Final Exam

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Which of the following is NOT required to prove a violation of Section​ 2(a) of the​ Robinson-Patman Act?

To violate section​ 2(a), the price discrimination must involve 2 or more sales of the same product to the same purchaser at different prices.

Which of the following is NOT true about a​ member's dissociation from a limited liability company​ (LLC)?

Under no circumstances can a member withdraw from a term LLC.

The Tax Reform Act of 1976 imposes all EXCEPT which of the following​ penalties?

strict liability for the understatement of a​ client's tax obligation

A registration statement must include all EXCEPT which of the​ following?

the mission statement and vision statement of the issuing company

According to the​ RMBCA, the articles of incorporation must include which of the​ following?

the name and address of each incorporator

Which of the following is NOT a good example of an issue addressed by a shareholder​ resolution?

which​ candidate(s) to support for political office in an upcoming election

A limited partnership must​ _____ its affairs on dissolution.

wind up

The universal rules of Kantian ethics are based on which of the following two important​ principles?

consistency and reversibility

According to the​ RULPA, which of the following has priority in the order of distribution of assets of a limited​ partnership?

creditors of the limited partnership

Which of the following is NOT a major responsibility of the Securities and Exchange Commission​ (SEC)?

determining the par value of​ publicly-traded securities

Price fixing is an example of a​ _____ restraint of trade.

horizontal

​_____ directors are the current directors of a corporation.

incumbent

The CPSC is​ a(n) _____ federal administrative agency.

independent

A business or party selling securities to the public is called​ a(n) _____.

issuer

If someone is suing a​ corporation, the complaint and summons is typically served on the​ corporation's _____.

registered agent

Which of the following is NOT true about​ Rawls' social justice​ theory?

A criticism of​ Rawls' social justice theory is that it is difficult to reach consensus on what the universal rules should be.

Which of the following is NOT true about defective formation of a limited​ partnership?

A limited partner may not file a certificate of limited partnership.

Which of the following is NOT a​ security?

a check

Which of the following is an INCORRECT statement regarding the duration of a​ corporation's existence?

Corporations automatically expire twenty​ (20) years after the secretary of​ state's issuance of a certificate of incorporation unless the owners of the corporation expressly petition the secretary of state for a renewal of the corporate charter.

Which of the following is NOT true about Kantian​ ethics?

Critics argue that Kantian ethics does not permit people to determine right and wrong for themselves.

Which of the following is NOT true about​ utilitarianism?

Critics argue that utilitarianism does not permit people to determine right and wrong for themselves.

Which of the following is NOT true regarding​ crowdfunding?

Crowdfunding offerings are not subject to the Securities Act of 1933.

The federal​ Food, Drug, and Cosmetic Act​ (FDCA) gives the​ _____ the authority to regulate the​ testing, manufacture,​ distribution, and sale of drugs.

FDA

Which of the following federal administrative agencies has the authority to​ bring, pursuant to the Federal Trade Commission​ Act, an administrative proceeding to attack a deceptive or an unfair business​ practice?

FTC

Which of the following is NOT true about the​ Food, Drug, and Cosmetic Act​ (FDCA)?

Food must be entirely pure to be distributed or sold.

Which of the following is NOT true about shareholder​ resolutions?

If management opposes a​ resolution, it does not have to be included in the proxy materials issued by the corporation.

Which of the following is an INCORRECT statement regarding the​ Sarbanes-Oxley Act and the​ reason(s) for its​ enactment?

In the late 1990s and early​ 2000s, many small companies in the United States were found to have engaged in massive financial fraud.

Which of the following is NOT true about the Section​ 32(a) of the Securities Exchange Act of​ 1934?

Insider trading falls outside the parameters of Section​ 32(a).

Which of the following is a correct statement regarding the corporate citizenship theory of social​ responsibility?

It contends that corporations owe a duty to promote the same social goals as individual members of society.

Which of the following is an INCORRECT statement regarding ethical​ relativism?

Many philosophers advocate ethical relativism as an acceptable moral theory.

Which of the following is NOT true about the Securities Act of​ 1933?

Securities that are issued online are not covered by the 1933 Act.

Which of the following is NOT a characteristic of a​ corporation?

same identity as​ owner(s)

Before transacting business in a foreign​ state, a foreign limited partnership must file an application for registration with that​ state's _____.

secretary of state

Which of the following is NOT exempt from​ registration?

securities of an emerging growth company

Which of the following is NOT exempt from​ registration?

securities such as mutual funds

Which of the following is NOT a requirement for a corporation to qualify as an S​ corporation?

The corporation must have begun its business operations as either a sole proprietorship or a general partnership.

Which of the following is an INCORRECT statement regarding the duty of care of directors and officers of a​ corporation?

The duty of care is not a fiduciary duty.

Which of the following is NOT an element that must be shown to prove usurping a corporate​ opportunity?

The opportunity is accompanied by demonstrated proof of profitability.

Which of the following is NOT a tender offer​ rule?

The par value rule stipulates that the terms of the tender offer cannot stipulate an offer price for less than the par value of the shares to be purchased.

Which of the following is an INCORRECT statement regarding a joint​ venture?

The parties to a joint venture are called the employer and the employee.

Which of the following is NOT true regarding​ WKSIs?

They must file a new prospectus every time they have a new public offering.

Victims of a securities fraud perpetrated by a firm suffer​ $1 million in damages. The accountants for the firm are found to be 10 percent​ liable, although they did not knowingly participate in the fraud. What​ amount, if​ any, would the accountants owe to the​ plaintiffs?

​$100,000; accountants are liable to their proportionate degree of fault

Section​ _____ of the​ _____ Act prohibits​ contracts, combinations, and conspiracies in restraint of trade.

​1; Sherman

Section​ _____ of the​ _____ Act prohibits monopolization and attempts or conspiracies to monopolize trade.

​2; Sherman

What is one of the differences between an LLC and an​ LLP?

​Accountants, lawyers, and doctors must use the LLP form of​ partnership, not an LLC.

Which of the following is an INCORRECT statement regarding​ cabinet-level federal​ departments?

​Cabinet-level federal departments answer directly to the United States Congress.

​_____ fraud occurs when an accountant acts with​ "reckless disregard" for the truth or the consequences of his or her actions. This type of fraud is sometimes categorized as​ _____.

​Constructive; gross negligence

Which of the following is NOT true about a limited liability partnership​ (LLP)?

A certificate of limited liability partnership is a private document.

Which of the following is NOT true regarding initial public​ offerings?

A company going public does not need to submit a prospectus to the SEC.

Which of the following is an INCORRECT statement regarding incorporation​ procedure?

A corporation can be in incorporated in more than one state.

Which of the following is an INCORRECT statement regarding selecting a state for​ incorporation?

A corporation can be incorporated in more than one state.

Which of the following statements about voluntary dissolution is NOT​ true?

A corporation cannot be voluntarily dissolved.

Which of the following is an INCORRECT statement regarding the corporation as a legal​ person?

A corporation has the same identity as its shareholders.

Which of the following is an INCORRECT statement regarding Delaware corporation​ law?

A corporation must do business in Delaware in order to obtain the benefits of Delaware corporation law.

Which of the following is an INCORRECT statement regarding corporate​ management?

A corporation usually has a decentralized management.

Which of the following is an INCORRECT statement regarding breach of the franchise​ agreement?

A lawful franchise agreement is an enforceable employment contract between the franchisor and the franchisee.

Which of the following is an INCORRECT statement regarding limited​ partnerships?

A limited partnership cannot have more than one general partner.

Which of the following is an INCORRECT statement regarding a limited​ partnership?

A limited partnership has two types of​ partners: general and specific.

Which of the following is a correct statement regarding a limited​ partnership?

A limited partnership must have one or more limited partners.

The​ _____ is a federal administrative agency that is empowered to administer federal securities law.

SEC

Which of the following is NOT true about tying​ arrangements?

Section 1 of the Sherman Act​ (restraints of​ trade) exempts tying arrangements involving real estate.

Which of the following is true about Section​ 10(b) of the Securities Exchange Act of​ 1934?

Section​ 10(b) prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the SEC.

The​ _____ is a federal statute that regulates primarily the issuance of securities by​ corporations, limited​ partnerships, and associations.

Securities Act of 1933

Which of the following is NOT an example of a breach of a​ director's or​ officer's duty of​ care?

a​ director's or an​ officer's failure to realize a profit for the corporation in any given calendar or fiscal year

If the government sued the​ Anheuser-Busch Corporation​ InBev, which is the largest beer producer in the United​ States, for violating Section 2 of the Sherman​ Act, the government would argue that the relevant product market is​ _____.

beer sales

The RULPA identifies the types of activities that a limited partner may engage in without losing his or her limited liability. These activities include all EXCEPT which of the​ following?

being a general partner of the limited partnership

Which of the following is an INCORRECT statement regarding​ members' and​ managers' duty of care to an​ LLC?

A manager of a​ manager-managed LLC does not owe a fiduciary duty of loyalty to the​ LLC, since he or she is not a member.

Which of the following is an INCORRECT statement regarding​ members' and​ managers' duty of loyalty to an​ LLC?

A manager of a​ manager-managed LLC does not owe a fiduciary duty of loyalty to the​ LLC, since he or she is not a member.

​_____ law is enacted by governments that regulate industries and business and professionals.

Administrative

Which of the following is an INCORRECT statement regarding administrative​ law?

Administrative law is enacted by businesses that regulate governments and industries and professionals.

Suppose​ John, Alex,​ Mary, and​ Anna, each a certified public accountant​ (CPA), are partners in an LLP called​ "Alex Anna,​ LLP." One of their audit clients goes bankrupt due to​ fraud, which was not detected due to​ John's negligence. Who is​ liable?

Alex​ Anna, LLP can be sued and the partners are liable up to their contribution amounts. John may be held personally liable because it was his negligence that failed to detect the fraud.

A group​ _____ is also known as a refusal to deal.

boycott

An LLC is formed by members​ John, Alicia, and Margaret. They designated the LLC as​ manager-managed and appoint Alicia and nonmember Robert as its managers. Who has the authority to bind the LLC to​ contracts?

Alicia and​ Robert, because they are the managers of the LLC

Which of the following is an INCORRECT statement regarding​ manager-managed LLCs?

All actions concerning the LLC can be delegated to managers.

