Bus Law Practice Test – Flashcards
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Which of the following is not required of an agency relationship
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Consideration
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The equal dignities rule relative to agency law applies to an agent
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hired to contract for booth at a trade show scheduled to occur in two years
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Mohammad was an employee int he new product development department of Estay Inc. Mohammad was directly involved in the development of a new product that essay intended to launch in 6 months. Estay took great care to keep information concering the new product a secret. Ceries, Inc., a competitor of Estay, persuaded Mohammed to leave Estay to direct Ceries' marketing department. Which statement is correct?
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Mohammad cannot share with Ceries the confidential information he knows about the Estay's new product because he has a duty not to disclose confidential information he acquired during the agency
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An agency relationship can be created:
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by the conduct of the parties
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Ron is the business agent for Kansas Sunshine, a rock band. He is also the agent for another popular Midwestern rock group, City Sand. Ron negotiates a deal with a Kansas City promoter to have City Sand play after a professional football game. The promoter was willing to pay 250,00 for both groups to play after the game; however, Ron talked her into booking just City Sand for 175,000. Given his contract with City Sand, Ron made more money under this arrangement. Has Ron violated his fiduciary duty to Kansas Sunshine?
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Yes. It appears that Ron put his own interests ahead of his principal's interests.
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John hired Tim to sell his house. Which statement is correct?
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John is Tim's principal
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The doctrine of estoppel would most often apply in situations of
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apparent authority
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Cameron, editor of the local newspaper, assigned to Jim the writing of the story about pollution of a nearby stream. Although Jim used reasonable care in gathering and checking his information, unknown to Jim, the story contained a defamatory statement about Maureen. Maureen reads the story Jim for libel. Cameron, who read and publish the story:
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must indemnify Jim for Maureen's claim
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Pamela hired Lena to sell her business Lena:
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can buy the business only with Pamela's permission
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Chance is a traveling marketing representative for a publishing company. He is an independent contractor. One afternoon while driving to a meeting, he negligently runs a stop sign and causes an accident. Judy is injured. Judy can:
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hold Chance but not the company liable for her injury
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Mrs. O'Leary hired Jenna to sell her house in Michigan. She executed a power of attorney in favor of Jenna authorizing her to do "anything and everything associated wight he sale of real estate, acting as a prudent person" On May 30, Jenna finalized a deal with Brandon for the purchase of the house. Brandon and Jenna signed the real-estate contract that day. Jenna learned the next day that Mrs. O'Leary had died May 29
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The contract is void since the agency terminated May 29
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Jim agreed to show Donna's car to a potential buyer. Donna was not able to be home since she had to attend a meeting. After showing the car, Jim left the keys in it and the car was stolen. Which statement is correct?
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Since Jim is a gratutious agent, he will only be liable for the loss of the car if his conduct constitutes gross negligence
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Tom, the production manager at Esday was told by his supervisor to hire Elton, a 15-year-old, to operate an industrial machine. Hiring the 15-year-old violates the child labor laws. Tom:
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should not hire Elton. Tom has a duty to obey Esday's instructions only if they are legal and ethical
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If the agent is disloyal to the principal:
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All the above ware correct
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Linda borrowed $2,500 from Tonya. They agreed that Tonya could take a grouping of Linda;s antiques as collateral. If Linda could not pay, then Tonya could sell the antiques to recover her money. When Linda couldd pay off the loan, Tonya sold the antiques and paid Linda the proceeds atet deducting the balance of the loan. Which of the following is correct?
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All the above are correct
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HBR Accounting hired Denise, a CPA, to prepare tax returns. Which statement is correct?
