Pretest Flashcards Preview

Business Law for Accountants > Pretest > Flashcards

Flashcards in Pretest Deck (60):
1

1. What is the purpose of informal agency actions?
A. To provide an informal means to resolve a dispute
B. To provide advance notice that formal rulemaking may be forthcoming
C. To rectify a dispute to the agency's satisfaction
D. To allow an agency to take an administrative act against an individual or organization

ANSWER :

2

2. Which action has the government implemented in order to minimize health care costs?
A. Insurance companies are required to participate in the National Health Exchange
B. Insurance companies must spend at least 80% of individual premiums on benefits or pay a rebate to the insured
C. Insurance companies must spend at least 80% of individual premiums on benefits or are required to decrease rates
D. Insurance companies cannot increase rates for two years and must apply for an increase after two years

ANSWER :

3

3. Which act did Congress pass in 2011 to give the Food and Drug Administration (FDA) greater authority to recall any food products suspected to be tainted?
A. Consumer Food Safety Act
B. Federal Food, Drug, and Cosmetic Act
C. Federal Drug Administration Act
D. Food Safety Modernization Act

ANSWER :

4

4. A specialized debt-collection agency contacted a consumer at his home at four o'clock in the morning to collect a past due medical bill owed by the consumer's mother. During the call, the collection agency harassed and threatened the consumer if payment of the debt was not forthcoming. Which federal statute prohibits this type of collection tactic?
A. The Fair Credit Reporting Act
B. The Truth-in-Lending Act
C. The Equal Credit Opportunity Act
D. The Fair Debt Collection Practices Act

ANSWER :

5

5. What is the purpose of the Comprehensive Environmental Response, Compensation, and Liability Act?
A. To determine which forms of solid waste are considered hazardous
B. To regulate the cleanup of hazardous waste disposal sites
C. To prohibit the dumping and disposal of hazardous waste
D. To compensate individuals impacted by leaking hazardous waste

ANSWER :

6

6. Which act regulates the cleanup of hazardous waste disposal sites?
A. Federal Insecticide, Fungicide, and Rodenticide Act
B. Comprehensive Environmental Response, Compensation, and Liability Act
C. Toxic Substances Control Act
D. Resource Conservation and Recovery Act

ANSWER :

7

7. What is the purpose of Section 2 of the Clayton Act?
A. To prohibit exclusive dealing contracts
B. To prohibit tying arrangements
C. To prohibit price fixing contracts
D. To prohibit price discrimination agreements

ANSWER :

8

8. A certified public accountant (CPA) is engaged to perform an audit for a company. During the course of the audit, the CPA accepts explanations from management of financial data irregularities that seem to indicate fraud. The CPA issues a clean opinion on the company's financial statements. Investors extend additional funding to the company based on the financial statements issued by the CPA. A short time later, the company declares bankruptcy and closes. The investors suffer losses and file a motion to sue the CPA for gross negligence due to fraud. Which type of fraud did this CPA engage in?
A. Constructive fraud
B. Professional fraud
C. Material fraud
D. Actual fraud

ANSWER :

9

9. How does the Private Securities Litigation Reform Act of 1995 impact the liability of accountants?
A. By limiting an accountant's liability to a proportionate share of the damage resulting from a wrongful act
B. By ruling that an accountant is not liable for errors and omissions if the accountant acted in good faith.
C. By increasing an accountant's potential liability by making the release of false and misleading reports a felony offense
D. By increasing the penalty for an accountant who is found guilty of violating security laws

ANSWER :

10

10. Which worker is eligible for unemployment compensation under the Federal Unemployment Tax Act?
A. A manager who resigns from a company because a change in company vision
B. A staff member who is involuntary terminated and actively seeking employment
C. An independent contractor who is terminated from a long term project by a company
D. An executive who us fired for workplace misconduct

ANSWER :

11

11. Which employer requirement is included in the Davis-Bacon Act?
A. Posting notices in the workplace that address the death or three or more employees from work related injury
B. Paying prevailing rates to all employees paid with federal funds
C. Ceasing to mandate federal contractor employees to waive their right to join a union
D. Posting criteria for lost wages due to absences from work

ANSWER :

12

12. Which act ensures employees have the right to a duly designated representative who bargains collectively on their behalf?
A. Norris-LaGuardia Act
B. Labor-Management Reporting and Disclosure Act
C. Labor-Management Relations Act
D. National Labor Relations Act