Which of the following is NOT true regarding accounting malpractice​ (negligence)?

An accountant is relieved of liability if he or she can prove they followed applicable​ GAAP, GAAS,​ and/or IFRS.

Which of the following is an INCORRECT statement regarding an international branch​ office?

An international branch office is a separate legal entity.

The​ _____ provides an​ _____ offering exemption that permits local businesses to obtain from local investors capital to be used in the local economy without the need to register with the Securities and Exchange Commission​ (SEC).

Securities Act of​ 1933; intrastate

Which of the following is an INCORRECT statement regarding law and​ ethics?

Businesses organized in the United States are not subject to the laws of other countries in which they operate.

​A(n) _____ corporation is a corporation that does not qualify to or does not elect to be federally taxed as an S corporation.

C

Which of the following is an INCORRECT statement regarding common​ stock?

Common stock has a fixed maturity date.

The Williams Act is an amendment to the​ _____.

Securities Exchange Act of 1934

Which of the following is NOT a​ cabinet-level federal administrative​ agency?

Securities Exchange Commission

Which of the following agencies has the authority to regulate the solicitation of​ proxies?

Securities and Exchange Commission​ (SEC)

Which of the following is NOT true about the Equal Access to Justice​ Act?

Congress enacted the Equal Access to Justice Act to protect persons from harassment by federal administrative agencies.

Which of the following is NOT true regarding the Securities Act of​ 1933?

Corporate officers may not be held​ liable, only members of the board of directors can be sued.

​_____ are the most dominant form of business organization in the United​ States, generating more than 85 percent of the​ country's gross business receipts.

Corporations

Which of the following is an INCORRECT statement regarding the corporation as a legal​ person?

Corporations are not separate legal persons.

Which two administrative agencies are responsible for government enforcement of antitrust​ laws?

DOJ and FTC

​_____ formation occurs​ when: 1) a certificate of limited partnership is not properly​ filed; 2) there are defects in a certificate that is​ filed; or​ 3) some other statutory requirement for the creation of a limited partnership is not met.

Defective

​_____ has the most advanced corporation law in the United States.

Delaware

Which of the following is an INCORRECT statement regarding tender offers and the business judgment​ rule?

Due to the business judgment​ rule, the members of the board of directors of a corporation do not owe a fiduciary duty to the corporation and its shareholders.

Which of the following is NOT true about ethical​ fundamentalism?

Ethical fundamentalism is based on the premise that people can use reasoning to reach ethical decisions.

​_____ holds that individuals must decide what is ethical based on their own feelings about what is right and wrong.

Ethical relativism

Which of the following is NOT true about offerings exempt from​ registration?

Exempt transactions that do not have to be registered with the SEC are not subject to the antifraud provisions of the federal securities laws.

The​ _____ is a federal administrative agency empowered to enforce the Federal Trade Commission Act and other federal consumer protection statutes.

Federal Trade Commission (FTC)

The​ _____ is the federal government agency that is empowered to enforce federal franchising rules.

Federal Trade Commission (FTC)

Which of the following is NOT true about​ accountant's work​ papers?

Federal law does not allow for discovery of an​ accountant's work papers in a federal case against the​ accountant's client.

Which of the following is an INCORRECT statement regarding judicial review of administrative agency​ actions?

Federal law prohibits judicial review of administrative agency actions.

Which of the following is an INCORRECT statement regarding laws governing administrative​ procedures?

Few states have enacted administrative procedural acts that govern state administrative procedures.

Which of the following is an INCORRECT statement regarding food​ regulation?

Food must be entirely pure to be distributed or sold.

Which of the following is NOT an advantage to​ franchising?

For the​ franchisee, there are no​ start-up expenses.

Which of the following is NOT true about franchise​ agreements?

Franchisors may not license or disclose their trade secrets to franchisees.

The​ _____ Act gives the public access to documents in the possession of federal administrative agencies.

Freedom of Information Act

Which of the following is an INCORRECT statement regarding generally accepted accounting​ principles?

GAAPs specify the methods and procedures that are to be used by public accountants when conducting external audits of company financial statements.

What are the two uniform standards of professional conduct that CPAs must comply​ with?

Generally Accepted Accounting Principles​ (GAAP) and Generally Accepted Auditing Standards​ (GAAS)

Which of the following is an INCORRECT statement regarding generally accepted auditing​ standards?

Generally accepted auditing standards​ (GAASs) are standards for the preparation and presentation of financial statements.

The​ _____ Act opens most federal administrative agency meetings to the public.

Government in the Sunshine

Which of the following is an INCORRECT statement regarding price​ fixing?

Horizontal price fixing occurs when competitors in different lines of business agree to set the price of goods or services they sell.

Courts apply the​ _____ test to determine whether an arrangement is an investment contract and therefore a security.

Howey

Under the​ _____ test, an arrangement is considered an investment contract if there is an investment of money by an investor in a common enterprise and the investor expects to make profits based on the sole or substantial efforts of the promoter or others.

Howey

Which of the following is NOT a major theory of business​ ethics?

Howley ethics

Which of the following is NOT true about franchise​ agreements?

If a franchisor terminates a franchise agreement without just​ cause, the franchisee cannot sue the franchisor for wrongful termination.

Which of the following is NOT true about executive​ power?

If a person or business does not supply information to the agency​ voluntarily, the agency must obtain a warrant from a federal judge in order to obtain that information.

Which of the following is an INCORRECT statement regarding​ promoters' liability and the​ corporation's liability on​ promoters' contracts?

If the corporation never comes into​ existence, the promoters have no liability on the contract.

Which of the following is an INCORRECT statement regarding a​ short-form merger?

If the parent corporation owns 51 percent or more of the outstanding shares of the subsidiary​ corporation, a​ short-form merger procedure may be followed to merge the two corporations.

Which of the following is NOT true about​ tipper-tippee liability?

If the tippee tips other​ persons, the tippee becomes liable for the profits made by these remote​ tippees, and the original tipper is not liable for the profits made by these secondary tippees.

Which of the following is NOT true about a corporate​ dissolution?

In a voluntary​ dissolution, the liquidation is usually carried out by the secretary of state.

Which of the following is an INCORRECT statement regarding the liability of partners in a limited liability partnership​ (LLP)?

In an​ LLP, there must be at least one general partner who is personally liable for the debts and obligations of the partnership.

Which of the following is an INCORRECT statement regarding a​ manager-managed LLC?

In a​ manager-managed LLC, all actions can be delegated to managers by members of the LLC.

Which of the following is an INCORRECT statement regarding agency authority to bind an LLC to​ contracts?

In a​ manager-managed LLC,​ non-manager members can bind the LLC to contracts.

Which of the following is an INCORRECT statement regarding the regulation of medicinal​ devices?

In​ 1996, the U.S. Congress enacted the Medicinal Device Amendment to the FDCA.

Under the JOBS​ Act, to qualify as an​ EGC, an existing company must satisfy all of the following requirements​ EXCEPT?

It must pledge due diligence in maintaining its status as a​ closely-held corporation.

What of the following is NOT a feature of the​ Sarbanes-Oxley Act?

It prohibits employees of an accounting firm from ever becoming CEO at one of their audit clients.

Which of the following is NOT true about the antifraud provisions of Section​ 14(a) of the Securities Exchange Act of​ 1934?

It prohibits shareholder resolutions.

Which of the following is an INCORRECT statement regarding Section 4205 of the Patient Protection and Affordable Health Care Act of​ 2010?

It was deemed unconstitutional by the United States Supreme Court.

The purpose of the​ _____ Act is to make it easier for​ start-up companies to raise capital through initial public offerings.

JOBS

Suppose that​ Jasmin, Shou-Yi, and Vanessa form an​ LLC, and each contributes​ $25,000 in capital. The LLC operates for a period of​ time, during which it borrows money from banks and purchases goods on credit from suppliers. After some​ time, the LLC experiences financial difficulty and goes out of business. If the LLC fails with​ $600,000 in​ debts, which of the following is a correct statement regarding the personal liability of​ Jasmin?

Jasmin will lose her capital contribution of​ $25,000, but she is not personally liable for the rest of the unpaid debts of the LLC.

When the United States Congress enacted the Securities Act of 1933 and the Securities Exchange Act of​ 1934, it created the​ _____, a​ _____ administrative​ agency, to administer and enforce those statutes.

Securities and Exchange Commission​ (SEC); federal

Which of the following is NOT true regarding the criminal liability of​ accountants?

Securities laws are a federal creation. States do not enact their own securities laws.

Which of the following is NOT true about the​ Food, Drug, and Cosmetic Act​ (FDCA)?

The FDA does not have the authority to deny applications to approve certain food​ additives, drugs,​ cosmetics, and medicinal devices.

Which of the following is NOT a power of the​ FDA?

The FDA prosecutes suspected criminal violations.

Which of the following is an INCORRECT statement regarding the regulation of​ drugs?

The FDCA gives the CPSC the authority to regulate the​ testing, manufacture,​ distribution, and sale of drugs.

Which of the following is an INCORRECT statement regarding the​ Food, Drug, and Cosmetic Act​ (FDCA or FDC​ Act)?

The FDCA was enacted in 1964.

Which of the following is an accurate statement regarding enforcement of the FTC​ Act?

The Federal Trade Commission is exclusively empowered to enforce the FTC Act.

Which of the following is an accurate statement regarding the functions of administrative​ agencies?

The Federal Trade Commission​ (FTC) enforces federal antitrust and consumer protection law.

Which of the following is an INCORRECT statement regarding specific government​ regulation?

The Federal Trade Commission​ (FTC) issues licenses and regulates the operation of television and radio stations.

Which of the following statements about administrative agency functions is NOT​ true?

The Federal Zoning Administration​ (FZA) regulates zoning ordinances.

Which of the following is NOT true about the Jumpstart Our Business Startups Act​ (JOBS Act)?

The JOBS Act prohibits the use of public and Internet advertising in many circumstances.

Which of the following is an INCORRECT statement regarding food​ labeling?

The NLEA does not apply to packaged​ foods, since such foods are regulated by the United States Department of Agriculture.

Which of the following is NOT true about the Nutrition Labeling and Education Act​ (NLEA)?

The NLEA requires drug manufacturers to disclose the number of calories derived from fat and the amount of dietary​ fiber, saturated​ fat, trans​ fat, cholesterol, and a variety of other substances contained in the drug.

