Business Law for Accountants
Study Guide Questions
Course Introduction
Business Law for Accountants provides an essential overview of the legal principles and regulations affecting the practice of accounting. The course covers key topics such as contract law, agency, business organizations, sales, creditors rights, and bankruptcy, with a particular emphasis on laws that directly impact financial reporting and ethical responsibilities. Students will explore the legal framework governing accounting practices, understand the implications of compliance with relevant statutes and professional standards, and develop the ability to recognize and address legal issues as they arise in an accounting context. Through case studies and practical examples, participants will gain the foundational legal knowledge necessary to navigate the complexities of the business environment as a professional accountant.
Recommended Textbook
Business Law Today Comprehensive 9th Edition by Roger
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Page 2
LeRoy Miller
Chapter 1: The Legal Environment
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Q1) Equity is a branch of unwritten law that seeks to supply remedies of equal measure to the parties in a legal dispute.
A)True
B)False
Answer: False
Q2) A decision on a given issue by a court is not binding on an inferior court.
A)True
B)False
Answer: False
Q3) In Sales Distribution Corp.v.Consumer Products Co.,the court decides that a precedent is incorrect or inapplicable.The court
A)may rule contrary to the precedent.
B)must apply the precedent.
C)must ask a higher court to rule on the case.
D)must refuse to decide the case.
Answer: A
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Chapter 2: Constitutional Law
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Q1) Political speech that would otherwise be protected by the First Amendment is prohibited if its source is a corporation.
A)True
B)False
Answer: False
Q2) Adult Shoppe in Beach City sells a variety of publications,including child pornography.Beach City enacts an ordinance prohibiting the sale of such materials.This ordinance is most likely
A)an invalid restriction of individuals' privacy.
B)an unconstitutional restriction of speech.
C)a violation of adults' rights to enjoy certain privileges.
D)constitutional under the First Amendment.
Answer: D
Q3) The Bill of Rights protects individuals against types of interference by the states.
A)True
B)False
Answer: True
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Chapter 3: Courts and Alternative Dispute Resolution
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Q1) Refer to Fact Pattern 3-1.If Java and Kaffe have a long-standing business relationship that they would like to continue,a preferred method of settling their dispute may be mediation because
A)the case will be heard by a mini-jury.
B)the dispute will eventually go to trial.
C)the process is not adversarial.
D)the resolution of the dispute will be decided an expert.
Answer: C
Q2) To prepare for a trial between Large Lots Development Corporation (LLDC)and MiniMansion Construction Company (MMCC),MMCC's attorney places LLDC's president under oath.A court reporter makes a record of the attorney's questions and the officer's answers.This is
A)a cross-examination.
B)a deposition.
C)an imposition.
D)an interrogatory.
Answer: B
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Chapter 4: Torts and Cyber Torts
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Q1) An Internet service provider cannot be held liable for disseminating defamatory remarks under any circumstances.
A)True
B)False
Q2) The extreme risk of an activity is a primary basis for imposing strict liability.
A)True
B)False
Q3) OK Dry-Cleaning advertises so effectively that the regular customers of its competitor Purity Cleaners patronize OK instead of Purity.This is A)appropriation.
B)conversion.
C)wrongful interference with a contractual relationship.
D)none of the choices.
Q4) Tortfeasor is the term for a person who commits a tort.
A)True
B)False
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Chapter 5: Intellectual Property and Internet Law
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Q1) There are no registration requirements for trade secrets.
A)True
B)False
Q2) RockStar Software,Inc.,develops a new series of performance-related video games.This software is most likely protected by
A)copyright law.
B)patent law.
C)trademark law.
D)trade secrets law.
Q3) Ric designs a new computer hard drive,which he names "Sci Phi." He also writes the operating manual to be included with each final product.Ric could obtain patent protection for
A)the hard drive.
B)the "newness" of the hard drive.
C)the name.
D)the operating manual.
Q4) A list of customers cannot be a trade secret.
A)True
B)False
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Chapter 6: Criminal Law
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Q1) Jeri is indicted.Before she is arrested,she confesses to the crime in a conversation with Kelly,the arresting officer.Kelly then arrests Jeri and advises her of the right to counsel.Later,Jeri claims that her statement should be excluded as evidence from her trial.The statement will most likely be
A)admitted because Jeri knew she did the crime and confessed.