ANSWER :

13

13. Which remedy is available to an employee who is discriminated against because of a disability, according to the Americans with Disabilities Act?
A. A state employee may sue the state employer in federal court instead of a state court
B. Congressional abrogation through legislation may allow a private suit in state court
C. Corrective action such as mediation can reverse the act of discrimination
D. The Equal Employment Opportunity Commission (EEOC) can sue on behalf of the employee

ANSWER :

14

14. Which federal provision requires the plaintiff to show that unlawful bias is the primary reason for an adverse employment action?
A. Title VII of the Civil Rights Act of 1964
B. The Equal Pay Act of 1963
C. The Civil Rights Act of 1866
D. The Age Discrimination Employment Act

ANSWER :

15

15. Candidate A is a 35 year old man with 10 years of work experience. Candidate B is a 50 year old woman with 25 years of work experience. Both candidates interview for a job at the county prison working with male prisoners. Candidate A is hired over Candidate B. Candidate B sues for discrimination. The courts finds for the prison, and the case is dismissed. Which type of discrimination defense did the prison successfully employ?
A. Business necessity
B. Bona fide occupational qualification
C. Seniority system
D. After acquired evidence of seniority
E. Justifiable selection

ANSWER :

16

16. Who owns the copyright for work that is completed for an employer?
A. The employee and employer share ownership rights
B. The employer owns the copyright for work that independent contractors complete for the employer
C. Employees own the copyright for work that they complete for their employer
D. Independent contractors own the copyright for work that they complete for an employer unless otherwise stated in a work for hire agreement

ANSWER :

17

17. Which act by a party terminates an agency relationship?
A. Bankruptcy
B. Lapse of time
C. Changed circumstances
D. Death or insanity

ANSWER :

18

18. Which type of agency relationship is formed by express consent or implied by conduct?
A. Agency by operation of law
B. Agency by ratification
C. Agency by agreement
D. Agency by estoppel

ANSWER :

19

19. What is one duty of an agent to the principal in an agency relationship?
A. The agent must notify the principal of information it deems important to the subject matter of the agency
B. The agent must provide information obtained during the agency relationship to a third party
C. The agent must employ usual and customary efforts and skill in completing the agreed upon assignment
D. The agency must not represent another party in addition to the initial principal

ANSWER :

20

20. What is one remedy for a principal against an agent who has breached fiduciary duties?
A. Choosing to pursue either a contract remedy or a tort remedy, but not both
B. Recovering damages from the agent for negligent conduct, if a third party wins a suit against the agent
C. Recovering any benefits or profits that were obtained by virtue of the agency relationship
D. Choosing the right of avoidance, thereby requiring the agent to fulfill all contracts

ANSWER :

21

21. How does an agent exercise implied authority?
A. By acting when the principal causes a third party to believe that the agent has the authority to act
B. By acting in a manner indirectly understood by custom or inferred from the position the agent occupies
C. By acting under the framework of clear, direct, and definite terms agreed upon by the principal
D. By acting when an unforeseen emergency demands action to protect the property and the rights of the principal, and the agent is unable to communicate with the principal

ANSWER :

22

22. How does an agent exercise apparent authority?
A. By acting in a manner indirectly understood by custom or inferred from the position the agent occupies
B. By acting when an unforeseen emergency demands action to protect the property and rights of the principal, and the agent is unable to communicate with the principal
C. By acting when the principal causes a third party to believe that the agent has the authority to act
D. By acting under the framework of clear, direct, and definite terms agreed upon by the principal

ANSWER :

23

23. A cable repairman, who is employed by a cable company, travels to various service locations as part of his job. One afternoon, while driving to a service call, he negligently runs a stop sign and causes an accident. A woman is injured in the car accident. Who is liable to the woman for her injuries?
A. The repairman and the cable commonly are liable to the woman because the repairman caused the accident
B. The repairman's manager is liable to the woman because the manager is responsible for the acts of the employees
C. The cable company is liable because the repairman was acting within the scope of his duties
D. The repairman is liable because he caused the accident due to his negligence

ANSWER :

24

24. Mr. A and Mr. B are partners in a COA firm. Both partners manage client bank accounts. Mr. A embezzled from a client account. Can Mr. B's personal assets be attached to pay off any financial liabilities resulting from the embezzlement?
A. No. Mr. A is the principal and is wholly responsible for the financial liabilities as the principal
B. No. Mr. A is an owner of the company, and there is no principal and agent relationship
C. Yes. Mr. A is acting as an agent of the company; as partners, Mr. A and Mr. B share financial liabilities
D. Yes. Mr. A is an agent for Mr. B; the principal will share responsibility for the financial liabilities

