Generally, an agency relationship is terminated by operation of law in all of the following situations EXCEPT the

Generally, an agency relationship is terminated by operation of law in all of the following situations EXCEPT the

a. Principal's death.
b. Principal's incapacity.
c. Agent's renunciation of the agency.
d. Agent's failure to acquire a necessary business license.


Answer: c

Thorp was a purchasing agent for Ogden, a sole proprietor and had the express authority to place purchase order with Ogden's supplier. Thorp placed an order with Datz, Inc. on Ogden's behalf after Ogden was declared incompetent in a judicial proceeding. Thorp was aware of Ogden's incapacity. Which of the following statement is correct concerning Ogden's liability to Datz?

Thorp was a purchasing agent for Ogden, a sole proprietor and had the express authority to place purchase order with Ogden's supplier. Thorp placed an order with Datz, Inc. on Ogden's behalf after Ogden was declared incompetent in a judicial proceeding. Thorp was aware of Ogden's incapacity. Which of the following statement is correct concerning Ogden's liability to Datz?

a. Ogden will be liable because Datz was NOT informed of Ogden's incapacity.
b. Ogden will be liable because Thorp acted with express authority.
c. Ogden will NOT be liable because Thorp's agency ended when Ogden was declared incompetent.
d. Ogden will NOT be liable because Ogden was a non disclosed principal.


Answer: c

Which of the following rights will a third party be entitled to after validly contracting with an agent representing an undisclosed principal?

Which of the following rights will a third party be entitled to after validly contracting with an agent representing an undisclosed principal?

a. Disclosure of the principal by the agent.
b. Ratification of the contract by the principal.
c. Performance of the contract by the agent.
d. Election to void the contract after disclosure of the principal.


Answer: c

Easy Corp. is a real estate developer and regularly engages real estate brokers to act on its behalf in acquiring parcels of land. The brokers are authorized to enter into such contracts, but are instructed to do so in their own names without disclosing Easy's identity or relationship to the transaction. If a broker enters into a contract with a seller on Easy's behalf,

Easy Corp. is a real estate developer and regularly engages real estate brokers to act on its behalf in acquiring parcels of land. The brokers are authorized to enter into such contracts, but are instructed to do so in their own names without disclosing Easy's identity or relationship to the transaction. If a broker enters into a contract with a seller on Easy's behalf,

a. The broker will have the same actual authority as if Easy's identity has been disclosed.
b. Easy will be bound by the contract because of the broker's apparent authority.
c. Easy will NOT be liable for any negligent act committed by the broker while acting on Easy's behalf.
d. The broker will NOT be personally bound by the contract because the broker has express authority to act.



Answer: a

Which of the following generally may ratify a contract that was agreed to by his/her agent without authority from the principal? Fully disclosed principal / Partially disclosed principal / Undisclosed principal

Which of the following generally may ratify a contract that was agreed to by his/her agent without authority from the principal?
Fully disclosed principal / Partially disclosed principal / Undisclosed principal

a. Yes / Yes / Yes
b. Yes / Yes / No
c. Yes / No / No
d. No/ No / Yes


Answer: b

Ames, claiming to be an agent of Clar Corporation, makes a contract with Trimon in the name of Clar Corporation. Later, Clar Corporation, for the first time, learns what Ames has done and notifies Trimon of the truth that Ames was not an agent of Clar Corporation. Which of the following statement is incorrect?

Ames, claiming to be an agent of Clar Corporation, makes a contract with Trimon in the name of Clar Corporation. Later, Clar Corporation, for the first time, learns what Ames has done and notifies Trimon of the truth that Ames was not an agent of Clar Corporation. Which of the following statement is incorrect?

a. Clar Corporation may ratify this contract if it does so with the entire contract.
b. Trimon may withdraw from the contract before Clar attempts to ratify it.
c. Clar Corporation may ratify this contract by performing under the contract without stating that it is ratifying.
d. Trimon may enforce this contract even if Clar Corporation does not wish to be bound.