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Denise, as a CPA, is an agent with special skills, She is held to a higher duty than ordinary negligence
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Express authority can be created by:
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All the above
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Circus Pizza contracted with Art to run its birthday parties. Art's responsibilities included supervising the children and organizing the gams. Circus did not investigate Art's background, which included a history of assaulting children. Art assaulted a 7-year-old girl in the restaurant's kitchen during a birthday party. Circus Pizza:
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may be held liable on the basis of negligent hiring
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When a principal is partially disclosed:
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the agent and principal will be jointly and severally liable on the contract
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Debra and Lawrence have no equal partnership. This year, after expenses the partnership had a profit of $200,000. Debra and Lawrence will each pay taxes on:
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$100,000
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All the business forms listed below have limited liability except the:
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general partnership
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Rachel and Cyndi started a retail business called Zebra Toy Company. The business is operated as a partnership. Under partnership law:
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All the above
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Seventy farmers in Morgan county joined together to gain the advantages f purchasing seed and fertilizer in the bulk and of obtaining better prices when distributing and selling their crops. The farmers have formed a:
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cooperative
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The business form that is taxed as a partnership and gives all owners limited liability, is:
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a limited liability company
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All of the following are characteristics of a closely held corporation EXCEPT:
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the shares are publicly traded
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The form of business ownership that is most easily transferable is the:
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corporation
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The corporate from of business:
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was first known and used by the Greeks and then spread through the Romans to England
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What federal agency requires that the seller of a franchise give the potential buyer an offering circular and audited financial statements?
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The Federal Trade Commission (FTC).
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Harold and Zack have pooled their money together to buy real estate broker, finds buyers for the property they have subdivided. Harold and Zack are engaged in a:
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partnership
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LLCs have become popular for all EXEPT which of the following reason:
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uniformity of law
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Charles and Ellen, and unmarried couple, run an ice cream store. The business is not incorporated and they have filed no formation papers wight he state. Their business is a:
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partnership
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E.I James is a writer with a best selling novel. He wishes to create a corporation called "James, Inc "He will be the only shareholder. Can James incorporate his business of writing?
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Yes, this would be the incorporation of a sole proprietorship.
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Marin, Leah and Pablo are considering forming a business. What factors should they consider in making a choice of organization?
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Ease of creation and operation
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Charles and Becky are partners. If they have a disagreement, the Uniform Partnership Act will govern their respective rights with each other:
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only if they do not have a written partnership agreement that addresses the issue of dispute
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A partnership is the association of two or more persons to carry on as co-owners a business for profit. The association:
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means be established by a formal agreement
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Jackie and Robert own an apartment building as partners. Cyndi, one of their tenants, gives Robert written notice she will be moving out at the end of the following month. Robert did not tell Jackie that Cyndi was moving. Has Cyndi properly given notice to the partnership?
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Yes. Notice to Robert was notice to the partnership.
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Which of the following events occurs first with the respect to the ending of a partnership?
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Dissolution
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Theresa and Bobbi bought a race car together. They agreed to share all expenses and split net profits equally. There was no agreement as to the duration of the partnership. After about year, Bobbi decided she was tired of the racing business and left the partnership. Bobbie did not violate the partnership agreement. Theresa claims Bobbi's leaving was wrongful. Is Theresa correct?
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No, in a partnership at will, a partner has the right to leave the partnership at any time
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Art and Alma made capital contributions of 60% and 40% respectively to their newly formed partnership, AA & Associates. They did not have a written partnership agreement. At the end of the first year, the partnership made a profit of which Alma now claims half. However, Art maintains he should receive 60% Who is correct?
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Alma, as the UPA provides that profits are split equally unless partners agree other wise
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Sandy, Ramon and Bonnie were partners. Sandy dissociated from the partnership Bonnie and Ramon decided to continue the business. When Sandy dissociated, there was a $50,000 debt owed to Great State Bank. Which statement is correct?
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Sandy remains liable on the $50,000 debt owed to Great State Bank
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At what stage are the partnership debts paid and the proceeds distributed to the parters
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During winding up
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A group of accounting alumni decided to hold a fundraiser to establish a scholarship for an accounting student. This enterprise is:
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None of the above
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If Kay, a partner in an auction business, has a personal creditor who is aggressive about collecting the debt:
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the creditor cannot attach the partnership property to pay off the debt
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Gary and Herman are partners in a lawn mower repair business in Ohio. While Gary is on vacation, visiting his sister in Georgia, his sister's neighbor has trouble with her mower and Gary fixes it for her. She insist on paying him Gary
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must turn the money over to the partnership because he earned it doing the kind of work that the partnership does.
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Randy, Joan and Arnie are partners. Their agreement did not address dissociation nor how long the partnership would last. Randy decided to leave the partnership. When Randy serves notice he intends to withdraw:
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the partnership can either buy him out and continue in business or wind up the business and terminate the partnership
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Debbie is a partner with Adam and Marty. She sells her interest in the partnership to Craig. Which statement below is the most accurate?
