Final

13. A creditor is a person or business who: a. Lends money to someone else b. Allows goods to be purchased by someone else c. Allows services to be purchased by someone else d. All of the above e. Only A or C

a.

14. If a debtor refuses to pay an unsecured creditor, and the debtor is insolvent, the unsecured creditor collects: a. Nothing b. One-half of the bill c. One-quarter of the bill d. The full amount of the bill, over time e. The bill plus associated attorney's fees

a.

27. To be enforceable, a security interest must be detached from the debtor. a. True b. False

a.

28. Under the UCC, a security interest in consumer goods perfects automatically when the consumer signs the agreement. a. True b. False

a.

30. In the priority of classes of creditors, taxes owed to the government come before any other payments. a. True b. False

a.

32. Under Chapter 11 proceedings, businesses are forced to sell all company assets to pay outstanding debts. a. True b. False

a.

33. If a customer does not pay a judgment enters against her by a court, the party that won the judgment may seek a writ of exoneration. a. True b. False

a.

34. Limited liability companies are guided by an operating agreement. a. True b. False

a.

35. The income from a partnership is taxed as the personal income of the partners a. True b. False

a.

39. Evidence that shows a person's conduct is the cause of an event may establish the cause in fact of a tort. a. True b. False

a.

4. Bankruptcy law: a. Is federal statutory law b. Is controlled by the Bankruptcy Cost c. Is largely state common law d. A and B e. B and C

a.

41. Damages in a negligence suit are found to be $100,000. If the jury finds the plaintiff was 40% responsible, the defendant would pay for 60% of the damages ($60,000) under the rule of comparative negligence a. True b. False

a.

42. To prove intent for an intentional tort, the plaintiff must show willful misconduct by the defendant a. True b. False

a.

43. A battery is an unlawful physical contact without consent a. True b. False

a.

45. If you hack into your neighbor's computer, you may have committed the tort of invasion of privacy. a. True b. False

a.

46. Not all promises are enforceable contracts a. True b. False

a.

48. Two promises or an exchange of promises are involved in bilateral contracts a. True b. False

a.

49. Acceptance of an offer must be unconditional, unequivocal, and legally communicated to be effective. a. True b. False

a.

52. A void contract is never a valid contract a. True b. False

a.

53. If a minor buys a car, uses it for 6 months, then decides to disaffirm the contract to buy the car on a 3 year payment plan, the contract is voidable. a. True b. False

a.

55. If Performance of a contract is clearly inferior to the requirements of the contract, there is a material breach. a. True b. False

a.

58. A public corporation is one that trades shares on stock markets a. True b. False

a.

59. Directors of a corporation are responsible for making basic corporate policy a. True b. False

a.

order to establish a superior right, a creditor must: a. Prohibit a default b. Insure the debt instrument c. Perfect the security interest d. Keep the existence of the security interest a secret e. Do none of these things

a.

29. According to the Statues of Fraud, mortgages may be either oral or in writing a. True b. False

b.

31. Chapter 13 bankruptcy proceedings are used mainly by businesses a. True b. False

b.

36. Partners in a partnership, like corporate shareholders, have the right to sell their ownership shares whenever they want to whoever they want. a. True b. False

b.

37. When the sole owner of a corporation dies, the corporation ceases to exist and the business must be reorganized. a. True b. False

b.

38. The primary purpose of tort law is to inflict punishment on the wrongdoer. a. True b. False

b.

40. The only defense in case of negligence is that of assumption of risk a. True b. False

b.

44. Infliction of emotional distress is involuntary conduct by a person that causes an outrageous effects on another. a. True b. False

b.

47. The basic elements of a contract are: offer, acceptance, fair value, lawful subject matter, and genuine consent. a. True b. False

b.

50. Consideration involves the right of individuals to be considered to be able to enter into contracts legally. a. True b. False

b.

51. Courts will not enforce contracts if the consideration is not consistent with what is received in exchange. a. True b. False

b.

54. The Statute of Frauds states that all contacts that involve more than $1,000 must be in writing. a. True b. False

b.

56. Sole proprietorships must register with their state government to be able to operate a business legally. a. True b. False

b.

57. To terminate a partnership, the partners must go through a deconstruction process. a. True b. False

b.

8. When a business lends another business money, it should perfect its security interest by: a. Applying to the IRS for security b. Filing its financing statement with the state secretary of state c. Preparing its inventory for satisfaction d. Obtaining a late-term guarantor e. None of the above

b.

secured creditor is one who: a. Is insured by a third party b. Can take a debtor's property to try to satisfy the debt c. Does not see security to obtain a loan d. Does not use collateral so obtain a loan e. Is insured by the FSLIC

b.