B)admitted because Jeri made it before being advised of her rights.
C)excluded because a confession is not admissible in a criminal trial.
D)excluded because it was elicited before Jeri was advised of her rights.
Q2) Rick manages an illegal gambling operation in his Sushi Bar & Grill.Rick reports the profits of the gambling operation as income from Sushi's legitimate activities on its tax returns.This is
A)embezzlement.
B)larceny.
C)money laundering.
D)no crime.
Q3) A criminal case must be proved beyond a reasonable doubt.
A)True
B)False
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Chapter 7: Cyber Crime
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Q1) Rossi uses cyber tools to steal the personal information of unsuspecting consumers online.Like other cyber thieves,Rossi is most likely to
A)sell the data to other thieves online.
B)use the data to make purchases online.
C)use the data in retail outlets in the "real" world.
D)sell the data on a street corner in the "real" world.
Q2) The full extent of cyber crime is well known.
A)True
B)False
Q3) Jared uses his computer to secretly install software on thousands of personal computers without their owners' knowledge.The program can reproduce itself and spread from one computer to another via any USB port.This program is A)a hacker.
B)a bot.
C)a virus.
D)a worm.
Q4) Cyber criminals who steal persons' identities normally do not use them.
A)True
B)False
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Chapter 8: Ethics and Business Decision Making
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Q1) A common ethical dilemma faced by the management of General Holdings Corporation involves the effect that its decision will have on
A)one group as opposed to another.
B)the firm's competitors.
C)the government.
D)the U.S.Chamber of Commerce.
Q2) Ethics is the branch of philosophy that focuses on what constitutes right and wrong behavior.
A)True
B)False
Q3) Lia works for Media Marketing Company.Her job includes putting "spin" on the firm's successes and failures.In this context,ethics consist of
A)"bad" versus "good" publicity.
B)questions of rightness and wrongness.
C)the firm's quarterly revenue.
D)whatever is legal.
Q4) Ethical codes of conduct can set the ethical tone of a firm.
A)True
B)False
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Chapter 9: Nature and Classification
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Sample Questions
Q1) A quasi contract is not a true contract.
A)True
B)False
Q2) In negotiations with Coastal Distribution Company,Briggs Trucking,Inc.,insists that their contract be drafted according to certain plain language laws.These laws concern the phrasing of A)contracts.
B)ads.
C)product instruction manuals.
D)documents of delivery.
Q3) Parties can form a contract without putting the terms in writing.
A)True
B)False
Q4) Phil enters into a contract with Vacation Resorts,Inc.,to work as a chef.Under the plain meaning rule,the meaning of this contract must be determined by reference to A)any available evidence.
B)any relevant extrinsic evidence.
C)the face of the instrument.
D)the later testimony of the parties.
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Chapter 10: Agreement in Traditional and E-Contracts
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Q1) Wanda tells Vito that she would like to buy his Chocolate Goodies store.Vito declines,but later decides to sell and sends to Wanda,and others,a flyer describing the details.Wanda responds with a letter of "acceptance." Wanda and Vito have A)a contract.
B)no contract,because Vito sent the letter to more than one party.
C)no contract,because Vito was only inviting bids.
D)no contract,because the letter was an invitation to negotiate.
Q2) The E-Sign Act preempts the uniform version of the Uniform Electronic Transactions Act (UETA).
A)True
B)False
Q3) An offer must be practical to be effective.
A)True
B)False
Q4) A "sale" of software generally involves a right to use the software and a passage of ownership rights in the software to the buyer.
A)True
B)False
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Chapter 11: Consideration
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Q1) A covenant not to sue is an agreement to substitute a contractual obligation for a legal action.
A)True
B)False
Q2) Risks ordinarily assumed in business do not constitute consideration for the modification of a contract.
A)True
B)False
Q3) A transaction that lacks a bargained-for exchange lacks an element of consideration.
A)True
B)False
Q4) A businessperson who sells a business in reliance on a promise by another may be entitled to damages under the doctrine of promissory estoppel.
A)True
B)False
Q5) A release does not require consideration to be legally binding.