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Adam and Marty must approve the sale for Craig to become a full partner
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Dust dissociated from a partnership. To protect himself from debts of the partnership after he leaves Dusty should:
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file a statement of dissociation with the Secretary of State
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Ending a partnership involves which of the following three three steps
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Dissolution, winding up. and termination
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Nacy was a partner of a small business. She could see that the buissness was beginning to fail and that it was very unlikely it would recover. Not wanting to lose her investment, she asked that the court require the partnership to dissolve since she did not have a legal right to withdraw at the time. Does a court have the authority to order a partnership to dissolve?
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Yes. A court can dissolve a partnership when it is convinced that the partnership is unlikely to succeed
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Lori and Dan own a small restaurant as partners. Dan works several hours a day cooking, waiting on the tables. doing the books, and so forth. Dan believes he is entitled to be paid at least a standard wage for all his work since, at the present time, the part-time kitchen helpers earn more than he does! Lori claims Dan is not entitled to anything other than one-half the net profits. Is Lori right?
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Yes, as there is no agreement between Lori and Dan allowing for wither of them to be paid wages for work done at the restaurant
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Astrid and Razi formed a partnership in which they agree to share profits 60 percent to Astrid and 40 percent to Razi. Losses will be shared:
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60 percent to Astrid and 40 percent to Razi, unless otherwise agreed
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Laurie is incorporating her business. Laurie's home state is Wisconsin. Business will be conducted in the California, Michigan, Pennsylvania, and Virginia Laurie:
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can incorporate the business in any state
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A corporate charter is filed with:
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a state's Secretary of State office
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MegaCorp purchased 10,000 shares of it's own stock that had previously been owned by private investors. The stock MegaCorp repurchased is called:
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treasury stock
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Preemptive rights are:
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designed to prevent dilution of a shareholder's owner in the company
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Defining a corporation with such information as the corporate name, the number and type of authorized share of stock, identification of the purpose and the agent, is done through the:
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All of the above, All of these terms are used to identify the same document
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Once a provision is in the corporate charter, it can only be changed by:
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both of the above are necessary to change a corporate charter
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Incorporation protects:
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shareholders against personal liability for the debts of the company
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The director of MegaCorp learn that an outsider is planning on buying enough voting stock to get herself elected to the board of directors. MegaCorp, which has cumulative voting, quickly put together a vote of shareholders to eliminate the company's cumulative voting procedure. The shareholders vote to do away with cumulative voting. The outsider, Dawn who wanted to get herself elected to MegaCorp's board, claims that the company has committed and illegal act. Is she right?
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No. Under the Model Act, regardless of MegaCorp's motives, it had the right to act as it did
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Fashions Inc. has 12 shareholders. There is no shareholders agreement concerning the board of directors. The company is subject to the Model Act. How many directors is Fashions, Inc. required to have?
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One
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Fashion Inc. has 12 shareholders. The company is subject to the Model Act. What officers is Fashions, Inc. required to have?
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Whatever officers are described in the corporation bylaws
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Under most states statues, a corporation may:
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include in its charter a provision indemnifying directors unless they have engaged in intentional misconduct or bad faith
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Which of the following statements is correct?
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Bonds are long-term debt secured by company asset
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MegaCorp occasionally sells products in Michigan. It does not have an office in that state and does not advertise in Michigan. The company's marketing representative are based in New York but do travel to Michigan once a year to attend a trade show. Which statement is correct?
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MegaCorp is not required to register in Michigan because it does not have an ongoing presence in Michigan
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What is meant by the term "piercing the corporate veil?
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Corporate directors and/or officers may be held personally liable to a person damaged by an act of the corporation
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The executive of Jornaginn Corporation have decided they need to sell 50,000 additional shares of stock to finance their expansion plans. The executives:
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are limited by the number of shares authorized in the corporate charter, but this number can be increased by amending the charter and paying a fee
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If a court determines a manager's corporate decision amounted to self-dealing:
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the business judgment rule will not apply
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Anti-takeover tactics include all EXCEPT:
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negative tender offers
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A corporation board's refusal to remove a "poison pill" was held reasonable in:
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Unocal Corp. v Mesa Petroleum Co.