Which of the following is NOT true about the federal Privacy​ Act?

The Privacy Act stipulates that federal administrative agencies can collect any information about an individual that they want.

Which of the following is an INCORRECT statement regarding common​ stock?

The RMBCA encourages the concept of par value.

Which of the following is NOT true about SEC actions under the Securities Exchange Act of​ 1934?

The SEC may not require defendants to disgorge illegally gained profits.

Which of the following is an INCORRECT statement regarding the Uniform Franchise Offering Circular​ (UFOC)?

The UFOC satisfies the​ FTC, but not state regulations.

​_____ is a rule stating that an accountant is liable only for negligence to third parties who are in privity of contract or in a​ privity-like relationship with the accountant.

The Ultramares doctrine

Which of the following is an INCORRECT statement regarding product and automobile​ safety?

The United States Congress enacted the Consumer Product Safety Act in 1992.

Which of the following is a CORRECT statement regarding vertical restraints of​ trade?

The United States Supreme Court has applied both the per se rule and the rule of reason in determining the legality of vertical restraints of trade under Section 1 of the Sherman Act.

Which of the following is an INCORRECT statement regarding the​ Sarbanes-Oxley Act?

The act makes it possible for a registered public accounting firm to provide simultaneously audit and bookkeeping services to a public company.

Which of the following is NOT true regarding limited liability​ companies?

Most LLCs are taxed at the entity level.

Which of the following is NOT true regarding Regulation​ A+ offerings?

Most Regulation​ A+ offerings are done through online equity crowdfunding platforms such as SeedInvest and​ StartEngine, which handle the logistics of the offering and accept investments online.

Which of the following is NOT true about antitakeover​ statutes?

Most antitakeover statutes apply only to corporations that are incorporated in the state.

Which of the following is an INCORRECT statement regarding the termination of a​ franchise?

Most franchise agreements permit a franchisor to terminate the franchise at will.

Which of the following is NOT true regarding public​ accounting?

Most public accounting firms are organized and operated as LLCs.

Which of the following is an INCORRECT statement regarding shareholder​ resolutions?

Most shareholder resolutions have a great chance of being enacted.

Which of the following is NOT true about franchise​ agreements?

Most states do not require franchise agreements to be in writing.

Which of the following is an INCORRECT statement regarding franchise​ agreements?

Most states enforce both oral and written franchise agreements.

Which of the following is an INCORRECT statement regarding mutual​ funds?

Mutual funds are not sold to the public.

Which of the following is an example of an​ e-security exchange?

NASDAQ

The​ _____ requires food manufacturers and processors to provide nutrition information on many foods and prohibits them from making scientifically unsubstantiated health claims.

NLEA

Which of the following is NOT true about Section​ 10(b) of the Securities Exchange Act of​ 1934?

Negligent conduct is punishable under Section​ 10(b).

Which of the following is an INCORRECT statement regarding the admission of new partners in a limited​ partnership?

Once a limited partnership has been​ formed, a new limited partner cannot be admitted.

Which of the following is an INCORRECT statement regarding an administrative​ proceeding?

The administrative order need not state the reasons for the​ ALJ's decision.

Which of the following is an INCORRECT statement regarding corporate voting​ requirements?

The affirmative vote of the majority of the​ non-voting shares represented at a​ shareholders' meeting constitutes an act of the shareholders for actions other than for the election of directors.

Which of the following is NOT a requirement of the Administrative Procedures Act​ (APA)?

The agency must make the changes suggested in the​ notice-and-comment period.

Which of the following is NOT true about antitakeover​ statutes?

The antitakeover statutes are meant to protect out of state companies from foreign competition.

Which of the following is an INCORRECT statement regarding a merger or share​ exchange?

The approval of the surviving​ corporation's shareholders is not required if the merger or share exchange increases the number of voting shares of the surviving corporation by 49 percent or less.

Which of the following is NOT true about Section 11 of the Securities Act of​ 1933?

Only the accountants and signers of the registration statements may be held liable under Section 11.

Which of the following is NOT true about the​ Do-Not-Call Registry?

Only​ wire-connected phones can be registered.

Which of the following is an INCORRECT statement regarding the regulation of​ cosmetics?

Ordinary household soap is a cosmetic subject to FDA regulation.

Which of the following is an INCORRECT statement regarding the​ FDA's regulation of​ cosmetics?

Ordinary household soap is included in the​ FDA's definition of cosmetics.

​________ of the largest corporations in the United States have their articles of incorporation filed in the state of​ ________. One​ reason, in addition to​ others, is that its legislature has provided​ ____________ in its corporation code.

Over​ one-half; Delaware; a potent antitakeover statute

In POM​ Wonderful, LLC v.​ Coca-Cola Company​, the court held that​ ________.

POM could proceed with an action under Section 43 of the Lanham Act

Which of the following is NOT true of an ordinary merger or share​ exchange?

The approval of the surviving​ corporation's shareholders is not required if the merger or share exchange increases the number of voting shares of the surviving corporation by 50 percent or less.

Which of the following is an INCORRECT statement regarding the creation of a limited liability partnership​ (LLP)?

The articles of limited liability partnership is a private document.

Which of the following is NOT true about winding up a limited liability company​ (LLC)?

The assets of an LLC that are being dissolved must first be applied to paying off the​ members; thereafter, the surplus amount is distributed to the creditors in equal​ shares, unless the operating agreement provides otherwise.

Which of the following is NOT a criterion a corporation must meet in order to be taxed as an S​ corporation?

The corporation must have no more than​ 1,000 shareholders.

What is the difference between an international branch office and an international​ subsidiary?

The corporation of the international branch office is liable for torts committed by employees of the branch but would not be liable for torts committed by employees of the subsidiary.

Which of the following is a correct statement regarding the creation of a limited​ partnership?

The creation of a limited partnership is formal and requires public disclosure.

​_____ is a rule stating that an accountant is liable for negligence to third parties who are foreseeable users of the​ client's financial statements. It provides the broadest standard for holding accountants liable to third parties for negligence.

The foreseeability standard

​_____ provides the broadest standard for holding accountants liable to third parties for negligence.

The foreseeability standard

Which of the following is an INCORRECT statement regarding the liability of the franchisor and​ franchisee?

The franchisor deals with the franchisee as an employee.

Which of the following is an INCORRECT statement regarding the liability of general partners in a limited​ partnership?

The general partners of a limited partnership have limited liability for the debts and obligations of the limited partnership.

Which of the following is an INCORRECT statement regarding​ Rawls's social justice​ theory?

Under this​ theory, free enterprise is considered the essence of justice.

The Biosafety Protocol is a​ _____-sponsored protocol that requires signatory countries to place the label​ "May contain living modified​ organisms" on all genetically engineered foods.

United Nations

Which organization promulgated the Biosafety Protocol for Genetically Altered​ Foods?

United Nations​ (UN)

Which of the following is an INCORRECT statement regarding the management of an​ LLLP?

Unlike a limited​ partnership, the general partners have management responsibilities of an LLLP.

​_____ is a moral theory with origins in the works of Jeremy Bentham and John Stuart Mill. ​_____ dictates that people must choose the action or follow the rule that provides the greatest good to society. If an action would increase the good of 25 people by one unit each and an alternative action would increase the good of one person by 26​ units, then, according to​ _____, the latter action should be taken. A company is trying to determine whether it should close an unprofitable plant located in a small community.​ _____ would require that the benefits to shareholders from closing the plant be compared with the benefits to​ employees, their​ families, and others in the community from keeping it open.

Utilitarianism

Which of the following is an INCORRECT statement regarding​ utilitarianism?

Utilitarianism dictates that people must choose the action or follow the rule that provides the greatest good to society. This means the greatest good for the greatest number of people.

Which of the following is NOT true about state antitrust​ statutes?

When federal antitrust laws are applied​ loosely, plaintiffs seldom bring lawsuits under state antitrust laws.

Which of the following is an INCORRECT statement regarding administrative​ law?

When the United States Congress enacted the Securities Act of 1933 and the Securities Exchange Act of​ 1934, it created the Federal Trade Commission​ (FTC), a federal administrative​ agency, to administer and enforce those statutes.

Which of the following is NOT an example of a statutorily defined​ security?

a bond

The FTC franchise rule states that if a franchisor makes sales or earnings projections based on hypothetical​ examples, the franchisor must disclose all EXCEPT which of the​ following?

a cautionary statement in at least​ 12-point boldface print that​ reads, ​"​Warning: As a​ franchisee, your contributory or comparative negligence may prevent you from achieving such results. If​ so, you are hereby prohibited from suing the franchisor for breach of the franchise agreement.​"

Which of the following is NOT a​ security?

a promissory note

Which of the following is NOT an example of a common​ security?

a warranty

If a franchisee is the​ __________________ agent of the​ franchisor, the franchisor is responsible for the torts committed and contracts entered while the franchisee was​ ___________________.

actual or​ apparent; acting within the scope of the agency

The FDCA prohibits the​ shipment, distribution, or sale of​ _____ food.

adulterated

Which type of opinion is usually issued when an auditor determines that a company has materially misstated certain items on its financial​ statements?

adverse

​A(n) _____ opinion determines that the financial statements do not fairly represent the​ company's financial​ position, results of​ operations, or change in cash flows in conformity with GAAPs.

adverse

Which of the following is NOT one of the possible opinions offered by an​ auditor?

affirmative opinion

Which of the following is NOT a statutory exemption to federal antitrust​ laws?

airlines

The universal rules of Kantian ethics are based on two important​ principles: 1) consistency - that ​is, _________________, with no​ exceptions-and 2) reversibility - that ​is, ____________________ the morality of someone​ else's conduct.

all cases are treated​ alike; the actor must abide by the rule he or she uses to judge

The piercing the corporate veil doctrine is also called the​ _____ doctrine.

alter-ego

If a drug manufacturer requires patients to purchase its​ blood-monitoring services along with its drug to treat​ schizophrenia, where the drug manufacturer was one of many providing​ blood-monitoring services, but the only manufacturer of the​ drug, this would be​ ________.

an illegal tying arrangement

Which of the following issuers qualifies as a​ "well-known seasoned investor​ (WKSI)"?

an issuer who has issued at least​ $700 million of outstanding equity securities owned by​ non-affiliate investors