A)True
B)False
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Chapter 12: Capacity and Legality
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Q1) Jacquie signs a contract to buy a car just before reaching the age of majority.After reaching the age of majority,Jacquie does not take possession or make payments.Most courts would hold,with respect to the contract,that this is A)disaffirmance.
B)emancipation.
C)ratification.
D)rescission.
Q2) Mica,a minor,signs a contract to pay National Fitness Club a monthly fee for twenty-four months to use its facilities.Six months later,after reaching the age of majority,Mica continues to use the club.This act is A)disaffirmance.
B)emancipation.
C)ratification.
D)unconscionable.
Q3) Parents are always liable for the contracts made by their minor children.
A)True
B)False
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Chapter 13: Voluntary Consent
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Q1) Misrepresentation of a material fact can occur through silence.
A)True
B)False
Q2) A contract entered into under undue influence is unavoidable.
A)True
B)False
Q3) Misrepresentation of a material fact cannot occur through conduct alone.
A)True
B)False
Q4) A unilateral mistake of fact will usually enable a party to a contract to avoid it.
A)True
B)False
Q5) Misrepresentation of an opinion is an element of fraud.
A)True
B)False
Q6) All mistakes of fact are material.
A)True
B)False
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Chapter 14: The Statute of Fraudswriting Requirement
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Q1) Parol evidence includes oral evidence that is outside a written contract and not incorporated into the contract expressly or by reference.
A)True
B)False
Q2) Theo and Uma orally agree on the sale of Theo's Fitness Center to Uma and note the terms on a sheet of the center's letterhead stationery,which only Theo signs.This agreement is most likely enforceable against
A)neither Theo nor Uma.
B)Theo and Uma.
C)Theo only.
D)Uma only.
Q3) Under the Statute of Frauds,all contracts induced by fraud must be in writing to be enforceable.
A)True
B)False
Q4) A written contract for a transfer of land is enforceable.
A)True
B)False
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Chapter 15: Performance and Discharge
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Q1) Daphne agrees to buy Eduardo's Chef's Table restaurant on the condition that Financial Credit Company approves the financing.This approval is
A)a concurrent condition.
B)a condition precedent.
C)a condition subsequent.
D)a condition conjectural.
Q2) Most contracts are discharged by rescission.
A)True
B)False
Q3) Refer to Fact Pattern 15-1.Lacy's refusal to make further payments is most likely
A)a material breach.
B)complete performance.
C)excused by Kip's failure to fix the roof.
D)substantial,but not complete,performance.
Q4) After a contract is made,a supervening event may make performance impossible and discharge the contract.
A)True
B)False
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Chapter 16: Breach and Remedies
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Q1) On a contract breach,the nonbreaching party's only option is to refuse to perform.
A)True
B)False
Q2) Refer to Fact Pattern 16-1.If Estelle breaches the contract,Desmond's remedy would most likely be
A)a certain ratio of the amount that Estelle has in liquid funds.
B)a percentage of Estelle's unrealized profit.
C)the difference between the land's contract and market prices.
D)specific performance.
Q3) A remedy is the relief provided to an innocent contracting party when the other party breaches the contract.
A)True
B)False
Q4) The injury suffered by a nonbreaching party due to the breach of a contract may be remedied by payment of compensatory damages.
A)True
B)False
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Chapter 17: Third Party Rights
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Q1) Heather and Genice agree that Genice can satisfy her debt to Heather by paying the money directly to Fava (to whom Heather owes a debt).The designation of this contract as a third party beneficiary contract is determined by the intent to benefit
A)all of the parties.
B)Heather only.
C)Genice only.
D)Fava only.
Q2) Pam borrows $5,000 from Quality Auto Sales to buy a car.When Pam does not pay the loan or return the car,Quality wants to transfers the right to the payment to Rapid Collection Agency.Rapid agrees to pay Quality for this right,but for a price that is less than the amount owed.Can Quality transfer this right to Rapid without Pam's consent If so,and Quality committed fraud in the deal with Pam,could Pam legitimately refuse to pay Rapid Explain.
Q3) A third party beneficiary contract is formed when a contract confers a benefit on any third party.
A)True
B)False
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Page 19
Chapter 18: The Formation of Sales and Lease Contracts
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Q1) Under the UCC,a merchant who sells one type of good will be considered a merchant for any other type of good that he or she may sell.