Answer: d.

Frost's accountant and business manager has the authority to

Frost's accountant and business manager has the authority to

a. Mortgage Frost's business property.
b. Obtain bank loans for Frost.
c. Insure Frost's property against fire loss.
d. Sell Frost's business.


Answer: c

Pine, an employee of Global Messenger Co., was hired to deliver highly secret corporate documents for Global's client throughout the world. Unknown to Global, Pine carried a concealed pistol. While Pine was making a delivery, he suspected an attempt was being made to steal the package, drew his gun and shot Kent, an innocent passerby. Kent will NOT recover damages from Global if

Pine, an employee of Global Messenger Co., was hired to deliver highly secret corporate documents for Global's client throughout the world. Unknown to Global, Pine carried a concealed pistol. While Pine was making a delivery, he suspected an attempt was being made to steal the package, drew his gun and shot Kent, an innocent passerby. Kent will NOT recover damages from Global if

a. Global discovered that Pine carried a weapon and did nothing about it.
b. Global instructed its messengers NOT to carry weapons.
c. Pine was correct and an attempt was being made to steal the package.
d. Pine's weapon was unlicensed and illegal.


Answer: d

Trent was retained, in writing, to act as Post's agent for the sale of Post's memorabilia collection. Which of the following statements is correct? I. To be an agent, Trent must be at least twenty-one years of age. II. Post would be liable to Trent if the collection was destroyed before Trent found a purchaser.

Trent was retained, in writing, to act as Post's agent for the sale of Post's memorabilia collection. Which of the following statements is correct?
I. To be an agent, Trent must be at least twenty-one years of age.
II. Post would be liable to Trent if the collection was destroyed before Trent found a purchaser.

a. I only.
b. II only.
c. Both and I and II.
d. Neither I nor II.


Answer: d

Generally, a disclosed principal will be liable to third parties for its agents unauthorized misrepresentations if the agent is an Employee / Independent Contractor

Generally, a disclosed principal will be liable to third parties for its agents unauthorized misrepresentations if the agent is an
Employee / Independent Contractor

a. Yes / Yes
b. Yes / No
c. No / Yes
d. No / No


Answer: b

Which of the following statement(s) concerning agency law is (are) true? I. A contract is needed to have an agency relationship. II. The agent owes a fiduciary duty to the principal. III. The principal owes a fiduciary duty to the agent.

Which of the following statement(s) concerning agency law is (are) true?
I. A contract is needed to have an agency relationship.
II. The agent owes a fiduciary duty to the principal.
III. The principal owes a fiduciary duty to the agent.

a. I and II only.
b. I and III only.
c. II only.
d. I, II, and III.


Answer: c

When a corporation elects to be a Subchapter S corporation, which of the following statements is (are) true regarding the federal tax treatment of the corporation's income or loss?

When a corporation elects to be a Subchapter S corporation, which of the following statements is (are) true regarding the federal tax treatment of the corporation's income or loss?

I. The corporation's income is taxed at the corporate level and not the shareholders' level.
II. The shareholders report the corporation's income on their tax returns when the income is distributed to them.
III. The shareholders report the corporation's income on their tax returns even if the income is not distributed to them.
IV. The shareholders generally report the corporation's loss on their tax returns.



a. I only is true.
b. II only is true.
c. III only is true.
d. III and IV only are true.


Answer: d

When a consolidation takes place under the law of corporations, which of the following is true?

When a consolidation takes place under the law of corporations, which of the following is true?

a. Two or more corporations are joined into one new corporation.
b. All assets are acquired by the new corporation.
c. The new corporation is liable for the debts of each of the old corporations.
d. All of the above are true.


Answer: d.

Which of the following statements is a general requirement for the merger of two corporations?

Which of the following statements is a general requirement for the merger of two corporations?

a. The merger plan must be approved unanimously by the stockholder of both corporations.
b. The merger plan must be approved unanimously by the boards of both corporations.
c. The absorbed corporation must amend its articles of incorporation.
d. The stockholders of both corporations must be given due notice of a special meeting, including a copy or summary of the merger plan.