Which of the following issuers qualifies as a​ "well-known seasoned investor​ (WKSI)"?

an issuer who has issued​ $1 billion of securities in the previous three years

Section​ 14(a) of the Securities Exchange Act of 1934 is​ a(n) _____ provision that prohibits material misrepresentations or omissions of a material fact in proxy materials.

antifraud

Under the Revised Uniform Limited Partnership​ Act, all of the following events cause the dissolution of a limited partnership​ EXCEPT?

any substantive change in the limited​ partnership's business plan

​A(n)_____ agency is created when a franchisor leads a third person into believing that the franchisee is its agent.

apparant

In​ a(n) _____​ franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor.

area

A limited partnership agreement is also called the​ _____.

articles of limited partnership

According to the​ _____ rule, directors and officers are not liable to the corporation or its shareholders for honest mistakes of judgment.

business judgement

The RULPA identifies the types of activities that a limited partner may engage in without losing his or her limited liability. These activities include all EXCEPT which of the​ following?

committing a tort outside the course and scope of the limited partnership

Cumulative preferred stock provides that any missed dividend payment must be paid in the future to the preferred shareholders before the​ _____________ can receive any dividends. The amount of unpaid cumulative dividends is called​ ________________.

common​ shareholders; dividend arrearages

Federal law prohibits employers from hiring certain illegal alien workers. Suppose an employer advertises the availability of a job and receives no response except from a person who cannot prove he or she is a citizen of this country and does not possess a required visa. The worker and his or her family are destitute. The employer believes she has an ethical obligation to hire the person. In determining whether the employer should violate the law and hire the​ person, this is an example of how law and ethics​ _____.

conflict

Antitrust defendants often opt to settle​ government-brought antitrust actions through a​ _____ in a government civil action.

consent decree

Federal and state governments have enacted a variety of statutes that regulate the safety of​ food, drug,​ cosmetics, toys,​ vehicles, and other products. These laws are collectively referred to as​ _____ laws.

consumer protection

A limited partnership is required by law to keep all EXCEPT which of the following records at its principal​ office?

copies of financial statements older than three years

The​ _____ theory of social responsibility argues that business has a responsibility to improve society and help solve social problems.

corporate citizenship

Under the​ _____ theory of social​ responsibility, corporations owe a duty to subsidize schools and help educate children.

corporate citizenship

Which of the following is NOT a recognized theory of the social responsibility of​ business?

corporate dissolution

The Health Care Reform Act provides a number of new protections for insured persons. These protections include all EXCEPT which of the​ following?

creates a comprehensive system of universal health care

​_____ voting is a system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates.

cumulative

Which of the following actions does NOT require​ shareholders' approval?

declaring a dividend

​_____ formation occurs​ when: 1) a certificate of limited partnership is not properly​ filed; 2) there are defects in a certificate that is​ filed; or​ 3) some other statutory requirement for the creation of a limited partnership is not met.

defective

Most states have all of the following administrative agencies​ EXCEPT?

departments of defense

​A(n) _____ of opinion expresses the​ auditor's inability to draw a conclusion about the accuracy of the​ company's financial records.

disclaimer

If a franchisor violates​ FTC_______________, the wrongdoer is subject to​ ___________________, civil​ fines, and an FTC civil action on behalf of injured franchisees to recover damages from the franchisor that were caused by the violation.

disclosure​ rules; an injunction against further franchise sales

Which of the following is NOT a meeting that is exempt from being held in public under the Government in Sunshine​ Act?

discussing a proposed rule

On the​ _____ and the commencement of the winding up of a limited​ partnership, a certificate of cancellation must be filed by the limited partnership with the secretary of state of the state in which the limited partnership is organized.

dissolution

A​ _____ interest is a​ member's ownership interest in an LLC that entitles the member to receive distributions of money and property from the LLC.

distributional

Ford Motor Company manufactures automobiles and franchises independently owned automobile dealers to sell them to the public. This is an example of​ a(n) _____ franchise.

distributorship

In​ a(n) _____​ franchise, the franchisor manufactures a product and licenses a retail dealer to distribute a product to the public.

distributorship

The Ford Motor​ Company, a major manufacturer of automobiles and other​ vehicles, is incorporated in Delaware. It is​ a(n) _____ corporation in Delaware.

domestic

Which of the following is NOT part of a​ member's fiduciary duty of care in a​ member-managed LLC?

duty not to commit an ordinarily negligent act that injures the LLC

The articles of incorporation of a corporation authorize the corporation to invest in real estate only. If a corporate officer invests corporate funds in the commodities​ markets, the officer is liable to the corporation for any losses suffered because of his or her​ _______.

duty of obedience

Which of the following is NOT a document that is exempt from disclosure under the Freedom of Information Act​ (FOIA)?

emails

The JOBS Act creates a new class of public company and a new category of issuer under federal securities laws called the​ _____ company.

emerging growth

The terms of​ a(n) _____ are specified when an accountant and a client enter into a contract for the provision of accounting services by the accountant.

engagement

The terms of​ a(n) _____ are specified when an accountant and a client enter into a contract for the provisions of accounting services by the accountant.

engagement

Which of the following is NOT a recognized strategy or tactic incumbent management may use in defending against hostile tender​ offers?

engaging in a dark prince merger

If a person looks to the Bible or Koran for ethical rules or​ commands, this is an example of​ _____. If a person looks to Karl Marx for ethical rules or​ commands, this is an example of​ _____.

ethical fundamentalism

Under​ _____, a person looks to an outside source for ethical rules or commands.

ethical fundamentalism

A share​ _____ is a situation in which one corporation acquires all the shares of another​ corporation, and both corporations retain their separate legal existence.

exchange

A dividend preference is the right to receive​ a(n) _____ dividend at set periods during the year.

fixed

Resale price maintenance is also known as vertical price​ _____.

fixing

The Ford Motor​ Company, a major manufacturer of automobiles and other​ vehicles, is incorporated in Delaware. It distributes vehicles in​ Delaware, as well as the other 49 states. The Ford Motor Company is​ a(n) _____ corporation in the other 49 states.

foreign

The​ _____ is the party who is granted the franchise and license in a franchise agreement.

franchisee

The​ _____ is the party who grants the franchise and license in a franchise agreement.

franchisor

The federal Occupational Health and Safety Administration​ (OSHA) is authorized to regulate workplace safety for most industries and businesses in the country. This is an example of​ _____ government regulation.

general

A limited partnership has two types of​ partners: _____.

general and limited

An issuer may be a new company that is selling securities to the public for the first time. This is referred to as​ _____.

going public

Which of the following information does NOT need to be included in the certificate of limited​ partnership?

highest formal educational attainment of each of the general partners

Many tender offers are made without the permission of the target​ company's management. Such offers are often referred to as​ _____ tender offers.

hostile

Which of the following is NOT an example of a defense to price​ discrimination?

if the price differential is due to lack of buyer bargaining power

Federal law prohibits employers from hiring certain illegal alien workers. Suppose an employer advertises the availability of a job and receives no response except from​ Jacob, who cannot prove citizenship of this country and does not possess a required visa. Jacob and his family are destitute. If the employer hires​ Jacob, this would be an example of​ ________.

illegal but ethical conduct

Which of the following is NOT a strategy or tactic used in defending against a hostile tender​ offer?

implementing a black bishop consolidation

Longhorn Corporation has its annual audit done by its outside certified public accountants​ (CPAs), Young​ & Old, CPAs. Priscilla is one of the CPAs who conduct the audit. The audit discloses that the Longhorn​ Corporation's profits have doubled since last​ year, and Priscilla rightfully discloses this fact to​ Martha, the chief financial officer​ (CFO) of Longhorn Corporation. If Priscilla and Martha purchase stock prior to the time the company announces its​ earning, this would be​ ________.

insider trading

When a company employee or company advisor uses material nonpublic information to make a profit by trading in the securities of the​ company, this is known as​ _____.

insider trading

The United States Supreme Court has held that​ _____ of accountants and others​ violate(s) Section​ 10(b) of the Securities Exchange Act of 1934 and SEC Rule​ 10b-5.

intentional conduct and​ recklessness, but not ordinary​ negligence,

Federal and state laws make bribery unlawful. A person violates the law if he or she bribes a judge for a favorable decision in a case. Ethics would also prohibit this conduct. This is an example of how law and ethics​ _____.

intertwine

Ethics and the law are​ _____.

intertwined

A limited partnership is​ a(n) _____ because the​ _____ partner expects to make money based on the effort of the​ _____ partners.

investment​ contract; limited; general

A​ _____ is an arrangement in which two or more business entities combine their resources to pursue a single project or transaction.

joint venture

Administrative law​ _____ preside over administrative proceedings.

judges

In the case of United States v. LaGrou Distribution​ Systems, Incorporated​, the court had to determine if LaGrou​ ________, in violation of federal food safety laws.

knowingly engaged in the improper storage of​ meat, poultry, and other food products

Members of an LLC have​ _____ liability for the​ debts, obligations, and liabilities of an LLC.

limited

Shareholders of a corporation generally have​ _____ liability for the debts and obligations of the corporation.

limited

Most public accounting firms are organized and operated as​ _____.

limited liability partnerships

Which of the following is NOT a remedial power available to a court for a​ defendant's violation of antitrust​ law?

liquidated damages

Zoning laws are enforced by​ ________.

local administrative agencies

Which of the following is NOT a source of a​ corporation's express​ powers?

local ordinances

Directors and officers of a corporation owe a fiduciary duty to act honestly. This​ duty, called the duty of​ _____, requires directors and officers to subordinate their personal interest to those of the corporation and its shareholders.

loyalty

​Ester, Yi,​ Maria, and Enrique form the​ member-managed LLC​ Big.Business.com, LLC, which conducts online auctions over the Internet. Ester secretly starts a competing business to conduct online auctions over the Internet. Ester is liable for breaching her duty of​ _____ to the LLC with​ Yi, Maria, and Enrique.

loyalty

Electronic securities​ transactions, or​ e-securities transactions, are common in all of the following​ EXCEPT?

mailing in proxy statements

Under partnership​ law, general partners have the right to​ ________________. On the other​ hand, as a​ trade-off for__________________, limited partners give up their right to participate in the control and management of the limited partnership.

manage the affairs of the limited​ partnership; limited liability

What is the traditional view of the social responsibility of​ business?

