Barbara, an antique dealer, intentionally represents the value of an antique chest of
drawers, as $6,000 when she has reason to know the value is considerably less.
Margaret agrees to buy it for $5,500. It is worth $2,500. In a state that uses the
“benefit-of-the-bargain” rule, Margaret’s damage award would be:
a. $3,500.
b. $3,000.
c. $500.
d. $2,500.
If Bob’s mortgage debt is greater than the amount for which his farm is sold in a
foreclosure action, he is excused from payment of the remainder.
a. True
b. False
Unemployment insurance is funded by employer taxes; federal taxes generally pay
administrative costs and state contributions pay for the actual benefits.
a. True
b. False
The Uniform Probate Code has been adopted by:
a. fewer than half of the states.
b. all states without variation.
c. the great majority of states without variation.
d. the federal government.
Scienter is not a requirement for an accountant to be civilly liable under Rule 10b-5.
a. True
b. False
Ratification makes a contract void from the beginning.
a. True
b. False
A substitute check:
a. is basically a copy of the original check that shows both the front and back of the
original check.
b. is not suitable for automated processing in the same manner as the original but is
used by the banks for storage of the information on an original check after processing.
c. bears a legend stating that it is only a copy of a check and that it is not to be used in
the same way as the original.
d. All of these.
Alma sells her car to Ervin. Since she still has four months left on her automobile
insurance policy, she tells Ervin he will be covered for this four-month period under the
policy. This purported assignment of her policy is effective as long as she notifies her
insurance company about the change of insureds.
a. True
b. False
To which of the following limitations are the rights of the holder of a copyright subject?
a. Fair use
b. Compulsory licenses
c. Palming off
d. Both fair use and compulsory licenses
The UCC provides that a merchant is bound to keep a written offer open for a stated
period but no longer than:
a. ten days.
b. two months.
c. three months.
d. a reasonable time.
Which of the following is correct with respect to an accountant’s working papers?
a. The client is held to be the owner of an accountant’s working papers.
b. An accountant must surrender his working papers to his client if the client so
requests.
c. An accountant may not disclose the contents of his working papers unless the client
consents or a court orders the disclosure.
d. All of these are correct.
If Able Corporation buys all the assets of Beta Corporation in a merger, Able
Corporation also assumes Beta
Corporation’s liabilities.
a. True
b. False
Under the Antitrust Criminal Penalty Enhancement and Reform Act of 2004,
individuals who violate the Sherman
Antitrust Act may be imprisoned for ten years and fined up to $1,000,000.
a. True
b. False
If a bank pays on a check even though it has a ‘stop payment order,” it is liable to the
customer only if the customer can prove a loss because of the payment.
a. True
b. False
A mental illness or defect of one of the parties to a contract automatically makes a
contract void.
a. True
b. False
The firm offer provision in Articles 2 and 2A of the UCC covers only merchant sellers.
a. True
b. False
A purchase money security interest in equipment takes priority over a conflicting
security interest if the purchase money interest is perfected within thirty days of the
debtor’s receipt of the goods.
a. True
b. False
When can an accountant release audit working papers?
a. When a client consents
b. When a court orders disclosure
c. Both of these.
d. Neither of these.
A prompt promise to ship or prompt shipment of goods is a valid acceptance of an offer
to buy goods for prompt or current shipment.
a. True
b. False
Beth recently purchased a stereo system for her apartment and a new sailboat. She
financed the purchases with
XYX Finance Co. Under the Code, these items are classified as:
a. consumer goods.
b. equipment.
c. inventory.
d. real property.
What is the principal source for corporate financing?
a. Debt
b. Equity investment securities
c. Both of these.
d. None of these.
Growingreen, a gourmet fresh food store, orders 100 lbs. of peaches from Western
Fruits “on approval.” Growingreen has never dealt with Western before this transaction.
Since it only sells the highest quality fruits, Growingreen asked for and received these
special terms. The peaches arrived on Saturday, but the owners of Growingreen were
too busy to open the crates. Sunday they are closed. Monday at 4 p.m., they opened the
boxes and inspected the peaches. They did not meet the high standards of Growingreen,
so they nailed the crates shut and ordered a truck to return them the next day. They
arrived at Western on Thursday, totally spoiled, a week after they were sent. This is the
first time Western knew they were not being accepted. Who is responsible for the
damages to the peaches?
a. Growingreen, since it did not, within a reasonable time, notify Western of its election
to return the peaches
b. Growingreen; the risk of loss was on them when the peaches arrived
c. Western, since they retained the risk of loss until approval
d. Western, because they agreed to take the goods back
The Fair Housing Act prohibits discrimination based on race and color only.
a. True
b. False
The board of directors generally manages the day-to-day affairs of the company.
a. True
b. False
An insured holds a $32,000 fire insurance policy on a building which is valued at
$40,000, and on which there is an
80% co-insurance clause. If the building is totally destroyed by fire, the policyholder
will receive:
a. $40,000.
b. $32,000.
c. $30,000.
d. $25,600.
a. When may the attorney general of a state seek to dissolve a corporation?
b. When may the shareholders of a corporation seek to dissolve it?
c. When may the creditors of a corporation seek to dissolve it?
Paul is working as an undercover drug agent. He enrolls in classes at State University
where he meets several students in business administration and invites them to come to
his house for a party. No mention is made of any drugs, but he does say he will have a
keg of beer. Shortly after his guests arrive, he gets out some marijuana and encourages
the group to have some. All of them refuse, except Sam, who has never tried it before.
When Sam lights up, Paul arrests him for possession of a controlled substance. Sam:
a. is clearly guilty as charged.
b. can raise the defense of entrapment, claiming Paul has enticed him to commit a crime
that he would not have committed otherwise.
c. has a valid defense of duress.
d. can raise the Fourth Amendment to exclude the marijuana as evidence that has been
illegally seized.
An obligation imposed by law where there has been no agreement or expression of
assent by word or act on the part of either party involved is a(n):
a. implied in fact contract.
b. express contract.
c. void contract.
d. quasi contract.
A buyer’s right to purchase, in good faith and without unreasonable delay, substituted
goods from Seller B when
Seller A breaches a sales contract is:
a. cover.
b. specific performance.
c. replevin.
d. reclamation.
In which of the following situations would the persons be partners?
a. A and B jointly own shares of the capital stock of a corporation, have a joint bank
account, and have purchased real estate as tenants in common. They share the dividends
on the stock, the interest on the bank account, and the net proceeds from the lease of the
real estate.
b. A and B buy and sell real estate continuously over a five-year period, conducting a
business of trading in real estate. They do not consider themselves partners.
c. A, B, and C each inherit an undivided one-third interest in a restaurant and decide to
sell it because the market is such that they are assured a good price.
d. All of these.
An ordinary contract between the debtor and his creditors whereby the creditors receive
prorataa part of their claims and the debtor is discharged from the balance of the claims
is:
a. a nonstatutory composition.
b. a statutory assignment.
c. an equity receivership.
d. an automatic stay.
Karen has agreed to buy May’s car, but the two have not agreed on the price. When
there is no agreement in a sales contract as to price, what effect does it have on the
contract?
a. There is a contract, with the price being whatever the seller decides.
b. There is a contract, with the price being a reasonable price at the time the agreement
was made.
c. There is no contract, because the agreement is not definite and certain enough.
d. There is a contract, with the price being a reasonable price at the time of delivery.
The validity of zoning is based on the police power reserved to the states.
a. True
b. False