indiana, loaned Chmelik $5,000 and obtained a security interest in a copyright Chmelik owns. Chmelik lives in Illinois, but works in Indiana. In order to perfect its interest, Country Bank files a financing statement in Indiana. The financing statement provides Chmelik's correct name, his business address, and a reasonable description of the copyright used as collateral. Is the financing statement sufficient?
both a and c are correct
In June, The Seascape Gallery sells an oil painting to Collegiate Systems, Inc. Collegiate promises to pay for the painting in three months. The gallery prepares a draft ordering Collegiate Systems to pay $3,000 to First Bank on September 15. Collegiate Systems signs the draft. The draft is a:
both b and c
The accounting firm of Gray & Co. did accounting work for both Regional Bank and Carter Electronics. Without Carter's knowledge or approval, Gray & Co. discussed Carter's financial problems with Regional Bank. Gray & Co.:
breached a legal obligation to keep all client information confidential.
Which of the following is NOT a stakeholder?
business competitor
Chapter 13 bankruptcy:
can be used only by individuals with a regular source of income.
Agnes plans to file for bankruptcy under Chapter 7. One month prior to filing, Agnes gives Joe's Filling Station $700 to apply to her gas bill. Joe has been so kind to let her charge the gas she needed for her car over the past year. The bankruptcy trustee appointed to the case:
can cancel the payment to Joe as a voidable preference.
Techno is planning a security offering under Regulation D, Rule 506. Under this rule, Techno can:
can offer an unlimited amount of securities.
GBH, an accounting firm, was hired to prepare financial statements for E-treme. Great State Bank has asked to see GBH's working papers. Great State Bank is thinking about extending a $4 million line of credit to E-treme. GBH:
cannot show the bank the working papers unless E-treme gives permission.
If repossessed collateral is sold or otherwise disposed of by the creditor, the time, place, manner, and method of disposal must be:
commercially reasonable.
Kent needed to reduce his workforce by five people. Before notifying them, he thought about how he would feel if he were the one receiving the news and he tried to find ways to help the employees in their transition. Kent was exercising the value of:
compassion.
Chelvam is the director of quality control. Chelvam rejected some parts as non-conforming to the specifications. Chelvam's supervisor directs him to accept the parts. Which value might give Chelvam the strength to oppose his supervisor?
courage
The bigger the decision, the more ________ it may require.
courage
Which of the following values are considered universal?
courage
Which of the following would not be considered a fraudulent conveyance or a voidable preference under the provisions of the Code? Immediately prior to filing bankruptcy:
debtor sells his car at a public auction, thinking that it would bring a decent price, but the car brings an amount well below fair market value.
In analyzing a situation to determine how to act ethically, a business manager should:
determine whether an alternative violates important values.
Larry was working at his job at the landfill when he got off his tractor to take a break. He noticed some papers on the ground and went to throw them on a trashpile. As he held the papers he saw a confidential report from MegaCorp stating it would be announcing the development of a new super computer in two weeks. Larry has no relationship with MegaCorp. Larry mortgaged his house and borrowed all the money he could to purchase $200,000 worth of MegaCorp stock. Larry bought the stock for $32 a share. When the announcement was made public, MegaCorp's stock skyrocketed. Larry sold his stock a few weeks later and made a huge profit. Larry has:
done nothing legally wrong
Iris received a discharge under a Chapter 7 bankruptcy. She cannot receive another discharge under Chapter 7 for at least:
eight years after the prior filing.
What is oxygen for the soul?
encouragement
In January, E-treme Inc. entered into an oral contract with Ralco, LLC, an accounting firm, for the preparation of its tax return. The contract is:
enforceable even though it is oral.
If the final registration statement contains a material misstatement or omission, the purchaser of the security can recover damages from:
everyone who signed the registration statement..
A CPA's duty of care to a client most likely will be breached when the CPA:
fails to follow generally accepted auditing standards (GAAS).
A manager making a decision without fraud, prejudice, or favoritism is exhibiting the value of:
fairness.