Answer: d

The limited liability of a stockholder in a closely held corporation may be challenged successfully if the stockholder

The limited liability of a stockholder in a closely held corporation may be challenged successfully if the stockholder

a. Under-capitalized the corporation when it was formed.
b. Formed the corporation solely to have limited personal liability.
c. Sold property to the corporation.
d. Was a corporate officer, director, or employee.



Answer: a

Under the Revised Model Business Corporation Act, which of the following actions by a corporation would entitle a stockholder to dissent from the action and obtain payment of the fair value of his/her shares?

Under the Revised Model Business Corporation Act, which of the following actions by a corporation would entitle a stockholder to dissent from the action and obtain payment of the fair value of his/her shares?

I. An amendment to the articles of incorporation that materially and adversely affects rights in respect of a dissenter's shares because it alters or abolishes a preferential right of the shares.
II. Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the stockholder is entitled to vote on the plan.



a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.


Answer: c

Acorn Corp. wants to acquire the entire business of Trend Corp. Which of the following methods of business combination will BEST satisfy Acorn's objectives without requiring the approval of the shareholders of either corporation?

Acorn Corp. wants to acquire the entire business of Trend Corp. Which of the following methods of business combination will BEST satisfy Acorn's objectives without requiring the approval of the shareholders of either corporation?

a. A merger of Trend into Acorn, whereby Trend shareholder receive cash or Acorn shares.
b. A sale of all the assets of Trend, outside the regular course of business, to Acorn for cash.
c. An acquisition of all the shares of Trend through a compulsory share exchange for Acorn shares.
d. A cash tender offer, whereby Acorn acquires at least 90% of Trends' shares, followed by a short-form merger of Trend into Acorn.


Answer: d

The following are two statements concerning a fiduciary duty in a corporation. I. Officers and directors of a corporation owe a fiduciary duty to that corporation. II. Majority shareholders of a corporation can owe a fiduciary duty to the minority shareholders. Which of the statements is (are) correct?

The following are two statements concerning a fiduciary duty in a corporation.
I. Officers and directors of a corporation owe a fiduciary duty to that corporation.
II. Majority shareholders of a corporation can owe a fiduciary duty to the minority shareholders.
Which of the statements is (are) correct?

a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.


Answer: c

The officers of West Corporation wish to buy some used equipment for West Corporation. The used equipment is actually owned by Parks, a director of West Corporation. For this transaction to NOT be a conflict of interest for Parks, which of the following is (are) required to be true?

The officers of West Corporation wish to buy some used equipment for West Corporation. The used equipment is actually owned by Parks, a director of West Corporation. For this transaction to NOT be a conflict of interest for Parks, which of the following is (are) required to be true?

I. Parks sells the used equipment to West Corporation in a contract that is fair and reasonable to the corporation.
II. Parks' ownership of the used equipment is disclosed to the shareholders of West who approve it by majority vote.
III. Parks' ownership of the used equipment is disclosed to the board of directors, who approve it by a majority vote of the disinterested directors.



a. Any one of I, II, or III.
b. I and II are both required.
c. I and III are both required.
d. All three of I, II, and III are required.


Answer: a

Corporations generally have which of the following powers without shareholder approval? I. Power to acquire their own shares. II. Power to make charitable contributions. III. Power to make loans to directors.

Corporations generally have which of the following powers without shareholder approval?
I. Power to acquire their own shares.
II. Power to make charitable contributions.
III. Power to make loans to directors.

a. I only.
b. I and II only.
c. II and III only.
d. I, II, and III.


Answer: b

An owner of common stock will NOT have any liability beyond actual investment if the owner

An owner of common stock will NOT have any liability beyond actual investment if the owner

a. Paid less than par value for stock purchased in connection with an original issue of shares.
b. Agreed to perform services that were worth less than par value for the corporation in exchange for original issue par value shares.
c. Purchased treasury shares for less than par value.
d. Failed to pay the full amount owed on a subscription contract for no-par shares.