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Which of the following describes the duty of loyalty
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It prohibits making a decision that benefits the decision-maker at the expense of the corporation.
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Which of the following is NOT a method to acquire control of a company?
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Make an in tail public offering
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Which of the following statements is correct with respect to the states efforts to offer protection to companies targeted for hostile takeover
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Both statutory law and offers the state courts have provided some degree of protection for companies.
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On the day tender after begins:
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a bidder mist file a disclosure statement with the SEC
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Which of the following is correct concerning anti-takeover efforts?
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Most states have passed laws to deter hostile takeovers, but these statuses have not totally eliminated hostile takeovers
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For the business judgment rule to apply:
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the director must act in the best interests of the corporation
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The Williams Act:
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is designed to regulate the conduct of those attempting to take over a company
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Which of the following must be approved b the shareholders if a company is attempting to avoid hostile takeover bid?
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all the above
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Which of the following is not true in applying the Williams Act
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A bidder must keep a tender offer open for at least 30 business days initially
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The model Buissness Corporation Act states: All corporate power shall be exercised by or under the authority of and the business and affairs of the corporation managed by the directions of its:
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board of directors
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The term corporate manager refers to:
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both of the above
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A board of directors is considering whether to invest a great deal of money into research and development. Such a decision could have a long-term beneficial effect for the company's future. As an alternative, the board could forego the expenditures in to research and development and buy back its own shares in order to immediately increase the company's receivers. Which of the below groups would most likely favor the option to increase the company's reserves and not invest in more research development?
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Shareholders
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Management duty to have a rational business purpose, avoid illegal behavior , and make informed decisions frees to its:
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duty of care
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Who has the right to manage the business of a corporation?
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The board of directors
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Unless the form provides for a longer period, a proxy is valid for hole long under the Model Act?
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11 months
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IN derivative lawsuit, the name plaintiff:
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is the corporation on whose behalf the lawsuit is field
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Under SEC rules, companies:
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are required to post the information in the annual report and the proxy statement on there Web site, but must mail to shareholders either hard copies of all the information or a card telling them how they vote online
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Kain is the chief financial officer of Yonkka, Inc. He is also a member of Yonkka's board of directors. Kain is:
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an outside director
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A corporation must obtain shareholder approval before the company:
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All the above are correct
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The proceeds,if any of a derivative lawsuit go to:
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the corporation
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Meredith a shareholder in Quarto Inc. notified Quarto's board of directors that the corporation had been wronged and asked the board to bring a lawsuit in the corporation's name. In response to Meredith's demand the board:
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can do any of the above
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Ev-R-Green Co., a private corporation, decides to sell substantially all of the company assets. Under the Model Act and many states statues:
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Ev-R-Green must buy cake, at fair value, the stock of any shareholder who object to the decision.
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Lucy owns 10 shares of stock in Quamba, Inc. Lucy wishes to place a proposal in a company's proxy statement to be voted on at the shareholders; meeting. Pursuant to the SEC rules before Lucy is allowed to place her proposal on the proxy statement she must:
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have owned continuously for one year at least one percent of the company or $2000 or more of the stock
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Which of the following is correct concerning the SEC regulations on shareholders resolutions?
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all of the above are correct
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Luella just purchased 5 shares of common stock in TriColor Inc. for $250. Luella has the right to:
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vote to elect directors
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To be successful in a court challenge regarding an executive's compensation, shareholder must olive that"
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the board was grossly uniformed before it set the composition amount
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Veritas, Inc. is planning its annual shareholder met ting on June 15 The company:
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must send notices to everyone who owns stock on the "record date", which can be no more than 70 days before the meeting
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A "fundamental change" in a corporation would be illustrated by:
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All of the above
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A majority of shareholders of FamLi Co. wish to expel Glenn, a minority shareholder. In most states, the company cannot expel Glenn unless:
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Both of the above
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Quick Supply House breached a contract with MeganCorp. The breach resulted in a great deal of money to MegaCorp. The board of directors for MeaCorp vote not to sure the supply house since it believes the legal costs would be more than it would probably recover. If a group of shareholders wish to sure the supply house, this would:
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have to be a derived lawsuit