maximize profits

Which theory of the social responsibility of business dominated business and the law during the nineteenth​ century?

maximize profits

The owners of LLCs are usually called​ _____.

members

Cumulative voting gives a​ _____ shareholder a better opportunity to elect someone to the board of directors.

minority

Occupational safety laws that establish minimum safety standards for protecting employees from injuries in the workplace are an example of​ ________.

moral minimum

Some proponents of corporate social responsibility argue that a​ corporation's duty is to make a profit while avoiding causing harm to others. This is the​ _____ theory of social responsibility.

moral minimum

How many countries have agreed to the Biosafety Protocol for Genetically Altered​ Foods?

more than 165

How many countries have agreed to the United Nations Biosafety Protocol for Genetically Altered Foods​ (Biosafety Protocol)?

more than 165

The Ultramares doctrine provides​ a(n) _____ standard for holding accountants liable to third parties for negligence.

narrow

Antitrust defendants often opt to settle​ government-brought antitrust actions by entering a plea of​ _____ in a criminal action.

nolo contendere

The straight voting method is also referred to as​ _____ voting.

noncumulative

Managers of LLCs are​ _____ liable for the​ debts, obligations, and liabilities of the LLC they manage.

not personally

The fiduciary duty of loyalty includes the following duties​ EXCEPT?

not to engage in a known violation of the law

According to the​ Sarbanes-Oxley Act, any person who is employed by a public accounting firm that audits a client cannot be employed by that client as the chief executive officer​ (CEO), chief financial officer​ (CFO), controller, chief accounting​ officer, or equivalent position for a period of​ _____ year(s) following the audit.

one

​A(n) _____ is an agreement entered into among members that governs the affairs and business of the LLC and the relations among​ members, managers, and the LLC.

operating agreement

An​ ALJ's decision is issued in the form of an administrative​ _____.

order

If an officer acts​ ______________ and enters into a contract with a third​ person, but the corporation​ _________________ of the​ contract, the corporation has​ ___________ the contract and is bound by it.

outside the scope of his or her​ employment, accepts the​ benefits, ratified

Which of the following is NOT a recognized strategy or tactic incumbent management may use in defending against hostile tender​ offers?

parallel tender offer

All of the following are powers held by administrative agencies​ EXCEPT?

passing statutes

Market sharing is a​ _____ violation of Section 1 of the Sherman Act.

per se

The​ _____ rule is applicable to restraints of trade considered inherently​ anti-competitive.

per se

Three national breweries agree among themselves that each one will be assigned​ one-third of the country as a geographical​ "territory," and each agrees not to sell beer in the other two​ companies' territories. This arrangement is a​ _____.

per se illegal product division of markets

Suppose Camera Corporation manufactures a​ high-end digital camera and sets a minimum price below which the camera cannot be sold by retailers to consumers. This constitutes​ _____.

per se minimum resale price maintenance

A party who appeals the decision of an administrative agency is called the​ _____.

petitioner

According to the​ _____ doctrine, if a shareholder dominates a corporation and uses it for improper​ purposes, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the​ corporation's debts and obligations.

piercing the corporate veil

​_____ rights give existing shareholders the option of subscribing to new shares being issued in proportion to their current ownership interests.

preemptive

The​ _____ is/are a written disclosure document that must be submitted to the SEC along with the​ _____ and given to prospective purchasers of the securities.

preliminary​ prospectus; registration statement

Which of the following is NOT a statutory exemption to federal antitrust​ laws?

privately owned companies

In​ a(n) _____​ franchise, the franchisor provides a secret​ formula, or the​ like, to the franchisee. The franchisee then manufactures the product at its own location and distributes it to retail dealers.

processing plant

​A(n) _____ is a person who organizes and starts a​ corporation, negotiates and enters into contracts in advance of its​ formation, and finds the initial investors to finance the corporation.

promotor

Jackie is the president of a corporation and a statutory insider. On February​ 1, she purchases​ 2,000 shares of her​ employer's stock at​ $10 per share. On June​ 1, she sells the stock for​ $14 per share. Under Section 16 of the Securities Exchange Act of​ 1934, the corporation may​ ________.

recover the​ $8,000 profit because the trades occurred within 6 months of each other

A right of first​ _____ is an agreement that requires a selling shareholder to offer his or her shares for sale to the other parties to the agreement before selling them to anyone else.

refusal

The​ _____ standard holds that only unreasonable restraints of trade violate Section 1 of the Sherman Act.

rule of reason

Securities that are exempt from registration with the SEC include all EXCEPT which of the​ following?

securities that can be classified as either common stock or preferred stock

Owners of corporations are called​ _____.

shareholders

Market​ _____ is a restraint of trade in which competitors agree that each will serve only a designated portion of the market.

sharing

Which of the following is NOT a type of activities that a limited partner may engage in without losing limited liability under the Revised Uniform Limited Partnership Act​ (RULPA)?

signing contracts on behalf of the partnership

Which of the following is NOT a recognized theory of the social responsibility of​ business?

societal harmony

A limited partnership is also known as​ a(n) _____.

special partnership

The Federal Aviation Administration​ (FAA) regulates the operation of commercial airlines. This is an example of​ _____ government regulation.

specific

Because of their size and presence in the​ market, well-known seasoned investors​ (WKSIs) are granted substantial flexibility of communication not provided to other issuers. In addition to​ a____________________, a WKSI can release​ factual-information, __________________​ information, electronic​ communications, and​ free-writing prospectuses​ ___________________ significant restrictions during the entire offering period.

statutory​ prospectus; forward-looking; without

Unless otherwise required by a​ corporation's articles of incorporation or by corporate​ law, voting for the election of directors is by the​ _____ voting method.

straight

A​ _____ is an arrangement between two or more companies whereby they agree to ally themselves and work together to accomplish a designated objective.

strategic alliance

Under the​ RULPA, a limited partner is liable as a general partner if the​ partner's participation in the control of the business​ is__________________________, but the limited partner is liable only to persons who reasonably believed the limited partner to be a general partner​ [RULPA Section​ 303(a)]. This is called​ ____________.

substantially the same as that of a general​ partner; the control rule

To prove that tying​ existed, the defendant must be shown to have had​ _____________in the tying product market to​ _________________ in the tied product market.

sufficient economic​ power; restrain competition

The articles of incorporation or the bylaws of a corporation can require a greater than majority of the shares to constitute a quorum of the vote of the shareholders. This is called a​ _____ voting requirement.

supramajority

Which of the following is NOT a basic form of​ franchises?

temporal

A​ _____ offer is an offer that an acquirer makes directly to a target​ corporation's shareholders in an effort to acquire the target corporation.

tender

According to​ _____, an accountant is liable only for negligence to third parties who are in privity of contract or in a​ privity-like relationship with the accountant.

the Ultramares doctrine

Which of the following is a major rule of liability that a state can adopt in determining whether an accountant is liable in negligence to third​ parties?

the Ultramares doctrine

A registration statement must include all EXCEPT which of the​ following?

the articles of organization of the issuing company

Under the​ RULPA, all EXCEPT which of the following events cause the dissolution of a limited​ partnership?

the failure to generate a profit in any given fiscal or calendar year

Suppose a price increase for regular coffee causes consumers to switch to tea. The two products are part of​ _____ line of commerce because they are considered​ _____.

the​ same; interchangeable

Which of the following is NOT a corporate​ power?

to make excessive contributions to a political campaign

The formula for the​ Coca-Cola soft drink is a​ highly-protected _____.

trade secret

A multinational corporation is also known as​ a(n) _____ corporation.

transnational

In terms of membership on the Public Company Accounting Oversight Board​ (PCAOB), _____.

two of the members must be​ CPAs, and three must not be CPAs

An act by a corporation that is beyond its express or implied powers is called​ a(n) _____ act.

ultra vires

The general partners of a limited partnership have​ _____ liability for the debts and obligations of the limited partnership.

unlimited

​A(n) _____ opinion is the most favorable opinion an auditor can give.

unqualified

​A(n) _____ opinion represents an​ auditor's finding that the​ company's financial statements fairly represent the​ company's financial​ position, the results of its​ operations, and the change in cash flows for the period under​ audit, in conformity with generally accepted accounting principles​ (GAAPs).

unqualified

Negligence usually involves a​ director's or​ officer's failure to do any of the following​ EXCEPT?

usurp a corporate opportunity.

​A(n) _____ restraint of trade occurs when two or more parties on different levels of distribution enter into a​ contract, combination, or conspiracy to restrain trade.

vertical

A limited liability limited partnership must identify itself by using​ _____ after the partnership name.

​"L.L.L.P." or​ "LLLP"

A whistleblower bounty program allows a person who provides information that leads to a successful SEC action in which more than​ _____ is recovered to receive​ _____.

​$1 million; 10 to 30 percent of the money collected

The SEC has adopted the Small Company Offering Registration​ (SCOR) for companies proposing to raise​ _____ or less in any​ _____ period from a public offering of securities.

​$1 million;​ one-year

Two general partners each contribute​ $10,000 in capital to the limited partnership. Two limited partners each contribute​ $20,000 capital. The total amount of contributed capital is​ $60,000. The limited partnership agreement does not stipulate how profits and losses are to be allocated. Assume that the limited partnership makes​ $3 million in profits. Under the​ RULPA, each general partner would receive​ ____________ in​ profit, and each limited partner would receive​ ____________ in profit.

​$500,000; $1,000,000

Section​ _____ of the​ _____ prohibits any manipulative or deceptive practice in connection with the purchase or sale of any security.

​10(b); Securities Exchange Act of 1934

Section​ _____ of the​ _____ imposes civil liability on accountants and others for​ 1) making misstatements or omissions of material facts in a registration statement or​ 2) failing to find such misstatements or omissions.

​11(a); Securities Act of 1933

Section​ _____ of the​ _____ requires that any party that acquires​ _____ percent or more of any equity security of a company registered with the SEC must report the acquisition to the SEC and disclose its intentions regarding the acquisition.

​13(d); Securities Exchange Act of​ 1934; five

Section​ _____ of the​ _____ gives the Securities and Exchange Commission​ (SEC) the authority to regulate the solicitation of proxies.

​14(a); Securities Exchange Act of 1934

Section​ _____ of the​ _____ is an antifraud provision that prohibits material misrepresentations or omissions of a material fact in the proxy materials.

