1) An accountant is always liable for a misleading statement that affects the price of a
security, even if the accountant acted in good faith.
2) A concentrated industry is one in which either a single firm or a small number of
firms carry out the separate functions of the chain of production.
3) In most illegal contracts, both parties are considered to be equally at fault, and
neither party can enforce it or recover damages under it.
4) National Pollutant Discharge Elimination System permits can be issued even if a
discharge will violate water-quality standards.
5) States do not have trademark statutes.
6) The Securities and Exchange Commission cannot exempt persons, securities, and
transactions from the requirements of the securities laws.
7) Dumping is the exporting of environmentally polluting goods to a foreign market.
8) The law governing limited liability companies is uniform.
9) Badal is an employee of Cloud Computing Corporation. The federal government
raids the firm and determines that Badal and many of his co-workers are illegal
immigrants, whom are then detained and later deported. Derry, Badal’s manager, is
imprisoned for federal law violations related to the immigrants’ hiring. Unable to attract
replacement workers at a competitive wage, Cloud Computing shuts its doors. Reasons
for reforming U.S. immigration laws include
a.the disruption of business caused by federal raids on employers.
b.the economic conditions prompting immigration to the United States.
c.the imprisonment of those who violate U.S. laws.
d.the low wages offered by employers for jobs that should pay more.
10) Grid Tools & Hardware Company is subject to a decision by the Consumer Product
Safety Commission. Opposed to the decision, Grid Tools wants a court to review it.
First, however, the firm must use all of the potential administrative remedies. This is
a.an actual controversy at issue.
b.standing to sue.
c.the exhaustion doctrine.
d.the ripeness doctrine.
11) Entrepreneur Auto Rentals owes Sole Saver Auto Dealership $20,000. Entrepreneur
executes a note to Sole Saver as security for the debt. This security
a.does not constitute sufficient consideration for HDC status.
b.does not satisfy the value requirement for HDC status.
c.satisfies the consideration requirement for HDC status.
d.satisfies the value requirement for HDC status.
12) Fact Pattern 14-B1
Bay City Mall requires its tenants to sign a lease that includes a clause releasing Metro
from liability in the event of monetary or physical injury no matter who is at fault.
Coco’s Chocolate Creations signs a lease with Bay City that contains the clause.
Refer to Fact pattern 14-B1. The clause is most likely
a.enforceable as a matter of public policy.
b.enforceable if either party is considered to be a business for essential services.
c.enforceable if the lease also involves residential property.
d.unenforceable.
13) Sly includes in his song “Sneaky” a few seconds of Wily ‘s copyrighted sound
recording “Wits” without permission. Some federal courts have found that such digital
sampling is
a.a violation of copyright law.
b.a “fair use” exception to the provisions of the act.
c.not a “fair use” exception to the provisions of the act.
d.all of the choices.
14) Memphis Music Makers Inc.’s stated purpose is to sell musical instruments. If chief
executive officer Neal contracts with Open SeasonFirearms in Memphis Music’s name
to sell a shotgun, he has likely committed
a.anultra vires act.
b.ade facto act.
c.ade jure act.
d.a legal act.
15) Miracle Mobile Devices, Inc., is a private, for-profit corporation that (1) was
formed for the purpose of manufacturing and distributing a newly patented tablet, (2) is
owned by five shareholders, (3) is subject to double taxation, and (4) has made no
public offering of its shares. Miracle is
a.an S corporation.
b.aclose corporation.
c.a nonprofit corporation.
d.a professional corporation.
16) Ricardo, an accountant, contracts to conduct an audit for Sensei Sushi Restaurants.
In performing the audit, Ricardo fails to detect certain misconduct. Ricardo is most
likely
a.liable if a normal audit would have revealed the misconduct.
b.liable if Ricardo issues a specifically qualified opinion.
c.not liable if Ricardo generally disclaims any liability.
d.not liable if the misconduct was due to Sensei Sushi’s negligence.
17) Fact Pattern 41-1B
DIYFasteners Company decides to consolidate its operations with Evergrip Studs, Inc.,
to form Fit-Rite Bolts & ScrewsInc.
Refer to Fact Pattern 41-1B. Evergrip had rights in certain property. After the
consolidation, Fit-Rite acquires the rights
a.automatically.
b.only after completing certain additional statutory procedures.
c.only if Evergrip’s former shareholders expressly approve.
d.only if the acquisition is a specified result of the consolidation.
18) Alain is chairman of the board of Barber & Beauty Supply Corporation. Consuela, a
consumer, is injured while using a Barber & Beauty product. She sues Barber & Beauty
and Alain individually. The corporation may pay Alain’s legal fees under
a.under the director’s right to participation.
b.under the director’s right to compensation.
c.under the director’s right to indemnification.
d.only on the firm’s own initiative.
19) Through careless manufacturing practices, Metalworks Company makes and
distributes unsafe products that are sold to Nabi and other consumers. This may be
subject to sanctions under
a.federal and state law.
b.federal law only.
c.no law, according to the principles of freedom to contract.
d.state law only.
20) Service Employees International Union and Timberline Products, Inc., have their
dispute resolved in arbitration. The arbitrator arbitrates issues that the parties did not
agree to submit to arbitration. This is a ground for a court to
a.none of the choices.
b.review the merits of the dispute.
c.review the sufficiency of the evidence.
d.set aside the award.
21) 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.wrongful interference with a contractual relationship.
c.no tort.
d.wrongful interference with a business relationship.
22) Posing as Platinum Bank, Quentin e-mails Rachel, asking her to update her personal
banking information through a link in the e-mail. She clicks on the link and types in the
data, which Quentin promptly sells to Spence. This is
a.hacking.
b.identity theft.
c.cyberterrorism.
d.bribery.
23) A reviewing court may reverse a trial court’s judgment only in a case in which the
plaintiff lost.
24) An assignee’s rights are subject to the defenses that the obligor has against the
assignor.
25) In a federal form of government, the national government does not share sovereign
power with the states.
26) An injured party may sue only the manufacturer of defective products that are
subject to comprehensive federal regulatory schemes.
27) According to the United States Supreme Court, the First Amendment prevents limits
from being placed on independent political expenditures by corporations.
28) The breadth of the commerce clause permits the government to legislate only in
areas in which Congress has explicitly been granted power.
29) Shareholders own the corporation, and they have legal title to corporate property.
30) An extension clause allows a payee or other holder of a time instrument to demand
payment of the entire amount due, with interest, if a certain event occurs.
31) Social media posts are routinely included in discovery in litigation.