Answer: c

Johns owns 400 shares of Abco Corp. Cumulative preferred stock. In the absence of any specific contrary provisions in Abco's Articles of Incorporation, which of the following statements is correct?

Johns owns 400 shares of Abco Corp. Cumulative preferred stock. In the absence of any specific contrary provisions in Abco's Articles of Incorporation, which of the following statements is correct?

a. Johns is entitled to convert the 400 shares of preferred stock to a like number of shares of common stock.
b. If Abco declares a cash dividend on its preferred stock, Johns becomes an unsecured creditor of Abco.
c. If Abco declares a dividend on its common stock, Johns will be entitled to participate with the common stock shareholders in any dividend distribution made after preferred dividends are paid.
d. Johns will be entitled to vote if dividend payments are in arrears.


Answer: b

Promoters of a corporation which is NOT yet in existence

Promoters of a corporation which is NOT yet in existence

a. Are persons that form the corporation and arrange for capitalization to help begin the corporation.
b. Are agents of the corporation.
c. Can bind the future corporation to presently made contracts they make for the future corporation.
d. Are shielded from personal liability on contracts they make with third parties on behalf of the future corporation.


Answer: a

Which of the following statements is correct with respect to the differences and similarities between a corporation and a limited partnership?

Which of the following statements is correct with respect to the differences and similarities between a corporation and a limited partnership?

a. Stockholders may be entitled to vote on corporate matters but limited partners are prohibited from voting on any partnership matters.
b. Stock of a corporation may be subject to the registration requirements of the federal securities laws but limited partnership interests are automatically exempt from those requirements.
c. Directors owe fiduciary duties to the corporation and limited partners owe such duties to the partnership.
d. A corporation and a limited partnership may be created only under a state statute and each must file a copy of its organizational document with the proper government body.


Answer: d

A corporation as a separate legal entity can do which of the following?

A corporation as a separate legal entity can do which of the following?

a. Contracts in its own name with its own shareholders.
b. Contract in its own name with its own shareholders only if a majority of its shareholders agree that such contract can be made.
c. Contract in its own name with third parties.
d. Both a. and c. are correct.


Answer: d

Which of the following is NOT considered to be an advantage of the corporate form of doing business over the partnership form?

Which of the following is NOT considered to be an advantage of the corporate form of doing business over the partnership form?

a. A potential perpetual and continuous life.
b. The interests in the corporation are typically easily transferable.
c. The managers in the corporation and shareholders have limited liability.
d. Persons who manage the corporation are not necessarily shareholders.


Answer: c

Which of the following is NOT characteristic of the typical limited liability company?

Which of the following is NOT characteristic of the typical limited liability company?

a. Death of a member (owner) causes it to dissolve unless the remaining members decide to continue the business.
b. All members (owners) are allowed by law to participate in the management of the firm.
c. The company has, legally, a perpetual existence.
d. All members (owners) have limited liability.


Answer: c

Which of the following is NOT true of a joint venture?

Which of the following is NOT true of a joint venture?

a. Each joint venturer is personally liable for the debts of a joint venture.
b. Each joint venturer has the right to participate in the management of the joint venture.
c. The joint venturer owe each other fiduciary duties.
d. Death of a joint venturer dissolves the joint venture.


Answer: d

Riewerts, Morgan and Stonk form a limited partnership. Riewerts is the one general partner. Which of the following events will cause this limited partnership to be dissolved?

Riewerts, Morgan and Stonk form a limited partnership. Riewerts is the one general partner. Which of the following events will cause this limited partnership to be dissolved?

I. Riewerts dies and is survived by the other two partners.
II. Morgan dies leaving Riewerts and Stonk.
III. Riewerts takes out personal bankruptcy.
IV. Stonk takes out personal bankruptcy.



a. I only.
b. I and II only.
c. I and III only.
d. III and IV only.