​14(a); Securities Exchange Act of 1934

If a​ shareholders' meeting is not held within either​ _____ months of the last annual meeting or​ _____ months after the end of the​ corporation's fiscal​ year, whichever is​ earlier, a shareholder may petition the court to order the meeting held.

​15; 6

Section​ _____ of the​ _____ Act permits the government or a private plaintiff to obtain an injunction against​ anti-competitive behavior that violates antitrust laws.

​16; Clayton

Section​ _____ of the​ _____ imposes civil liability on any person who makes false or misleading statements of material fact in any​ application, report, or document filed with the SEC.

​18(a); Securities Exchange Act of 1934

Section​ _____ of the​ _____ Act permits any person who suffers antitrust injury in his or her​ "business or​ property" to bring a private civil action against the offenders.

​4; Clayton

Section​ _____ of the​ _____ Act prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce.

​5; Federal Trade Commission

​Today, more than​ _____ franchise outlets in the United States account from more than​ _____ percent of retail sales and about​ _____ percent of the gross domestic product.

​700,000; 25; 15

According to the​ courts, and as a general​ rule, market share above​ _____ percent is monopoly​ power, while market share under​ _____ percent is not.

​70; 20

Section​ _____ of the​ _____ Act gave the​ _____ the power to prevent anticompetitive mergers.

​7; Clayton; federal government

The JOBS Act amends Regulation​ _____ to permit​ non-reporting companies to sell up to​ _____ of securities to the public during a​ _____ period.

​A; $50​ million; one-year

In​ 2003, the United States Congress required the​ _____ to create and administer the National​ _____ Registry.

​FTC; Do-Not-Call

The​ _____ Trade Commission has adopted the FTC franchise​ rule, which requires franchisors to make full​ _____ disclosures nationwide to prospective franchisees.

​Federal; presale

Certified public accountants must comply with two uniform standards of professional​ conduct: _____ and​ _____.

​GAAPs; GAASs

Which of the following is an INCORRECT statement regarding corporate​ shareholders?

​Generally, shareholders have unlimited liability for corporate debts.

​_____ is the purchase by a target corporation of its stock from an actual or perceived tender offeror at a​ _____.

​Greenmail; premium

Which of the following is an INCORRECT statement regarding corporate​ bylaws?

​Incorporators, not the initial​ directors, can adopt the bylaws of the corporation.

​_____ trading occurs when a company employee or company advisor uses material​ _____ information to make a profit by trading in the securities of the company.

​Insider; nonpublic

Suppose that while conducting an​ audit, accountants fail to detect a fraud in the financial statements. The​ accountants' unqualified opinion is included in the registration statement and prospectus for the offering. The investor can sue the makers of the misrepresentation for​ _____ and the accountants for​ _____.

​fraud; negligence

A limited partnership is not dissolved on the withdrawal of a​ ________________ partner if​ (1) the certificate of limited partnership permits the business to be carried on by the remaining​ _____________________ partner or partners or​ (2) within 90 days of the​ withdrawal, all​ ____________________ partners agree in writing to continue the business​ (and select a general partner or​ partners, if​ necessary) [RULPA Section​ 801].

​general; general; remaining

Suppose that Technology Incorporated wants to acquire Digital Corporation. Technology Incorporated makes a tender offer to the shareholders of Digital Corporation to acquire their shares of Digital Corporation. This is a​ _____ tender offer in which Technology Incorporated is the tender​ _____ and Digital Corporation is the​ _____ corporation.

​hostile; offeror; target

Suppose the Walt Disney Company owns the merchandising rights to Winnie the Pooh stories and all the characters associated with Winnie the Pooh stories. The Walt Disney Company enters into an agreement whereby it permits the Beijing Merchandising​ Company, a business formed under Chinese​ law, to manufacture and distribute a line of​ clothing, children's​ toys, and other items bearing the likeness of Winnie the Pooh. This is a​ _____, with Walt Disney Company the​ _____, and Beijing Merchandising Company the​ _____.

​license; licensor; licensee

In a licensing​ arrangement, the party who grants a license is known as the​ _____, while the party to whom the license is granted is known as the​ _____.

​licensor; licensee

Licensing occurs when one business or party that owns​ trademarks, service​ marks, trade​ names, and other intellectual property​ (the _____) contracts to permit another business or party​ (the _____) to use its​ trademarks, services​ marks, trade​ names, and other intellectual property in the distribution of​ goods, services,​ software, and digital information.

​licensor; licensee

A bond is a​ _____________ security that is​ _________________.

​long-term, debt; secured by some form of collateral

A debenture is a​ _____________ debt instrument that is​ _________________.

​long-term, unsecured; based on a​ corporation's general credit standing

An LLC can be either​ a(n) _____-managed LLC or​ a(n) _____-managed LLC.

​member; manager

An LLC is a​ _____-managed LLC unless it is designated as a​ _____-managed LLC in its articles of​ _____.

​member; manager; organization

In recent​ decades, EU enforcement of antitrust laws has been​ _______________ stringent than the enforcement of antitrust laws in the United States.​ Thus, multinational corporations​ _____________________ when proposing mergers or engaging in business in Europe.

​more; must consider EU antitrust laws

If the board of directors of the target corporation does not agree to a merger or an​ acquisition, the acquiring corporation​ (the tender​ _____) can make a tender offer for the shares directly to the shareholders of the​ _____ corporation.

​offeror; target

After a share​ exchange, one corporation​ (the _____​ corporation) owns all the shares of the other corporation​ (the _____​ corporation).

​parent; subsidiary

Section 406 of the​ Sarbanes-Oxley Act requires a​ _____ company to disclose whether it has adopted a code of ethics for its​ _____.

​public; senior financial officers

Proving that a defendant is in violation of Section 2 means proving that the defendant in the​ _____ market possesses​ _____ power and engaged in a​ _____ act of monopolization to acquire or maintain that power.

​relevant; monopoly; willful

A note is a​ _________ ​ _____________ security with a maturity of 5 years or less. Notes can be​ _____________.

​short-term, debt; either secured or unsecured

A Small Company Offering Registration​ (SCOR) is a method for​ ________________ companies to sell up to​ $1 million of securities during a​ _____________ -month period to the public by using a​ question-and-answer disclosure form called Form​ _____________.

​small; 12;​ U-7

A limited liability limited partnership​ (LLLP) may be organized under​ _____ law by filing articles of​ _____ with the​ _____.

​state; limited liability limited​ partnership; secretary of state

Administrative law is a combination of​ _____ and​ _____ law.

​substantive; procedural

A person who discloses material nonpublic information to another person is called​ a(n) _____, while a person who receives such information is known as​ a(n) _____.

​tipper; tippee

In​ 1972, the United States Congress created the​ _____.

CPSC

Which of the following federal administrative agencies is empowered to adopt rules and regulations to interpret and enforce the Consumer Product Safety​ Act?

CPSC

​_____-level federal departments answer directly to the United States President.

Cabinet

An LLC is​ a(n) _____ LLC unless it is designated as​ a(n) _____ LLC.

​at-will; term

A certificate of​ _____ is a document that is filed with the​ _____ on the dissolution of a limited partnership.

​cancellation; secretary of state

​Accountants, lawyers, and doctors must use the LLP form of​ partnership, not an LLC.

​chain-style

When an administrative agency is​ created, certain powers are delegated to it. The agency has only the​ legislative, judicial, and executive powers that are so​ delegated, which is called​ the_________________ doctrine.​ Thus, an agency can adopt a rule or regulation​ (a(n) _______________​ function), prosecute a violation of the statute or rule​ (a(n) __________________​ function), and adjudicate the dispute​ (a(n) ________________​ function).

​delegation; legislative;​ executive; judicial

During which decade did the United States Congress enact the Administrative Procedure​ Act?

1940's

When was the Drug Amendment to the FDCA​ enacted?

1962

The Sherman Act has been called the​ "Magna Carta of​ _____."

free enterprise

Which of the following is NOT an exemption to federal antitrust​ laws?

the NFL

Which of the following is NOT true regarding Regulation​ A+ offerings?

Less information is required when they file their registration statement.

Which of the following is an INCORRECT statement regarding state and local administrative​ agencies?

Less than​ one-half of the states have created administrative agencies to enforce and interpret state regulatory​ law, with the remaining states relying exclusively on federal administrative regulation.

The general partners of the limited partnership vote to make​ Lucinda, a limited​ partner, president of the limited partnership. Lucinda therefore has two distinct relationships with the limited​ partnership: first as an investor and limited​ partner, and second as a manager​ (president) of the limited partnership. In this​ case, ________.

Lucinda can lawfully participate in the management of the limited partnership without losing the limited liability shield granted by her limited partner status.

Administrative agencies that are created by the​ _____________ are called federal administrative agencies. Federal administrative agencies have​ __________________ regulatory powers over key areas of the national economy.

U.S.​ Congress; broad

The​ _____ is a uniform disclosure document that requires a franchisor to make specific​ pre-sale disclosures to prospective franchisees.

UFOC

The​ _____ is a model act that provides comprehensive and uniform laws for the​ formation, operation, and dissolution of LLCs.

ULLCA

Which of the following federal administrative agencies conducts inspections of food processing and storage​ facilities?

USDA

The articles of incorporation are also referred to as the corporate​ _____.

charter

Which of the following is NOT a possible preference held by preferred​ stockholders?

right to authorize new shares

​Anheuser-Busch InBev is a brewer that sells beer nationally. Upper Brewer is a local brewery that sells beer only in the state of Michigan. If​ Anheuser-Busch intends to acquire Upper​ Brewery, the relevant section of the country is​ _____.

Michigan

Section 4205 of the Patient Protection and Affordable Health Care Act of 2010 requires restaurants and retail food establishments with​ _____ or more locations to disclose calorie counts of their food items and supply information on how many calories a healthy person should eat in a day.

20

Regulation​ A+ offerings are divided into two tiers. Tier 1 permits an issuer to raise up to​ $_____ in a​ 12-month period. Tier 2 permits an issuer to raise up to​ $_____ in a​ 12-month period.

20​ million; 50 million

The​ _____ is a federal statute that establishes procedures to be followed by federal administrative agencies while conducting their affairs.

APA

Which of the following is NOT true regarding​ accountant-client privilege?

Accountants cannot be called as a witness against a client in a court action.