ANSWER :

25

25. How does the Uniform Commercial Code (UCC) provide a single integrative framework for commercial transactions?
A. By covering the sale of intangible goods such as stocks and bonds
B. By covering real estate sales as tangible property
C. By covering sales of goods by merchants
D. By covering real estate leases

ANSWER :

26

26. What is one requirement of a firm offer for the formation of a sales and lease contracts?
A. It must be signed by the offeror
B. It must have consideration to keep the offer open
C. It must be signed by the offeree
D. It must be open for a definite period of time

ANSWER :

27

27. Company X submits a sales and lease contract to Company Y. Company y modifies the agreement and sends it back yo Company X. Why is the contract still enforceable under the Uniform Commercial Code (UCC) rules?
A. The modification creates a new contract that must be accepted by both parties
B. The modification constructs a counter offer to be negotiated
C. The modification includes a required consideration
D. The modification allows for the acceptance to be upheld

ANSWER :

28

28. Company A, located in the United States, submits an offer to Company B. Company B is located in Spain. Company B makes a charge to the payment terms, signs, and returns the contract to Company A. Has there been an enforceable contract formed under the Contracts for the International Sale of Goods (CISG)?
A. The contract is unenforceable because the CISG considers an alteration of payment terms to be a material change
B. The contract is enforceable because the CISG considers a contract valid if the change does not materially alter it
C. The contract is unenforceable because there is an offer but no consideration present within the contract
D. The contract is enforceable because an offer, acceptance, and consideration are present within the contract.

ANSWER :

29

29. An American music performance group offered entertainment services at a contracted price to a charity group, a British corporation, for a fundraising event. The offer was made and imposed a ten day acceptance window. The charity group immediately accepted the offer and transmitted its acceptance via an overnight courier service. Three weeks later, the music group had not yet received a reply to its offer and accepted another engagement. The overnight courier service then delivered the charity group acceptance to the music group. Noting the conflict, the music group informed the charity group that it had accepted another engagement. The charity group protested and expressed that there was a contract that should be honored. How would the Contracts for the International Sale of Goods (CISG) rule on this scenario?
A. This is a service, so it is an enforceable contract
B. This is a good, and the charity group is entitled to liquidating damages
C. This is a good, but there is no enforceable contract because there is no valid acceptance
D. This is a service, so the CISG would not apply

ANSWER :

30

30. A local heating distributor purchase a 25% interest in a container of oil. When does the risk of ownership take place?
A. When the oil ships to the local heating oil distributor
B. When the oil seller/owner passes title to the local heating oil distributor
C. When the oil seller/owner separates the individual purchases
D. When the oil is received by he local heating oil distributor

ANSWER :

31

31. Business A signs a lease agreement with Business B to lease a labeling machine. The lease agreement includes a destination contract. Business A is located in New Hampshire. The labeling machine is shipped free on board (FOB) to New Hampshire and is damages in transit. Which business assumes the risk for the damages to the labeling machine?
A. Business B assumes the risk, because the risk of loss transfers to Business A when goods are delivered
B. Business B assumes the risk, because the owner of the asset as outlined in the destination contract
C. Business A assumes the risk, because the risk of loss passes to the lessee in a destination contract
D. Business A and Business B share the loss equally as a result of the absence of a loss clause

ANSWER :

32

32. When a sale is made on credit, when does the credit period begin, according to the Uniform Commercial Code (UCC)?
A. On the date the contract was signed
B. On they date the shipment is received
C. On the date of shipment
D. On the date of final inspection and sign off

ANSWER :

33

33. What are two requirements of the buyer under the Uniform Commercial Code (UCC) when there are products that are sight unseen?
A. Acceptance of part of a shipment where goods are defective and cannot be replaced prior to expiration of contract terms
B. Payment for conforming collect on delivery (COD) goods without access for inspection
C. Acceptance upon delivery of conforming goods with a change in payment terms if deemed necessary
D. Payment for goods for which reasonable opportunity for inspection expired

ANSWER :

