Archives: Quiz

The victim of a fraud may be able to recover punitive damages. Answer: An agreement is illegal if it calls for behavior that violates a statute, but not a general rule of public policy. Answer: FALSE When entering into a […]

Parties who are negotiating a contract always prepare a written draft of the agreement for both parties to sign. Answer: As a general rule, the owner of the original personal property becomes the owner of the improvements. Answer: TRUE The […]

The final act of winding up a dissolved partnership is the distribution of assets. Answer: An agent’s exercise of apparent authority, in the absence of actual authority, is in violation of the agent’s duty to the principal. Answer: TRUE S […]

Disclaimers in contracts are usually effective to shield a manufacturer or seller against liability for negligence to consumers. Answer: The agent does not have to inform the principal of knowledge the agent gains in the course of her responsibilities. Answer: […]

Those creditors who do not take any collateral to secure the debt owed to them are unsecured creditors. Answer: The courts have generally held that ads for the sale of goods at a specified price are treated as invitations to […]

In determining whether a party has given consideration, courts look at whether the promises exchanged were of equal value. Answer: A bank does not owe a duty to its customer to pay any checks out of the account that are […]

A liquidation proceeding was traditionally known as straight bankruptcy. Answer: Once made, anticipatory repudiation can never be withdrawn. Answer: FALSE As under the Fair Credit Billing Act, operators under the Electronic Funds Transfer Act are given a maximum of 90 […]

If a liquidated damages clause is not enforceable because it is unconscionable, the injured party is barred from recovering actual damages. Answer: The elements of fraud are the same as the elements for the tort of deceit. Answer: TRUE The […]

The treble damages provision is applicable to individuals injured by violations of the Sarbanes-Oxley Act of 2002. Answer: A guarantor’s promise must be made in writing to be enforceable under the statute of frauds. Answer: TRUE Rob’s construction firm did […]

A person who inherits property under a will takes the property free of all outstanding claims against the property. Answer: States generally permit LLCs to have an indefinite duration. Answer: FALSE A landlord is not liable for criminal acts committed […]

Legislative reform at both the state and federal levels have facilitated e-commerce by revising traditional contract rules to include new contract rules for electronic transactions made over the Internet. Answer: To make a third party a donee beneficiary, the creation […]

The president cannot also be the secretary of the corporation. Answer: The EEOC has strongly supported mandatory binding arbitration as a condition of employment. Answer: FALSE The rights and liabilities of both sureties and guarantors are substantially equivalent. Answer: TRUE […]

Under the MBCA, the corporation can issue shares in return for the promoters’ preincorporation service. Answer: Tim takes a shortcut across John’s yard on his way to school. Even if John gives Tim permission to use John’s yard as a […]

If a person is adjudicated insane, his/her personal representative cannot ratify the contract. Answer: Under the UCC, the implied warranty of merchantability applies to the sale of food or drink. Answer: TRUE The UCC is unique in its approach to […]

A tenant is responsible for the care and upkeep of leased property, and is required to make major repairs if the damage was caused by his/her own negligence. Answer: A new trial is required in case where a case is […]

Under condominium ownership, a purchaser takes title to his/her individual unit and becomes a tenant in common with other unit owners in shared facilities. Answer: Trading on inside information is in violation of fiduciary duties. Answer: TRUE One can commit […]

If a husband and wife involved in bankruptcy cannot decide whether to use the state or the federal set of exemptions, the state set is elected by default. Answer: There is no guarantee that the values of “ethical” shareholders would […]

Agreements that create a conflict between a public employee’s personal interest and public duties are illegal and contrary to public policy. Answer: Union membership and union power have dramatically increased over the past decade. Answer: FALSE Foreign corporations doing business […]

Each state has a constitution that is similar to the U.S. Constitution in the design of the government it provides. Answer: The parties had to rely on the testimony of third persons who were often paid witnesses or friends, and […]

The U.S. Supreme Court generally disfavors arbitration as a way to settle disputes. Answer: A creditor of a partner can attach any property owned by the partnership. Answer: FALSE The plaintiff in a contract action has no duty to mitigate […]

If the seller refuses to deliver the goods called for by the contract, the buyer can recover as damages from the seller the difference between the contract price of the goods and the cost of the substitute goods. Answer: The […]

Discuss the importance of having contracts in today’s market economy. Answer: Statutory law has been supplanted by the common law of partnerships. Answer: FALSE The Restatement approach employs a “reasonably foreseeable” standard. Answer: FALSE Even if a jury unanimously finds […]

An option contract is created when the offeree gives the offeror something of value in exchange for a promise not to revoke the offer for a stated period of time. Answer: Rita cosigned a promissory note for $500 at the […]

Life insurance contracts give the insured the right to change the beneficiary only with the beneficiary’s consent. Answer: A contract of adhesion is not in violation of public policy. Answer: FALSE A warranty is an implied condition of an insurance […]

Under Section 11 of the Securities Act of 1933, a purchaser must sue the accountant within ten years after the time the misstatement or omission in the registration statement was or should have been discovered. Answer: Under the UCC, when […]