A)True
B)False
Q2) Rodeo,S.A.,which is based in Spain,enters into a contract for the sale of seven hydraulic lifts to Tonnage Shipping Company,which is based in the United States.This contract is governed by
A)Spanish law.
B)the provisions in the laws of both countries that are similar.
C)Article 2 of the UCC.
D)the United Nations Convention on Contracts for the International Sale of Goods.
Q3) Omni Corporation is a Pennsylvania-based firm that does business throughout the United States.With respect to this circumstance,the UCC has been adopted by,and applies in,
A)a few of the states.
B)all of the states,in whole or in part.
C)half of the states.
D)none of the states,to date.
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Chapter 19: Title and Risk of Loss
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Q1) If a sale involves crops that are to be harvested within twelve months,identification takes place when the crops are planted.
A)True
B)False
Q2) Tone Style Stores orders leather jackets from Universa Clothing Company.Universa mistakenly ships denim jackets,which Tone rejects and returns via Valu Transport,Inc.During the return,the jackets are lost.The loss is suffered by
A)Tone only.
B)Tone and Universa,but not Valu.
C)Tone,Universa,and Valu.
D)Universa only.
Q3) Deep Storage Company holds goods for EZ Sales Corporation,which contracts to sell them to Fabric Stores,Inc.The goods are to be delivered without being moved and are represented by a negotiable bill of lading.The risk of loss passes to Fabric Stores
A)if Deep refuses to honor the bill of lading.
B)if EZ gives the bill of lading to Deep.
C)if the goods are lost due to an "act of God."
D)when Fabric Stores receives the bill of lading.
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Chapter 20: Performance Breach of Sales Lease Contracts
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Q1) If goods identified to a contract are destroyed through no fault of either party,both parties are excused from performance.
A)True
B)False
Q2) On May 1,City Auto & Truck Sales agrees to sell a car to Dino.Five days later,Dino refuses delivery and cancels the contract.City is entitled to A)force Dino to accept the car.
B)recover any damages from Dino but not resell the car.
C)resell the car and recover any damages from Dino.
D)resell the car but not recover any damages from Dino.
Q3) In general,a buyer's duty to pay for tendered goods becomes absolute before the buyer has had an opportunity to inspect the goods.
A)True
B)False
Q4) In contracts involving a carrier,a seller can complete performance only through a shipment contract.
A)True
B)False
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22
Chapter 21: Warranties and Product Liability
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Q1) Privity of contract between the plaintiff and the defendant is required to bring a product liability suit based on negligence.
A)True
B)False
Q2) Universal Assembly Company makes espresso machines and sells one to Vim through a misrepresentation on the label on which Vim relies and that results in an injury to Vim.Universal is most likely liable for A)a commonly known danger.
B)fraud.
C)privity.
D)puffery.
Q3) Big Screen Video Corporation sells high-definition television sets.Under most circumstances,Big Screen Video will be presumed to have warranted that its title to the TVs is
A)the same as each brand's name.
B)none of the choices-a warranty of title is not presumed.
C)good and valid.
D)the best that money can buy.
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23
Chapter 22: Negotiable Instruments: Transferability Liability
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Q1) On May 1,Doug signs a check that is payable to the order of Extra Credit Corporation and that is dated July 1.This check is
A)negotiable.
B)nonnegotiable,because it is payable to Extra Credit Corporation.
C)nonnegotiable,because it is postdated.
D)nonnegotiable,because it is signed by Doug.
Q2) A signature can consist of initials signed by a party.
A)True
B)False
Q3) Bob writes a check on his account at County Bank to Dona,a famous singer.The person claiming to be Dona is an imposter,however,named Edy.Edy indorses the check to Frank,for whom County Bank cashes it.Ultimately,the loss will most likely fall on A)Bob.
B)County Bank.
C)Dona.
D)Frank.
Q4) A payee whose name is misspelled on an instrument cannot indorse the instrument. A)True B)False
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Chapter 23: Checks and Banking in the Digital Age
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Q1) Elmo pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service.This is
A)a cashier's check.
B)a certified check.
C)a trade acceptance.
D)a traveler's check.
Q2) When a check "bounces," its holder can resubmit the check later,hoping that sufficient funds will be available.
