Which of the following opinions indicates that the company’s financial statements fairly
present its financial condition according to GAAP?
a. Qualified opinion
b. Adverse opinion
c. Disclaimer of opinion
d. Unqualified opinion
Commercial paper is a contract to pay money.
a. True
b. False
Kyle was eating clam chowder soup in a restaurant when a very small piece of bone
lodged in his throat. Fortunately, he was able to remove the bone with his fingers.
However, he was upset by the incident and sued the restaurant for negligence. What is
the most likely result in this case?
a. Kyle will not collect any damages since he did not sustain any damages.
b. Kyle will collect damages because the restaurant committed negligence per se.
c. Kyle will collect damages if he proves it was possible to prevent tiny fish bones from
being present in clam chowder.
d. Kyle will collect damages, as res ipsa loquitur applies.
BGH Accounting firm audited the financial statements that were included in E-prise’s
registration statement. The financial statements overstated sales by 2000%. In
conducting the audit, BGH did not comply with generally accepted auditing standards
(GAAS). Under Section 11 of the 1933 Act, BGH is liable for any material
misstatement or omission in the financial statements they prepared for E-prise.
a. True
b. False
The single recovery principle requires a court to settle a matter once and for all by
awarding a lump sum for past and future expenses.
a. True
b. False
Cooperative strategies include all EXCEPT
a. horizontal agreements.
b. vertical agreements.
c. mergers.
d. spin-offs.
Office Plus, an office supply store, ordered 600 blank CDs from Curtis Co., a
manufacturer of computer products. Office Plus placed the order using a preprinted
purchase order form; Curtis acknowledged the order by sending a preprinted acceptance
form back to Office Plus. Unlike Office Plus’ form, which says nothing about
packaging, Curtis’s form specifies that the CDs will be packaged in cases of 10 CDs per
box, 10 boxes per case. Which statement is correct?
a. The UCC will classify this as a specialty goods exception and will reform the
contract.
b. Curtis’s packaging term is a different term which materially changes the offer. There
is no contract.
c. Curtis’s packaging term is an additional term and therefore a part of the contract
unless Office Plus promptly objects to the term.
d. The UCC does not cover the contract because both parties are merchants.
Title VII of the Civil Rights Act of 1964 applies to employers with any number of
employees, making it illegal to discriminate on the basis of race, color, religion, sex or
national origin.
a. True
b. False
Public officials can win a defamation case only by proving the defendant’s actual
malice.
a. True
b. False
Peggys credit card debts are mounting as her costs of insurance and fuel have
dramatically increased and her income, from sporadic free-lance jobs, has dropped.
Chapter 13 of the Bankruptcy Code will allow her to reorganize her debt while she
keeps most of her assets.
a. True
b. False
A partnership can only be held liable for the partners authorized acts.
a. True
b. False
Weste, Inc. decided to expand by building a $50 million manufacturing facility. Weste,
Inc. is not a federal agency and the expansion is not regulated or approved by the
government. Nevertheless, Weste must prepare an environmental impact statement.
a. True
b. False
Victor purchased $1 million of insurance on his home even though the house was only
worth $500,000. Victor’s house was destroyed by lightning. Under the insurance policy,
Victor will be able to recover $1 million.
a. True
b. False
Jackie hires Charles to lay new carpet in her bedroom. Charles does such a bad job, that
the only way to fix the carpet is to start over and relay the carpet. Which of the
following best describes this situation?
a. This is substantial performance. Jackie must still pay something to Charles.
b. This is a material breach. Jackie must still pay something to Charles.
c. This is substantial performance. Jackie owes nothing to Charles.
d. This is a material breach. Jackie owes nothing to Charles.
Spencer, age 18 and of sound mind, has the legal capacity to contract.
a. True
b. False
Most types of duties may be delegated.
a. True
b. False
Common law refers to
a. law that is the same or similar in all the states.
b. law made when judges decide cases and then follow those decisions in later cases.
c. law made by legislatures in the form of statutes.
d. the legal systems of France, Germany, and Italy.
AVCO used a famous registered trademark of BNC, Inc. in a manner that reduced its
value. This is a violation of the
a. Federal Fair Use Act.
b. Federal Trademark Dilution Act.
c. Federal Trade Protection Act.
d. Cleveland/Myer Act.