When the EPA expends money to clean up a Superfund site, it has the legal authority to recover its costs from those who were responsible for the problem. Answer: The parties to an arbitration proceeding can select an arbitrator in […]

According to the UCC, the offeror who remains silent impliedly authorizes the offeree to accept by any reasonable means of communication. Answer: Negligence is an important element of Rule 10b-5 violation. Answer: FALSE The USA PATRIOT Act restricts law enforcement’s […]

Jon, a high-school senior, bit into a turkey bone in a bite-sized cube of white turkey meat in his high-school cafeteria. He felt something in his throat and after some effort expelled a small ½ inch bone. He sustained injury […]

A promisor who renders performance to the assignor without notice of the assignment: A. is still liable under the contract. B. has no further liability under the contract. C. creates a novation. D. cannot be sued for nonperformance. Answer: Carl […]

Oral evidence may be introduced to “fill the gaps” in an incomplete written contract. Answer: In a bailment situation, the bailor retains the title to the item of property. Answer: TRUE Mike indorsed a check from his employer by signing […]

The Securities Act of 1933 is a one-time disclosure statute, although some of its liability provisions purport to cover all fraudulent sales of securities. Answer: The tenants have no right to remove trade fixtures even at the end of the […]

Statements of opinion serve as a basis for rescission. Answer: A registration statement is the basic selling document of a 1933 Act registered offering. Answer: FALSE A creditor who loans money to enable a consumer to buy goods can obtain […]

The concept of infancy is a set of common law presumptions about the relation between capacity and gender. Answer: Which of the following statements is TRUE about a minitrial? A. In a minitrial, a six-member mock jury empaneled by the […]

An agency relationship results from any indication of consent by the principal that the agent may act on the principal’s behalf and under her control. Answer: If a consumer brings suit against the manufacturer, the retailer is relieved of its […]

A client owns the working papers prepared by an accountant in connection with services performed for the client. Answer: An agent who commits a criminal act under instruction from her principal is guilty of that crime. Answer: TRUE Once a […]

On December 1, 2014, Crawley Corporation incurs a 15-year $600,000 mortgage liability in conjunction with the acquisition of an office building. This mortgage is payable in monthly installments of $7,200, which include interest computed at the rate of 12% per […]

On March 31, 2015, $6,000,000 of 6%, 10-year bonds payable, dated December 31, 2014, are issued. Interest on the bonds is payable semiannually each June 30 and December 31. The total amount received (including accrued interest) by the issuing corporation […]

Which of the following is an incorrect statement about a corporation? a. A corporation is an entity separate and distinct from its owners. b. Creditors ordinarily have recourse only to corporate assets in satisfaction of their claims. c. A corporation […]

Changes from cost are reported as part of net income for a. available-for-sale securities. b. held-to-maturity securities. c. debt securities. d. trading securities. Answer: Use the following information to calculate for the year ended December 31, 2015 (a) net income, […]

Each of the following decreases retained earnings except a a. cash dividend. b. liquidating dividend. c. stock dividend. d. All of these decrease retained earnings. Answer: When using the direct method to compute cash provided by operations, a. income taxes […]

Sandra Sikes sells exercise machines for home use. The machines carry a 2-year warranty. Past experience indicates that 5% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is […]

Which of the following is not a true statement about a multiple-step income statement? a. Operating expenses are similar for merchandising and service enterprises. b. There may be a section for nonoperating activities. c. There may be a section for […]

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of a. the adjusted trial balance. b. the current period’s balance sheet. c. a comparative balance sheet. d. a comparative income statement. […]

Which of the following time periods would not be referred to as an interim period? a. Monthly b. Quarterly c. Semi-annually d. Annually Answer: A company just starting business made the following four inventory purchases in June: A physical count […]

Moroni Industries has the following inventory information. Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a FIFO basis? a. $11,500 b. $11,520 c. $33,960 d. $33,980 Answer: Under the retail inventory […]

Ritter Company issues $1,200,000 of 10%, 10-year bonds on January 1, 2015, at 102. Interest is payable semiannually on July 1 and January The company uses the straight-line method of amortization. Instructions (a) Journalize the entries for the bonds on […]

The entry to record the issuance of an interest-bearing note credits Notes Payable for the note’s a. maturity value. b. market value. c. face value. d. cash realizable value. Answer: Martin Corporation purchased land in 2007 for $290,000. In 2015, […]

Regular dividends are declared out of a. Paid-in Capital in Excess of Par. b. Treasury Stock. c. Common Stock. d. Retained Earnings. Answer: The following information pertains to Rural Company. Assume that all balance sheet amounts represent both average and […]

On January 2, 2015, Parr Company purchased 100% of the common stock of Sneed Company for $420,000. The fair value of Sneed Company’s assets and liabilities are equal to their book values except that land has a fair value of […]

A correction in income of a prior period involves either a debit or credit to the Retained Earnings account. Answer: Recording depreciation each period is an application of the expense recognition principle. Answer: T A corporation acts under its own […]