Answer: c

Mandy is a limited partner in a limited partnership in which Strasburg and Hua are the general partners. Which of the following may Mandy do without losing limited liability protection?

Mandy is a limited partner in a limited partnership in which Strasburg and Hua are the general partners. Which of the following may Mandy do without losing limited liability protection?

I. Mandy acts as an agent of the limited partnership.
II. Mandy votes to remove Strasburg as a general partner.




a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.



Answer: c

Which of the following statements is correct with respect to a limited partnership?

Which of the following statements is correct with respect to a limited partnership?

a. A limited partner may not be an unsecured creditor of the limited partnership.
b. A general partner may not also be a limited partner at the same time.
c. A general partner may be a secured creditor of the limited partnership.
d. A limited partnership can be formed with limited liability for all partners.


Answer: c

Dowd, Elgar, Frost, and Grant formed a general partnership. Their written partnership agreement provided that the profits would be divided so that Dowd would receive 40%; Edgar, 30%; Frost, 20%; and Grant, 10%. There was no provision for allocating losses. At the end of its first year, the partnership had losses of $200,000. Before allocating losses, the partners' capital account balances were: Dowd, $120,000; Elgar, $100,000; Frost, $75,000; and Grant, $11,000. Grant refuses to make any further contributions to the partnership. Ignore the effects of federal partnership tax law. After losses were allocated to the partners' capital accounts and all liabilities were paid, the partnership's sole asset was $106,000 in cash. How much would Elgar receive on dissolution of the partnership?

Dowd, Elgar, Frost, and Grant formed a general partnership. Their written partnership agreement provided that the profits would be divided so that Dowd would receive 40%; Edgar, 30%; Frost, 20%; and Grant, 10%. There was no provision for allocating losses. At the end of its first year, the partnership had losses of $200,000. Before allocating losses, the partners' capital account balances were: Dowd, $120,000; Elgar, $100,000; Frost, $75,000; and Grant, $11,000. Grant refuses to make any further contributions to the partnership. Ignore the effects of federal partnership tax law.
After losses were allocated to the partners' capital accounts and all liabilities were paid, the partnership's sole asset was $106,000 in cash. How much would Elgar receive on dissolution of the partnership?

a. $37,000
b. $40,000
c. $47,500
d. $50,000


a

Wind, who has been a partner in the PLW general partnership for four years, decides to withdraw from the partnership despite a written partnership agreement that states, "no partner may withdraw for a period of five years." Under the Uniform Partnership Act, what is the result of Wind's withdrawal?

Wind, who has been a partner in the PLW general partnership for four years, decides to withdraw from the partnership despite a written partnership agreement that states, "no partner may withdraw for a period of five years." Under the Uniform Partnership Act, what is the result of Wind's withdrawal?

a. Wind's withdrawal causes a dissolution of the partnership by operation of law.
b. Wind's withdrawal has NO bearing on the continued operation of the partnership by the remaining partners.
c. Wind's withdrawal is NOT effective until Wind obtains a court-ordered decree of dissolution.
d. Wind's withdrawal causes a dissolution of the partnership despite being in violation of the partnership agreement.


Answer: d

Under the Revised Uniform Partnership Act, in which of the following cases will property be deemed to be partnership property?

Under the Revised Uniform Partnership Act, in which of the following cases will property be deemed to be partnership property?

I. A partner acquires property in the partnership name.
II. A partner acquires title to it in his/her own name using partnership funds.
III. Property owned previously by a partner is used in the partnership business.



a. I only.
b. I and II only.
c. II only.
d. I, II, and III.


Answer: b

The apparent authority of a partner to bind the partnership in dealing with third parties

The apparent authority of a partner to bind the partnership in dealing with third parties

a. Will be effectively limited by a formal resolution of the partners of which third parties are aware.
b. Will be effectively limited by a formal resolution of the partners of which third parties are unaware.
c. Would permit a partner to submit a claim against the partnership to arbitration.
d. Must be derived from the express powers and purposes contained in the partnership agreement.