A)True
B)False
Q3) Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Uma's account in Verity Bank.Most likely,if the bank pays the check
A)the Federal Reserve will reimburse all parties for their costs.
B)the loss will be apportioned among all of Verity's customers.
C)Uma will be liable for the amount.
D)Verity will have to recredit Uma's account.
Q4) A check is a special type of certificate of deposit.
A)True
B)False
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Chapter 24: Security Interests in Personal Property
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Q1) A financing statement is effective only if it is filed electronically.
A)True
B)False
Q2) A security interest is not enforceable after the creditor's rights have attached to the collateral.
A)True
B)False
Q3) The first security interest to be perfected is the last in priority over any other perfected security interests.
A)True
B)False
Q4) Olaf is the creditor in a transaction with Phil.Once certain requirements are met,Olaf's rights will attach,which means that Olaf will have
A)an indivisible ownership right to Phil's property.
B)an enforceable security interest in Phil's property.
C)a notice affixed to Phil's property.
D)the permission of a court to seize Phil's property.
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Chapter 25: Other Creditors Remedies and Suretyship
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Q1) The usual method of mortgage foreclosure is by a judicial sale of the property subject to the mortgage.
A)True
B)False
Q2) Residence Painting Company has a claim against Stuart's property to satisfy a debt that takes priority over other claims against the same property.This is
A)a lien.
B)a violation of most state laws.
C)a writ of attachment.
D)a garnishment.
Q3) State law governs the procedures that must be followed to create a mechanic's lien.
A)True
B)False
Q4) All of a debtor's pay can be garnished.
A)True
B)False
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Chapter 26: Bankruptcy
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Q1) Reconstruction Building Services receives a discharge in bankruptcy,even though some creditors hold judgments on overdue debts against it and others filed actions to collect on overdue debts before the bankruptcy.Reconstruction's discharge will
A)absolve the liability of any co-debtors.
B)permit the debtor to enter into reaffirmation agreements.
C)allow the debtor to file a petition for a reorganization.
D)prohibit actions and void judgments regarding overdue debts.
Q2) Elise goes through an involuntary bankruptcy proceeding.An involuntary bankruptcy occurs when
A)creditors are forced to accept a discharge of a debtor's debts.
B)a debtor is unable to pay his or her debts as they come due.
C)a debtor's creditors force the debtor into bankruptcy proceedings.
D)a debtor's debts exceed the fair market value of his or her assets.
Q3) In some circumstances,a bankruptcy court can conduct a jury trial.
A)True
B)False
Q4) A trustee has the power to set aside a sale of the debtor's property.
A)True
B)False
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Chapter 27: International Law in a Global Economy
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Q1) The government of Iran violates an international law.Persuasive tactics to remedy the situation fail.The only recourse of other nations is to
A)approve the European Union's enforcement of the law.
B)ask the International Court of Justice to enforce sanctions.
C)seek enforcement of the law through the United Nations.
D)take coercive action-sever relations,impose boycotts,go to war.
Q2) Yoko,Ltd.,and Zeno,S.A.,transact an international sale of goods.For these parties,and other international buyers and sellers,the United Nations Convention on Contracts for the International Sale of Goods spells out the duties that apply
A)if Article 2 of the Uniform Commercial Code does not apply.
B)if a dispute is submitted to the International Court of Justice.
C)if the parties have not agreed otherwise in their contracts.
D)under all circumstances.
Q3) Antidumping duties are the responsibilities of international environmental polluters. A)True
B)False
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Chapter 28: Agency Relationships in Business
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Q1) In considering the scope of an agent's implied authority,the test is whether the agent reasonably believed that he or she had the authority.
A)True
B)False
Q2) All employment laws apply to independent contractors.
A)True
B)False
Q3) A principal owes an agent a duty of ratification.
A)True
B)False
Q4) Iggy hires Joy to act as his agent to purchase Kup-a-Koffee Kompany.Iggy tells Joy to reveal only that she is buying the firm on behalf of a third party,without telling Kup-a-Koffee's seller who that third party is.Iggy is
A)a disclosed principal.
B)an implied principal.
C)an undisclosed principal.
D)a partially disclosed principal.