16. Chapter 11 bankruptcies, which are filed by businesses: a. Force the sale of all business assets b. Wipe the slate clean of all debts for a business and allow it to continue operating c. Allow a business to keep operating under reorganization of its activities and debts d. Prohibits the firm from starting any new operations, and it must wind up all old business e. None of the above

c.

23. In general, if a partnership agreement does not specify what happens in case of the death or departure of a partner, one looks to: a. Federal Partnership Act b. Robinson-Patman Act c. Uniform Partnership Act d. Partnership Termination Act e. Partnership Operation Act

c.

24. The business organization that has at least one general partner and other investors who have limited liability is a: a. Corporation b. General partnership c. Limited partnership d. Limited liability company e. Proprietorship

c.

5. Tiny borrows $20,000 from First Bank. Mike is the surety on the loan. Tiny defaults and First required Mike to pay the balance of the loan. In this case, Mike may see: a. First for violating its guarantor obligations b. First for defrauding him c. Tiny to reimburse of exonerate him d. Tiny to enslave himself to Mike e. First to exonerate him

c.

9. In the case of bankruptcy, which of the following classes of creditors have highest priority? a. Taxes b. Costs of preserving and administering the debtor's estate c. Secured creditors d. Rent claims e. General creditors

c.

1. Which of the following debt item(s) are not extinguished by a Chapter 7 bankruptcy? a. Debts owed for the purchase of "necessities" b. Alimony c. Debts owed for food purchases d. All of the above e. None of the above

b.

18. In a(an) ____, the debtor makes a minimum monthly payment and more debt can be added to the account over time. a. Collections account b. Installment account c. Revolving account d. Open account e. Security account

b.

19. The board of directors of a corporation are elected by: a. Top managers b. Shareholders c. Current board members d. The president e. All of the above have equal votes

b.

25. A certification of incorporation from the government: a. Gives a business monopoly privileges b. Is necessary for a corporation to be recognized legally c. Must be obtained by all limited partnerships d. B and C e. None of the above

b.

26. A corporation consists of legally distinct groups, not including: a. Shareholders b. Stakeholders c. Directors d. Managers e. All of the above are included

b.

10. Voluntary Chapter 13 bankruptcies: a. Apply to corporations only b. Apply to businesses with debt of more than $1 million c. Permit business to reorganize while paying debt d. Apply to individuals only e. A, B, and C

d.

2. The final stage of bankruptcy is known as: a. Disruption in bankruptcy b. Removal in bankruptcy c. Distancing of the debtor d. Discharge in bankruptcy e. Divorce from the proceedings

d.

3. Billy wants to borrow $10,000 to start a male belly dancing business. Creditors are not anxious to lend him the funds. Billy convinces Gary to back-up his credit. Gary is: a. The principal b. The grantor c. The testator d. The surety e. The detainer

d.

7. Under Chapter 13, which kind of debt is subject to a different repayment schedule? a. Personal property debt b. Short-term debt c. Unsecured debt d. Long-term, secured debt e. non of the above

d.

mortgage will typically contain: a. A description of the property b. The amount of debt involved c. The state's duties to the mortgagor d. A and B e. A, B, and C

d.

11. According to the UCC, a creditor may repossess a product in which it has a security interest: a. Without judicial process b. Only with a search warrant c. So long as this doesn't cause a breach of peace d. A and B e. A and C

e.

15. Brandon files for a Chapter 11 bankruptcy on behalf of his company, Brandon's B-B-Q. The company is allowed to continue its operations. During this period Brandon is: a. The debtor in possession b. The guarantor in ex... c. A trustee d. A and B e. A and C

e.

20. The owner of a sole proprietorship a. Is legally the same as the business b. Is taxed the same as the business c. May hire any number of employees d. A and B e. A, B, and C

e.

21. A written partnership agreement typically specifies the following except: a. The ownership interest of the partners b. The method of accounting to be used c. The name of the partnership business d. The procedures for dissolution of the partnership e. All of the above

e.

22. Unless otherwise stated by contract, the law of partnership presumes which of the following not to be true? a. Each partner has an equal voice in partnership management b. A majority vote controls ordinary business decisions c. Profits are to be divided among the partners d. Regardless of the amount invested in the partnership, each partner has an equal vote e. All of the above are true

e.