Which of the following is NOT true about the​ Food, Drug, and Cosmetic Act​ (FDCA)?

A manufacturer may not be held liable for deceptive labeling or packaging.

Which of the following is a correct statement regarding a​ merger?

A merger occurs when one corporation is absorbed into another corporation.

Which of the following is an INCORRECT statement regarding the winding up of a limited​ partnership?

A partner who winds up the affairs of a limited partnership has fewer rights than a partner winding up a general partnership.

Which of the following is an INCORRECT statement regarding product and automobile​ safety?

A private party cannot sue for an injunction to prevent violations of the CPSA.

Which of the following is an INCORRECT statement regarding a share​ exchange?

A share exchange cannot be used to create a holding company arrangement.

Which of the following is NOT true about terminating a​ franchise?

A single failure to meet a​ quality-control standard is a cause for termination.

Which of the following is a correct statement regarding a strategic​ alliance?

A strategic alliance is an arrangement between two or more companies whereby they agree to ally themselves and work together to accomplish a designated objective.

Which of the following is an INCORRECT statement regarding shareholder voting​ trusts?

A voting trust may not authorize the trustee to vote the shares held by the trust at his or her discretion.

Which of the following is NOT true regarding the management of an​ LLC?

All actions in a​ manager-managed LLC must be delegated to the managers.

What of the following is NOT true regarding state securities​ laws?

All states have enacted securities laws except New York.

Which of the following is a correct statement regarding a limited liability company​ (LLC)?

An LLC is a separate legal entity.

Which of the following is an INCORRECT statement regarding the management of an​ LLC?

An LLC must be managed by designated​ management, not by its members.

Which of the following is an INCORRECT statement regarding a limited liability limited partnership​ (LLLP)?

An LLLP is a type of general partnership.

Which of the following is an INCORRECT statement regarding an​ LLLP?

An LLLP requires at least two general partners and at least two limited partners.

Which of the following is an INCORRECT statement regarding​ shareholders' meetings?

Annual​ shareholders' meetings must be held at the times fixed in the articles of organization.

Which of the following is NOT true about continuing an​ LLC?

At the expiration of the term of a term​ LLC, the members may not continue the LLC.

​_____ can be defined as a verification of a​ company's books and records.

Audit

Which of the following is an INCORRECT statement regarding the sale or lease of corporate assets other than in the usual and regular course of​ business?

A​ corporation's board of directors may sell all of the assets of the corporation without shareholder approval.

Which of the following is an INCORRECT statement regarding capital contributions to an​ LLC?

A​ member's capital contribution to an LLC may not be in the form of services.

Which of the following is an INCORRECT statement regarding a distributional interest in an​ LLC?

A​ member's distributional interest in an LLC must be transferred in whole.

Which of the following is an INCORRECT statement regarding capital contributions to an​ LLC?

A​ member's obligation to contribute capital is excused by the​ member's death.

Which of the following is an INCORRECT statement regarding electronic securities​ transactions?

Because of concerns regarding identity theft and other forms of​ fraud, electronic securities transactions are a generally disfavored method of trading in securities.

Which of the following is NOT​ true?

Before transacting business in a foreign​ state, a foreign limited partnership must file an application for registration with that​ state's secretary of state.

The United Nations Biosafety Protocol for Genetically Altered Foods is also referred to as the​ _____.

Biosafety Protocol

Suppose that a new oil field is discovered in northern Canada. Two large oil​ companies, ChevronTexaco Corporation and ConocoPhillips​ Corporation, would each like to drill for oil​ there, but neither one has sufficient resources to do so alone. They join together to form a joint venture​ partnership, and each contributes​ $100 million capital to the joint venture. If the joint venture fails and the joint venture owes​ $1 billion to its​ creditors, which of the following is an accurate statement regarding the liability of ChevronTexaco and ConocoPhillips for the joint​ venture's unpaid debts and​ obligations?

Both ChevronTexaco and ConocoPhillips are each responsible for the joint​ venture's unpaid debts and obligations.

Which of the following is a correct statement regarding the liability of joint venturers for the debts and obligations of the joint venture​ corporation?

Joint venturers are liable for the debts and obligations of the joint venture corporation only up to their capital contributions to the joint venture corporation.

Which of the following is NOT true about a joint​ venture?

Joint ventures must file for a certificate of joint venture.

Which of the following is an INCORRECT statement regarding Kantian​ ethics?

Kant believed that people owe moral duties that are based on conditional rules.

​_____ is also called duty ethics. According to​ _____, people owe moral duties that are based on universal rules.

Kantian ethics

​A(n) _____ is an unincorporated business entity that combines the most favorable attributes of general​ partnerships, limited​ partnerships, and corporations.

LLC

Which of the following is an INCORRECT statement regarding limited liability companies​ (LLCs)?

LLCs are creatures of federal statue.

Which of the following is NOT true about limited liability partnerships​ (LLPs)?

LLPs are creatures of federal​ law, not state law.

Which of the following is a correct statement regarding a limited liability partnership​ (LLP)?

LLPs are creatures of state law.

Which of the following is NOT true regarding​ short-swing profits and Section 16 of the Securities Exchange Act of​ 1934?

Lack of intent is a defense to liability under Section 16.

​_____ stock is a type of equity security that is given certain preferences and rights over common stock.

Preferred

Which of the following is an INCORRECT statement regarding preferred​ stock?

Preferred stock is an equity security that represents the residual value of a corporation.

Which of the following is an INCORRECT statement regarding preferred​ stock?

Preferred stockholders have unlimited liability for corporate debts and other obligations.

Which of the following is an INCORRECT statement regarding price​ fixing?

Price fixing agreements cannot occur between buyers.

​_____ administrative law establishes the procedures that must be followed by an administrative agency while enforcing substantive laws.

Procedural

Which of the following is NOT true about profit maximization​ theory?

Profit maximization theory holds that the interests of other constituencies​ (e.g., employees,​ suppliers, residents of the communities in which businesses are​ located) must be given consideration over profit.

Which of the following is NOT true about reporting​ companies?

Reporting companies tend to be smaller corporations.

​_____ is a rule stating that an accountant is liable only for negligence to third parties who are members of a limited class of intended users of the​ client's financial statements. It provides a​ _____ standard for holding accountants liable to third parties for negligence than does the Ultramares doctrine.

Section 552 of the Restatement​ (Second) of​ Torts; broader

The majority of states have adopted which rule of liability in determining whether an accountant is liable in negligence to third​ parties?

Section 552 of the Restatement​ (Second) of Torts

Which of the following is a major rule of liability that a state can adopt in determining whether an accountant is liable in negligence to third​ parties?

Section 552 of the Restatement​ (Second) of Torts

​_____ is a rule stating that an accountant is liable only for negligence to third parties who are members of a limited class of intended users of the​ client's financial statements.

Section 552 of the Restatement​ (Second) of Torts

Which of the following is NOT true about shareholder​ resolutions?

Shareholder resolutions are usually made when the corporation is considering a merger.

Which of the following is an INCORRECT statement regarding shareholder voting​ agreements?

Shareholder voting agreements are limited in duration.

Which of the following is NOT true of dissenting shareholder appraisal​ rights?

Shareholders do not have to be notified of the existence of their appraisal rights before a transaction can be voted on.

Which of the following is an INCORRECT statement regarding a​ corporation's shareholders?

Shareholders have comprehensive management duties.

Which of the following is NOT true about the Homeland Security​ Act?

The DHS is the largest governmental agency.

Which of the following is NOT true about food​ labeling?

The Department of Agriculture adopted consistent labeling requirements for the raw fruits and vegetables products it regulates.

A new natural gas field is discovered in northern Canada. Two natural gas​ companies, Small Gas Corporation and Tiny Gas​ Corporation, would each like to drill for natural gas​ there, but neither one has sufficient resources to do so alone. They join together to form a joint venture​ partnership, and each contributes​ $100 million capital to the joint venture. If the joint venture fails and the joint venture owes​ $1 billion to its​ creditors, which it cannot​ pay, _______.

Small Gas and Tiny Gas are each responsible for the joint​ venture's unpaid debts and obligations

A new natural gas field is discovered in northern Canada. Two natural gas​ companies, Small Gas Corporation and Tiny Gas​ Corporation, would each like to drill for natural gas​ there, but neither one has sufficient resources to do so alone. Small Gas Corporation and Tiny Gas Corporation form a third​ corporation, called Big Gas​ Corporation, to operate a joint venture. Small Gas and Tiny Gas each contribute​ $100 million capital to Big Gas​ Corporation, and each becomes a shareholder of Big Gas Corporation. If the joint venture fails and Big Gas Corporation owes​ $1 billion to its​ creditors, which it cannot​ pay, _______.

Small Gas and Tiny Gas each lose their​ $100 million capital contributions but are not liable for any further unpaid debts or obligations of Big Gas Corporation

Which of the following is NOT true about the social responsibility of​ business?

Social responsibility requires that business decisions be based solely on a​ cost-benefit analysis and how they affect the bottom line.

Which of the following is true about​ accountant-client privilege?

Sometimes clients of accountants are sued in court.

Which of the following is true about state antitrust​ laws?

State antitrust statutes are usually patterned after federal antitrust statutes.

Which of the following is NOT true about false and deceptive​ advertising?

Statements of opinion and sales talk​ (e.g., "This is a great​ car") constitute false and deceptive advertising.

Which of the following is an INCORRECT statement regarding a strategic​ alliance?

Strategic alliances have the same protection as mergers.

Which of the following is NOT true about a strategic​ alliance?

Strategic alliances resemble joint​ ventures, except that joint ventures are usually formed to pursue ongoing business operations rather than to focus on a single project or transaction.

​_________________ do not have the same protection as​ mergers, ____________, or​ franchising, and sometimes they are dismantled. Consideration must always be given to the fact that a​ __________________ is also a​ ____________________.

Strategic​ alliances; joint​ ventures; strategic alliance​ partner; future potential competitor

​_____ administrative law is law that an administrative agency enforces

Substantive

​_____ law is law that an administrative agency enforces.

Substantive

Which of the following is NOT true about the Securities Exchange Act of​ 1934?

The 1934 Act applies to the original issue of​ securities, including initial public offerings​ (IPOs) by new public companies and the sales of new securities by existing companies.

Which of the following is an INCORRECT statement regarding Section 5 of the FTC​ Act?