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Chapter 29: Employment, immigration, and Labor Law
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Q1) Pam is an administrative employee of Quality Assurance Company.Social Security contributions to help pay for Pam's loss of income on retirement are made by
A)neither Pam nor Quality Assurance.
B)Pam and Quality Assurance.
C)Pam only.
D)Quality Assurance only.
Q2) Flem is an employee of Glo Goods,Inc.Flem reports to state officials that Glo is illegally shipping unsafe goods to unsuspecting customers.When Glo learns of Flem's report,Glo fires him.He successfully sues Glo for wrongful discharge.With respect to the employment-at-will doctrine,this is
A)an example of the doctrine.
B)an exception based on contract theory.
C)an exception based on public policy.
D)an exception based on tort theory.
Q3) Federal law governs unions' internal business procedures.
A)True
B)False
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Chapter 30: Employment Discrimination
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Q1) Svetlana,a fifty-five-year-old member of a racial minority with a disability,believes that she is a victim of employment discrimination.Potentially the most widespread form of discrimination is based on A)age.
B)disability.
C)gender.
D)race.
Q2) Paolo has cerebral palsy,Quincy has kleptomania,and both work for Realty Insurance Company.Considered disabled under the Americans with Disabilities Act
A)are Paolo and Quincy.
B)is Paolo only.
C)is Quincy only.
D)is neither Paolo nor Quincy.
Q3) An employer who hires and fires workers according to a fair seniority system may have a good defense to an employment discrimination suit.
A)True
B)False
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Chapter 31: Sole Proprietorships and Private Franchises
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Q1) Euro Autos & Trucks,Inc.,licenses Fancy Vehicles Corporation,an automobile dealership,to sell its products.This is
A)a chain-style franchise.
B)a distributorship franchise.
C)a manufacturing franchise.
D)no franchise.
Q2) Kelly,the owner of Llama Farms,a sole proprietorship,wants to obtain additional business capital but to maintain control.This can best be accomplished by A)borrowing funds.
B)bringing in partners.
C)issuing stock.
D)selling the business.
Q3) Stacy contracts to buy a franchise from Tender Steak House Company.In this contract,as in most franchise contracts,the determination of the territory to be served is made by A)a court.
B)Stacy.
C)Tender Steak House.
D)the Federal Trade Commission.
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Chapter 32: All Forms of Partnerships
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Q1) In a limited liability limited partnership,the liability of a general partner is the same as the liability of a limited partner.
A)True
B)False
Q2) A general partner is personally liable for partnership debts if its assets are insufficient to pay its creditors.
A)True
B)False
Q3) In a family limited liability partnership,only persons related to each other may be partners.
A)True
B)False
Q4) Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte and Deli Delite.In most states,a limited partnership will be created when
A)a certificate of limited partnership is filed.
B)a partnership agreement is executed.
C)the business for which the firm is formed actually begins.
D)the partners make their capital contributions.
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Chapter 33: Limited Liability Companies Special Business
Forms
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Q1) The members,managers,and agents of a limited liability company are liable for its obligations by virtue of their status.
A)True
B)False
Q2) In a limited liability company,members must participate in the management of the company.
A)True
B)False
Q3) A cooperative may take the form of a corporation.
A)True
B)False
Q4) The owners of a joint stock company are personally liable for its obligations.
A)True
B)False
Q5) For federal jurisdictional purposes,a limited liability company can choose to be treated like a corporation.
A)True
B)False
Page 35
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Chapter 34: Corporate Formation and Financing
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Q1) "Piercing the corporate veil" means revealing to shareholders the internal rules of corporate management.
A)True
B)False
Q2) Corporate officers hire corporate directors.
A)True
B)False
Q3) Incredible eSales Corporation is a new Internet business.How can Incredible eSales obtain capital to finance its operations
Q4) Stan incorporates his scientific products business as Tech Supply,Inc.Unless the articles of incorporation state otherwise,Tech Supply most likely has
A)a finite,yet-to-be-determined existence.
B)a one-year,nonrenewable existence.
C)a one-year,renewable existence.
D)perpetual existence.
Q5) A corporate director is an "owner" of the corporation.
A)True
B)False
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Chapter 35: Corporate Directors,officers, Shareholders
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Q1) A majority shareholder does not owe a fiduciary duty to minority shareholders under any circumstances.