Ed wants to give Howard his old car, but Howard says he doesnt want it. Howard later
reconsiders and tells Ed he does want the car. His previous repudiation means there is
no gift, and Howard has no rights in the car.
a. True
b. False
Felicia, an elderly woman, does not speak or read English well. Felicia is a recent
immigrant to this country. A dishonest immigration officer tells Felicia to sign several
documents as being necessary to maintain her legal immigration status. Unknown to
Felicia, she signs a promissory note. The immigration officer thereafter sells the note to
Neighborhood Bank, a holder in due course, who goes after Felicia for payment of the
note. Felicia’s defense to the Neighborhood Bank is
a. fraud in the inducement; a real defense.
b. fraud in the execution; a real defense.
c. unauthorized completion; a personal defense.
d. breach of contract; a real defense.
Charles and Ellen, an unmarried couple, run an ice cream store. The business is not
incorporated and they have filed no formation papers with the state. Their business is a
a. sole proprietorship.
b. partnership.
c. franchise.
d. limited liability company.
An exculpatory clause is generally unenforceable when
a. it attempts to release a party from liability for ordinarily negligent behavior.
b. it involves public transportation.
c. it is written clearly and in bold, large print.
d. the affected activity is a recreational activity.
Sophie issues a promissory note made “payable to the order of Molly.” Molly indorses
the note by signing her name and gives the note to Dana. Which of the following is
correct?
a. Sophie issued a bearer instrument and Molly kept it in bearer form.
b. Sophie issued an order instrument, but Molly changed it to bearer form.
c. Sophie issued an order instrument and Molly kept it in order form.
d. Sophie issued a bearer instrument and Molly changed it to bearer form.
The law governing the acquisition of territory and the settlement of disputes among
nations is public international law.
a. True
b. False
While at the park, Tasha saw a small child fall into the lake. Tasha did not know the
child. Under the common law of most states, Tasha has a legal duty to take reasonable
steps to assist the child if Tasha is able to help and such help will not jeopardize Tasha’s
well-being.
a. True
b. False
Margo is in possession of a check issued to her by Felix. The check states, “Pay to the
order of Margo.” If Margo wishes to transfer the check to Pete to pay a debt she owes
him, all she needs to do is strike out her name on the front of the check, write in Felixs
name and give it to him.
a. True
b. False
A draft is always a check, but a check is not always a draft.
a. True
b. False
John was a licensed physician in Michigan. When he retired to Florida, he started
providing medical services to the people in his condo, relying on his Michigan license
since he did not have a Florida license and there is no reciprocity between the two
states. Isaac, John’s next-door neighbor, owed John $2000 for medical services. John
will be able to enforce the contract he made with Isaac.
a. True
b. False
The term “issuer
a. is not used in relation to commercial paper.
b. is an all-purpose term that means both maker and drawer.
c. is synonymous with drawee.
d. is used in relation to commercial paper only to indicate the bank which creates a
certificate of deposit.
Which of the following statements, if made by a seller who knows the statement to be
untruthful, would NOT be misrepresentation of material fact resulting in a cause of
action for fraud?
a. “This horse is only six years old.”
b. “There is no better car in the world.”
c. “The tires have less than 5,000 miles on them.”
d. “This car gets 28 miles per gallon. “
A new savings and loan bank, called Federal Deposit Bank, applied for a trademark of
its name. Why will this bank probably not receive trademark approval?
a. It is similar to an existing mark.
b. It is a generic trademark.
c. It is a deceptive mark.
d. It is a scandalous or immoral mark.
Morality plays no part of gambling contract legality.
a. True
b. False
“Course of dealing” refers to prior commercial transactions between the same parties.
a. True
b. False
As assistant manager of a discount department store, you have been asked to review the
store’s policy concerning shoplifters. (a) Discuss the legal standard used in most states
governing the detention of suspected shoplifters. (b) In reviewing the store’s policy,
discuss some of the items that you will consider.
Bob, a house builder, contracts with Ollie to build a house on Ollie’s lot. The total price
of the construction is $100,000, $20,000 of which will be Bob’s profit. After Bob has
put $10,000 worth of materials into the house, Ollie wrongfully refuses to let him finish
the house. If Bob sues for damages, he will be able to collect
a. $10,000.
b. $20,000.
c. $30,000.
d. $100,000.