The initial term for which a financing statement will be effective is:
five years
Felicia, an elderly woman, does not speak or read English well. Felicia is a recent immigrant to this country. A dishonest immigration officer tells Felicia to sign several documents as being necessary to maintain her legal alien status. Unknown to Felicia, she signs a promissory note. The immigration officer thereafter sells the note to Neighborhood Bank, a holder in due course, who goes after Felicia for payment of the note. Felicia's defense to the Neighborhood Bank is:
fraud in the execution; a real defense.
An accommodation party on a negotiable instrument:
has the same liability to a holder as the person for whom he signed.
Ethics is the study of:
how people should act
A bailment is different from a gift because
in a bailment, only possession of the property is transferred to the bailee, whereas with a gift, both possession and ownership must pass to the donee.
The term "issuer":
is an all-purpose term that means both maker and drawer.
An estray statute:
is none of the above
Criminal liability for accountants:
is possible under the Securities Act of 1933, the 1934 Act, state securities laws, and the Internal Revenue Code.
Forever Yours, Inc. has a secured and perfected security interest in Sally's big-screen TV. On the filing date of Sally's Chapter 7 petition, the balance of the debt owed to Forever Yours is $2,000. The value of the TV is estimated at $1,500. This means that Forever Yours:
is unsecured for $500, the excess of the debt over the value of the TV.
The 1934 Act is primarily intended to:
maintain the integrity of the secondary market for securities.
GBH, an accounting firm, was hired to prepare financial statements for E-treme. GBH:
must allow E-treme access to the working papers.
First Bank loaned $400,000 to Thomas, taking a security interest in his yacht. Thomas defaulted on the loan and First Bank repossessed the boat. First Bank sold the yacht at a public sale. The sale yielded $50,000 more than the debt. First Bank:
must pay Thomas the $50,000.
Ed, a vice-president of Palmette Products, Inc., buys 1,000 shares of his company's stock on June 15. His son has medical problems in September, and Ed sells the stock at a profit. Ed:
must turn over to Palmette any profits he made on the sale.
To be negotiable, a check must be in writing. Under the UCC, a check:
need not be on any official form or even on paper.
Debts that cannot be discharged in bankruptcy include all EXCEPT:
negligence judgments.
Hayden owes Luther $5000. Hayden will only be able to pay this debt if he is able to sell his one-year-old Harley motorcycle, valued at $20,000. Hayden writes a check to Luther that reads, "Payable to the order of Luther the sum of $5000 as soon as my Harley motorcycle sells for a reasonable amount." This check is:
non-negotiable because the check is conditional.
Tim buys a high-powered tool from Binford Tools to use on the construction of his own garage. Binford Tools provides a full warranty on the tool for the first six months. To pay for the tool, Tim signs a negotiable promissory note which contains the FTC Notice. Binford properly negotiates the note to First Finance. Within three weeks, the tool stops working and Binford refuses to repair or replace it. In the meantime, First Finance demands payment from Tim. Under the Federal Trade Commission rules, this consumer credit situation means First Finance can:
not collect
Ethics is fundamentally a:
personal issue
A security interest in money may be perfected by:
possession only.
If a plaintiff is successful in proving that an auditor has violated Section 10(b) of the 1934 Act, the auditor has:
primary liability.
Creditors of Northern Hydraulics file an involuntary bankruptcy petition against it. Northern continues to operate its business until the court officially acknowledges that Northern is under the jurisdiction of the court. Any expenses Northern incurs in the ordinary course of business during this gap period are:
priority claims.
Research has shown that the least important motivation for managers in behaving ethically is:
profitability
Wanderlust gave a security interest in his Conestoga wagon to Iowa Bank who perfected its security interest by filing a financing statement with the appropriate officials in Iowa. Five months later, Wanderlust hit the trail again, moving to Montana. If Iowa Bank wants to continue its perfected interest in the Conestoga wagon, it should:
re-perfect by filing a financing statement in the appropriate place in Montana, according to Montana law, within four months of Wanderlust's entering Montana.
A Chapter 7 debtor's agreement to pay a creditor on a debt after receiving a discharge in bankruptcy is called a:
reaffirmation
The UCC requires that anyone wishing to cash a check must provide:
reasonable identification.