A)True
B)False
Q2) Coast-to-Coast Distribution,Inc.,is a direct-mail distribution company.Like most corporations,Coast-to-Coast's employees include its A)board of directors.
B)incorporators.
C)officers.
D)shareholders.
Q3) Thor Power Products Corporation permits its directors to be elected by cumulative voting.This
A)allows minority shareholders to be represented on the board.
B)assures directors that they will be selected by their peers.
C)guarantees Thor's executive officers of the final choice.
D)ensures against persons who may "cloud" the corporate direction.
Q4) For action to be taken during a shareholders' meeting,a forum must be present.
A)True B)False
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Chapter 36: Corporate Acquisitions, takeovers, Termination
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Q1) The results of a consolidation are different from those of a merger-both companies remain.
A)True B)False
Q2) Dissolution can be brought about voluntarily by the directors and shareholders of a corporation.
A)True B)False
Q3) A target corporation's attempted takeover of an acquiring corporation is referred to as the Pac-Man defense.
A)True
B)False
Q4) Stratified Industries,Inc.,increases its holdings,making tender offers in many states.These offers are subject to
A)federal securities laws only.
B)state antitakeover statutes only.
C)neither state statutes nor federal laws.
D)state antitakeover statutes and federal securities laws.
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Chapter 37: Investor Protection,insider Trading, Corp Gov
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Q1) State securities laws apply only to interstate transactions.
A)True
B)False
Q2) A corporation can recapture any profits realized by an insider on any purchase or sale of the firm's stock within any twelve-month period.
A)True
B)False
Q3) Readmore Bookstore Corporation files a registration statement with the Securities and Exchange Commission and provides a prospectus describing the securities to investors.These items are intended to provide sufficient information so that the financial risks involved can be evaluated by
A)market professionals to explain to all investors.
B)government regulators to disclose to the general public.
C)sophisticated investors only.
D)unsophisticated investors.
Q4) Generally,stock offerings that involve a small dollar amount are not exempt from the registration requirement.
A)True
B)False
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Chapter 38: Administrative Law
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Q1) Persons who favor the creation of a National Biotech Agency to regulate the production of genetically altered agricultural products should concentrate their lobbying efforts on
A)Congress.
B)federal administrative agencies that oversee agricultural products.
C)the United States Supreme Court.
D)the president of the United States.
Q2) Final administrative rules have binding legal effect unless the courts later overturn them.
A)True
B)False
Q3) Federal administrative agencies can regulate beyond the powers granted by enabling legislation.
A)True
B)False
Q4) Final administrative rules do not have binding legal effect unless the courts later declare them to be binding.
A)True
B)False
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Chapter 39: Promoting Competition
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Q1) A firm can have monopoly power without violating antitrust law.
A)True
B)False
Q2) HVAC Parts Company charges different buyers different prices for identical goods.HVAC's prices are subject to evaluation under
A)the Clayton Act.
B)the Federal Trade Commission Act.
C)the Sherman Act.
D)no antitrust law.
Q3) Bubbly Bottling Company is engaged in the soft-drink bottling and distribution industry in the states of New York and New Jersey.The firm currently has about 40 percent of the market for these products and related services.Carbonate Distribution Corporation competes with Bubbly in the same states.Carbonate has about 35 percent of the market.If Bubbly were to acquire the stock and assets of Carbonate,would Bubbly be in violation of any of the antitrust laws If so,which one Discuss fully.
Q4) Size alone determines whether a firm is a monopoly.
A)True
B)False
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Chapter 40: Consumer Law
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Questions
Q1) In the ordinary course of business,Xtra Charge Company sells goods to Yvon and other consumers on credit under installment sales contracts that typically require at least one year of monthly payments.Xtra does not disclose all of the credit terms to its customers.This practice is most likely to result in
A)a cease-and-desist order.
B)a fine.
C)no sanctions.
D)rescission of the contracts.
Q2) Frosty's Appliance Store advertises freezers at a "Special Low Price of $299." When Garth tries to buy one of the freezers,Huey,the salesperson,tells him that they are all sold and no more are obtainable.Huey adds that Frosty's has other freezers for $2,299.This is A)a legitimate sales technique.
B)bait-and-switch advertising.
C)counteradvertising.