The Act prohibits​ false, but not​ deceptive, advertising.

Suppose that​ McDonald's Corporation, a​ fast-food restaurant​ franchisor, grants a restaurant franchise to Tina Corporation. Tina Corporation opens the franchise restaurant. One​ day, a customer at the franchise spills a chocolate shake on the floor. The employees at the franchise fail to clean up the spilled​ shake, and one hour​ later, another customer slips on the spilled shake and suffers severe injuries. Which of the following is a correct statement regarding the liability of​ McDonald's Corporation​ and/or Tina​ Corporation?

The injured customer can recover damages from Tina​ Corporation, but not​ McDonald's Corporation.

Which of the following is NOT true about a proxy​ contest?

The insurgent shareholders can challenge the incumbent directors in a proxy​ contest, in which the incumbent directors solicit proxies from the insurgent shareholders.

Which of the following is NOT true about crowdfunding​ offerings?

The issuer of the crowdfunding offering must disclose five years of financial information.

Which of the following is an INCORRECT statement regarding a joint venture​ corporation?

The joint venturers are employees of the joint venture corporation.

Which of the following is NOT true about limited partnership name restrictions under​ RULPA?

The name must contain the words limited partnership or an abbreviation thereof.

Which of the following is an INCORRECT statement regarding corporate voting​ requirements?

The record date is set forth in the​ corporation's articles of organization.

Which of the following is an INCORRECT statement regarding the registered office​ and/or registered agent of a​ corporation?

The registered office must be the same as the​ corporation's place of business.

Which of the following is NOT true about administrative​ dissolution?

The secretary of state can obtain administrative dissolution of a corporation if the corporation has been sued.

Which of the following is an INCORRECT statement regarding an international subsidiary​ corporation?

The subsidiary corporation is organized under the laws of the home country.

Which of the following is NOT true about apparent​ agency?

The use of the same name makes a franchisor liable for the​ franchisee's actions.

Which of the following is an INCORRECT statement regarding an administrative​ proceeding?

There is a jury in an administrative proceeding.

What of the following is true regarding state securities​ laws?

These laws require registration of certain securities.

Which of the following is NOT true about​ non-for-profit corporations?

They are prohibited from making a profit.

Which of the following is NOT true about the ownership of​ for-profit corporations?

They can be owned by the government.

Private parties who have been injured by certain securities violations may bring a civil action against the violator under Section 12 of the Securities Act of 1933. What remedies are​ available?

They may rescind the purchase or sue for damages.

Which of the following is NOT true regarding small company​ offerings?

They must file a registration​ statement, prospectus, and a​ question-and-answer form.

Which of the following is NOT true regarding emerging growth​ companies?

They must submit a confidential draft registration statement with the SEC.

Which of the following is an INCORRECT statement regarding federal administrative​ agencies?

The​ Workers' Compensation Commission​ (WCC) is an example of a federal independent agency.

Which of the follows correctly ranks the major rules of liability​ (Ultramares, Section​ 552, foreseeability​ standard) in order from least broad to broadest standard for holding accountants liable to third parties for​ negligence?

Ultramares​, Section​ 552, foreseeability standard

Which of the following is an INCORRECT statement regarding ethical​ fundamentalism?

Under ethical​ fundamentalism, the people must choose the action or follow the rule that provides the greatest good to society.

Which of the following is an INCORRECT statement regarding the taxation of​ LLCs?

Under the Internal Revenue​ Code, for federal income tax​ purposes, an LLC is taxed as a corporation unless it elects to be taxed as a partnership.

After conducting considerable research and​ investigation, the directors of a major automobile company decide to produce large and expensive​ sport-utility vehicles​ (SUVs). Three years​ later, when the SUVs are introduced to the public for​ sale, few of them are sold because of the​ public's interest in buying​ smaller, less expensive automobiles due to an economic recession and an increase in gasoline prices. In this​ case, the directors are protected by the​ _____ rule.

business judgment

Suppose that​ McDougal's Corporation, a​ fast-food restaurant​ franchisor, grants a restaurant franchise to​ O'Leary Corporation.​ O'Leary Corporation opens the franchise restaurant. One​ day, a customer at the franchise spills a chocolate shake on the floor. The employees at the franchise fail to clean up the spilled​ shake, and one hour​ later, another customer slips on the spilled shake and suffers severe physical injuries. The injured customer​ ________.

can recover damages from the​ franchisee, O'Leary​ Corporation, because it was​ negligent, but not the​ franchisor, McDougal's Corporation

As a general​ rule, members of an LLC are not personally liable to third persons for the​ debts, obligations, and liabilities of an LLC beyond their​ _____.

capital contributions

In a limited​ partnership, limited partners are not personally liable for partnership debts beyond their​ _____.

capital contributions

Limited partners are liable only for the debts and obligations of the limited partnership up to their​ _____.

capital contributions

Section 5 of the Federal Trade Commission Act covers conduct that does all of the following​ EXCEPT?

causes​ discernible, but​ insignificant, injury to competitors or consumers

​Originally, sales transactions in the United States were guided by the principle of​ _____--"let the buyer​ beware."

caveat emptor

​Originally, sales transactions in this country were guided by the principle of​ _____________ ("let the buyer​ beware"). Because of abusive practices by​ businesses, ____________________ laws were passed.

caveat​ emptor; consumer product safety

In​ a(n) _____​ franchise, the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory.

chain-style

that hears and decides business cases.

chancery

Advertising is​ _____ under Section​ _____ of the FTC Act if it contains misinformation or omits important information that is likely to mislead a​ "reasonable consumer" or makes an unsubstantiated claim.

false and​ deceptive; 5

Decisions of federal administrative agencies can be appealed to the appropriate​ _____.

federal court

The Securities Exchange Act of 1934 created the Securities and Exchange Commission​ (SEC), a​ __________________ agency that is empowered to administer federal securities law. The SEC is an agency composed of​ ___ commissioners who are appointed by the president.

federal​ administrative; 5

Most states have enacted securities laws. State securities laws generally require the registration of certain​ securities, _____________________, and contain broad antifraud provisions. State securities laws are usually applied when​ _______________ companies are issuing securities within that state. The​ _________________ has been adopted by many​ states, which coordinates state securities laws with federal securities laws.

provide exemptions from​ registration; smaller; Uniform Securities Act

Shareholder resolutions are usually made when the corporation is soliciting​ _____ from its shareholders.

proxies

​A(n) _____ is a written document signed by a shareholder that authorizes another person to vote the​ shareholder's shares.

proxy

​A(n) _____ is a​ shareholders' authorizing of another person to vote the​ shareholder's shares at the​ shareholders' meetings in the event of the​ shareholder's absence.

proxy

A professional who is not a certified public accountant is generally referred to as​ a(n) _____ accountant.

public

​A(n) _____ opinion states that the financial statements are fairly represented except​ for, or subject​ to, a departure from​ GAAPs, a change in accounting​ principles, or a material uncertainty.

qualified

Administrative laws are often referred to as​ _____ statutes.

regulatory

Administrative laws are often referred to as​ _____.

regulatory statutes

The goals of the​ Sarbanes-Oxley Act​ (SOX) of 2002 include all EXCEPT which of the​ following?

replace independent corporate audits with internal audits

Common stock is a type of equity security that represents the​ _____ value of a corporation.

residual

Which of the following is a major rule of liability that a state can adopt in determining whether an accountant is liable in negligence to third​ parties?

the foreseeability standard

A registration statement must include all EXCEPT which of the​ following?

the name and address of the registered agent of the issuing company

Which of the following is NOT governed by the operating agreement of an​ LLC?

the name of the LLC

According to the​ RMBCA, the articles of incorporation must include all EXCEPT which of the​ following?

the period of duration of the corporation

The courts examine all EXCEPT which of the following factors in applying the rule of reason to a particular​ case?

the prevailing political climate in the United States

A stockholder purchases​ $10,000 of a preferred stock that pays a 6 percent dividend annually. The stockholder has​ ________.

the right to receive​ $600 each year as a dividend on the preferred stock.

Section 2 of the Clayton​ Act, commonly referred to as the​ Robinson-Patman Act, prohibits price discrimination in which of the​ following?

the sale of winter gloves

Suppose that​ McDonald's Corporation, a​ fast-food restaurant​ franchisor, grants a restaurant franchise to Tina Corporation. Tina Corporation opens the franchise restaurant.​ McDonald's Corporation enters into a loan agreement with City Bank whereby it borrows​ $100 million. Which of the following is a correct statement regarding the liability of​ McDonald's Corporation​ and/or Tina Corporation for repayment of the​ loan?

​McDonald's Corporation is liable for repayment of the​ loan, but Tina Corporation is not.

Jason is a corporate officer of​ Farmtown, a corporation that produces farming equipment. While still an​ officer, Jason decides to start a new tractor company that would directly compete with Farmtown. Is this​ allowed?

​No, Jason owes Farmtown a duty of loyalty and is not allowed to compete with the corporation.

Which of the following is NOT true regarding​ crowdfunding?

​Non-U.S. companies can use crowdfunding in the U.S.

The U.S.​ _____ appoints cabinet members subject to confirmation by a majority vote of the U.S.​ _____.

​President; Senate

Under​ _____, fairness is considered the essence of justice.

​Rawls's social justice theory

​_____ Rule 504 exempts from registration the sale of securities not exceeding​ _____ during a​ 12-month period. This is known as the​ _____ exemption.

​SEC; $1​ million; small offering

​Sarah, Jim, and Alex decided to form Super​ Company, LLC. Sarah contributed​ $5,000; Jim contributed​ $10,000; and Alex contributed​ $15,000. While on LLC​ business, Jim accidentally hits and injures Ronald. Who is liable for​ Ronald's injuries?

​Sarah, Jim, and Alex could all be held liable but only up to their capital contributions

Section 406 of the​ _____ Act requires a public company to disclose whether it has adopted a code of ethics for senior financial​ officers, including its principal financial officer and principal accounting officer.

​Sarbanes-Oxley

​________________ profits are profits that are made by statutory insiders on trades involving equity securities of their corporation that occur within​ ____ months of each other.

​Short-swing; 6

Which of the following is an INCORRECT statement regarding​ corporations?

​Today, most corporations are formed pursuant to general corporation laws of the federal government.

The​ _____ Act specifically regulates​ _____ offers.

​Williams; tender


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