Byron bought a 50' yacht from Myrtle's Marina by entering into a note and security agreement promising the yacht as collateral for the purchase money security interest. When Byron faced some tough financial times, he failed to make three monthly payments. Myrtle's Marina repossessed the yacht by removing the yacht engine and advertised a public auction of the yacht. Byron appealed to his good friend Charles and managed to pay off the debt balance and the Marina's expenses of repossessing and advertising the sale. Byron's actions represent:
redemption
Laurel Speckle received a check from State University. She indorsed the check as follows: "For Deposit only, /s/ Laurel Speckle." Laurel's indorsement is a:
restrictive indorsement.
The correct order of payment of claims from the debtor's estate would be:
secured claims, priority claims, unsecured claims.
Kathleen filed for voluntary bankruptcy and the automatic stay went into effect. The automatic stay:
stops any and all acts to collect, assess, or recover a claim against Kathleen that arose before she filed bankruptcy.
A study by the Government Accountability Office found:
substantial market power in the four largest accounting firms. The Big Four audit 97 percent of all public companies in the United States that have sales over $250 million.
To perfect a security interest in a negotiable instrument, Second State Savings and Loan should:
take possession of the instrument
Pursuant to a public offering, a CPA firm prepared an unqualified opinion as to the financial statements. After the offering, omissions and misstatements were found. The CPA firm is now being sued by the purchasers of the stock. The purchasers are alleging that the erroneous financial statements in the registration statement caused them to suffer a monetary loss. The CPA firm can avoid liability if it can prove:
that it used due diligence in preparing the financial statements.
A defense to a civil action brought under Section 10(b) and Rule 10b-5 of the 1934 Act would be:
that the sellers did not intentionally or recklessly make a false representation.
When a negotiable instrument is transferred, the transferor warrants all EXCEPT:
that the transferor is a holder in due course of the instrument.
A criminal case under the Securities Act of 1933 is prosecuted by:
the Justice Department.
Which of the following parties has primary liability on a draft?
the acceptor
The start of the bankruptcy process is:
the bankruptcy court's issuance of an order for relief.
If a registration statement contains a material misstatement or omission:
the company is liable and has no defense.
To whom or what does a stockbroker owe his first duty?
the law
To prevail under Section 11 of the 1933 Securities Act, the plaintiff must prove:
the registration statement contained a material misstatement or omission; and the plaintiff lost money.
Felicity brought a lawsuit under Section 11 of the 1933 Act against Mojo Corp. She will have to prove that:
there was a material misstatement or omission in the registration statement and she lost money.
Generally, indorsers are not liable under signature liability if:
they write the words "without recourse" next to their signatures on the instrument.
The guiding principal of federal securities law is:
to insure investors have full and accurate information.
Clint is auditing MegaCorp. In reviewing the sales ledger, Clint saw that MegaCorp had sold 3,000 disk drives to CompSales, Inc. Clint reviewed the original invoice of this sale to ensure that the date, price, quantity, and customer's name all match. He then verified each step along the paper trail until the disk drives left the warehouse. This illustrates:
tracing
John is auditing MegaCorp. He finds an accounts payable for 1,000 reams of photocopy paper. He checks to make sure the paper actually arrived and that the receiving department had signed and dated the invoice. He also checks the original purchase order to make sure the purchase was properly authorized. This illustrates:
vouching
Charlie Sheen's drug use and violent behavior:
were bad enough that to warrant CBS's firing of him from a hit TV show.
When a person indorses a check, the indorser assumes contractual liability based on the indorsement. This liability expires unless presentment is made:
within 30 days of indosement
Larry is a certified public accountant in a firm which audits public companies. Larry is accused of unethical conduct. Is Larry required to abide by the ethical standards of the Public Company Accounting Oversight Board?
yes
The IRS files criminal charges against Rich for evasion of federal taxes. Rich's accountant, Sonya, is summoned to appear in court to testify against Rich. The state where the incident occurred recognizes an accountant-client privilege. Does Sonya have to testify in federal court against her client?
yes