D)puffery.
Q3) A consumer may be denied credit on the basis of a credit report.
A)True
B)False
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42
Chapter 41: Environmental Law
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Q1) Hi-Yield Agriculture,Inc.,makes a pesticide with a risk to people of developing cancer from exposure of one in a million.This substance must be
A)disposed of before anyone develops cancer.
B)registered before it is sold.
C)taken off the market and placed in temporary storage.
D)used only in a way that avoids exposure to people.
Q2) Under the Marine Protection,Research,and Sanctuaries Act (the Ocean Dumping Act),Bayside Chemical Company may dump its chemical waste into the ocean
A)after obtaining a permit.
B)before obtaining a permit.
C)without a permit.
D)not at all.
Q3) When a release of hazardous chemicals from a site occurs,potentially responsible parties can avoid liability through transfer of ownership.
A)True
B)False
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Chapter 42: Liability of Accountants Other Professionals
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Q1) Marquis Company's liabilities exceed its assets,but the firm's employees falsify its books to reflect a positive net worth.Marquis hires Nan & Ollie,an accounting firm,to prepare a balance sheet,which is certified to show a positive net worth.Pure Credit Corporation relies on the balance sheet to make a loan to Marquis.When the firm defaults,Pure Credit files a suit against Nan & Ollie.Under the Ultramares rule,the accounting firm is most likely
A)liable because Nan & Ollie owed a duty of care to all third parties.
B)liable because Nan & Ollie owed a duty of care to Marquis.
C)liable because Nan & Ollie owed a duty to any foreseeable user.
D)not liable because Nan & Ollie and Pure Credit were not in privity.
Q2) Meri,an accountant,includes a false statement in a report for Novelty Paper Products,Inc.(NPPI)that is filed with the Securities and Exchange Commission.When Otho buys stock in NPPI and loses money on the investment,he files a suit against Meri,alleging fraud under the 1934 Securities Exchange Act.To avoid liability,Meri can show that she
A)intended to defraud NPPI,not Otho.
B)intended to profit on stock trades generally,not only with Otho.
C)is an otherwise competent accountant.
D)was not aware her statement was false.
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Chapter 43: Personal Property and Bailments
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Q1) The most common way to acquire personal property is to "capture" it.
A)True
B)False
Q2) In most bailments,the bailee has a right to place a lien on the bailed property until he or she is fully compensated.
A)True
B)False
Q3) Ben allows Cody to store his trailer on Ben's property for $20 a month while Cody is out of town.Later,Ben notices rainwater collecting in the trailer and covers it with a tarp at a cost of $40.This cost is most likely borne by
A)Ben and Cody.
B)Ben only.
C)Cody only.
D)neither Ben nor Cody.
Q4) Property voluntarily discarded by its owner with no intention of reclaiming it is abandoned property.
A)True
B)False
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Chapter 44: Real Property and Landlord-Tenant Law
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Q1) A tenant cannot withhold rent for any reason.
A)True
B)False
Q2) An item cannot be a fixture unless it is physically attached to the land.
A)True
B)False
Q3) A fixed-term tenancy terminates automatically when its terms ends.
A)True
B)False
Q4) Under the covenant of quiet enjoyment,a landlord promises that a tenant will not be disturbed in the possession of the premises.
A)True
B)False
Q5) Even after a tenant sublets leased premises,the tenant may be obligated to pay rent.
A)True
B)False
Q6) The possession of land without right is a tenancy at will.
A)True
B)False
Page 46
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Chapter 45: Insurance,wills,and Trusts
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Q1) Holly obtains an insurance policy from Inviolable Insurance Corporation (IIC).IIC may cancel,or refuse to renew,the policy because of
A)Holly's appearance as a witness against IIC.
B)Holly's national origin.
C)Holly's race.
D)none of the choices.
Q2) Edy obtains a homeowners' insurance policy with First Source Insurance Company.First Source can cancel the policy
A)if Edy appears as a witness in a case against First Source.
B)if Edy fails to pay the premiums.
C)if Edy makes changes that add to the home's value.
D)under no circumstances.
Q3) State law may mandate that an incontestability clause be included in an insurance policy.
A)True
B)False
Q4) The trustee is the person for whose benefit a trust is held.
A)True
B)False
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