Answer: a

Lark, a partner in DSJ, a general partnership, wishes to withdraw from the partnership and sell Lark's interest to Ward. All of the other partners in DSJ have agreed to admit Ward as a partner and to hold Lark harmless for the past, present, and future liabilities of DSJ. As a result of Lark's withdrawal and Ward's admission to the partnership, Ward

Lark, a partner in DSJ, a general partnership, wishes to withdraw from the partnership and sell Lark's interest to Ward. All of the other partners in DSJ have agreed to admit Ward as a partner and to hold Lark harmless for the past, present, and future liabilities of DSJ. As a result of Lark's withdrawal and Ward's admission to the partnership, Ward

a. Acquired only the right to receive Ward's share of DSJ profits.
b. Has the right to participate in DSJ's management.
c. Is personally liable for partnership liabilities arising before and after being admitted as a partner.
d. Must contribute cash or property to DSJ to be admitted with the same rights as the other partner.



Answer: b

A partnership agreement must be in writing if

A partnership agreement must be in writing if

a. Any partner contributes more than $500 in capital.
b. The partners reside in different states.
c. The partnership intends to own real estate.
d. The partnership's purpose CANNOT be completed within one year of formation.


Answer: d

Deductible casualty loss for each casualty event =

Deductible casualty loss for each casualty event =

A. change in FMV - $100 - 10% AGI
B. change in FMV - 10% AGI
C. adjusted basis - insurance recovery - $100 - 10% AGI
D. the lessor of adjusted basis or the difference between FMV of property immediately before and FMV immediately after - insurance recovery - $100 - 10% AGI



Answer: D.

The maximum amount that can be treated as home equity indebtedness (debt secured by principal or second residence, but not used for purchase, build, or improve home) is the lessor of: $X ($Y MFS) or FMV of the property (home) reduced by the amount of outstanding acquisition indebtedness. What is X and Y?

The maximum amount that can be treated as home equity indebtedness (debt secured by principal or second residence, but not used for purchase, build, or improve home) is the lessor of: $X ($Y MFS) or FMV of the property (home) reduced by the amount of outstanding acquisition indebtedness. What is X and Y?

A. 100,000; 50,000
B. 50,000; 25,000
C. 200,000; 100,000
D. 400,000; 200,000


Answer: A. 100,000; 50,000

Interest on up to $X ($Y MFS) of acquisition indebtedness (a loan/mortgage incurred to buy, build, improve a principal and second home) is deductible as qualified residence interest. What is X and Y?

Interest on up to $X ($Y MFS) of acquisition indebtedness (a loan/mortgage incurred to buy, build, improve a principal and second home) is deductible as qualified residence interest. What is X and Y?

A. 100,000; 50,000
B. 500,000; 250,000
C. 1,000,000; 500,000
D. 750,000; 375,000


Answer: C. 1,000,000; 500,000

Which of the following is the correct amount of additional standard deduction for age 65 or older and/or blindness for 2 qualified married taxpayer?

Which of the following is the correct amount of additional standard deduction for age 65 or older and/or blindness for 2 qualified married taxpayer?

A. 900; 1800
B. 1250; 2500
C. 1300; 2600
D. 2500; 5000


Answer: D. 2500; 5000

Which of the following is the correct amount of additional standard deduction for age 65 or older and/or blindness for 1 qualified married taxpayer?

Which of the following is the correct amount of additional standard deduction for age 65 or older and/or blindness for 1 qualified married taxpayer?

A. 900; 1800
B. 1250; 2500
C. 1300; 2600
D. 1450; 2900


Answer: B. 1250; 2500

Which of the following is the correct amount of additional standard deduction for age 65 or older and/or blindness for single taxpayer?

Which of the following is the correct amount of additional standard deduction for age 65 or older and/or blindness for single taxpayer?

A. $1000; 2000
B. $1500; $3000
C. $ 1550; 3100
D. 1600; 3200


Answer: C. $ 1550; 3100