34

34. Seller A signs a contract with Buyer B. The contract states that Seller A will ship one truckload of wood every month for twelve consecutive months. Seller A ships the first shipment in January and the second shipment in February. Seller A realizes that Buyer B has not made payment for the first shipment as outlined in the contract. The nonpayment is a breach of contract. Which legal remedy is available to Seller A for this breached contract?
A. The right to stop shipment in transit, return it to Seller A's facility, and discontinue any further deliveries
B. The duty to complete shipment in transit and then discontinue shipments until Buyer B makes a payment
C. The duty to give Buyer B reasonable notice to cure and then cancel the contract if the buyer is still in breach of contract
D. The right to cancel the contract without any further notification as a result of the breached contract

ANSWER :

35

35. How does the United Nation's Convention on Contracts for the International Sale of Goods (CISG) provide legal remedies when there is a breach of international sales contracts?
A. It provides that one party may not require performance of any obligation by the other party of a breached contract
B. It provides for monetary damages to those who suffered up to the date of the breach
C. It provides the seller the remedy of withholding payment through letter of credit if the shipment has been made
D. It provides the seller a release from contract obligations when the buyer breaches the contract

ANSWER :

36

36. What is one characteristic of an express warranty?
A. A recommendation of the seller for the buyer's specific use
B. An affirmation of fact from the seller of the quality and feature of a good
C. A statement from the seller about the value or worth of a good
D. A statement from the seller that a good will be delivered quickly

ANSWER :

37

37. When does an implied warranty of fitness arise in connection with the sale of a good?
A. When the good is properly packaged, labeled, and is of a proper quality
B. When the good has a particular purpose, and the buyer relies on the merchant's judgement to select the good
C. When the merchant has the right to pass the good and rightful title to the good
D. When the merchant affirms that the good conforms to a description of the good based upon a sample shown

ANSWER :

38

38. What are two examples of order to pay negotiable instruments?
A. Drafts
B. Certificate of deposits
C. Checks
D. Promissory notes

ANSWER :

39

39. Mr. A borrowed $1,000 from Mrs. X. He constructed a note promising to pay back the loan. Mr. A wrote, "I, Mr. A, will pay Mrs. X the money that I borrowed as soon as I am able." The note was signed "Mr. A." Which two requirements need to be added to make this note a negotiable instrument?
A. It must be signed by the maker
B. It must be an unconditional order to pay
C. It must be a stated, fixed amount
D. It must be nontransferable

ANSWER :

40

40. Jane A. writes an order to pay Martha B. The order to pay states : " I, Jane A., owe Martha ab. $1,000. I will pay Martha B. the full amount when i receive payment from Acme Manufacturing for invoice number 1234." Jane A. signs with her initials but does not date the document. The document is scanned and emailed to Martha B. Which element is needed to make this a valid negotiable instrument?
A. The instrument must include the maker's full signature
B. The instrument must be an unconditional promise or order to pay
C. The instrument must be an original document
D. The instrument must include the date that the document is signed

ANSWER :

41

41. What is the legal effect of a special indorsement?
A. It identifies the person to whom the instrument is payable
B. It relieves the indorser of any liability for paying for the instrument
C. It transfers legal possession to the bank
D. It creates a bearer instrument that can be negotiated by delivery alone

ANSWER :

42

42. Mr. A pays a debt to Mr. B with a one hundred dollar bill. The police later inform Mr. B that Mr. A had stolen the money. Is Mr. B a holder in due course?
A. Yes, Mr. B acted in good faith, which impacts holder in due course status
B. No, Mr. A did not have clear rights to the property before he paid Mr. B
C. Yes, the stolen property does not impact Mr. B's holder in due course status
D. No, Mr. A knew the money was stolen and did not act in good faith

ANSWER :

43

43. Mr. X loans his girlfriend, Miss A money. Miss A signs a note payable to Mr. X for the debt. Mr. X receives a check in full payment for the debt from Miss A. Mr. X rips up the check and the note and tells her she does not need to pay him back. One week later, Miss A breaks up with Mr. X. He then asks her for a replacement check for payment on the debt. Is Miss A liable for the debt?
A. Miss A is liable for the debt because destroying the negotiable instrument does not cancel the debt
B. Miss A is no longer liable for the debt because Mr. X intentionally canceled the debt by destroying the check and the note
C. Miss A is liable for the debt because the payment has not been tendered, and Mr. X has the right to enforce the debt
D. Miss A is no longer liable for the debt because Mr. X verbally stated that Miss A did not need to pay him

ANSWER :

44

44. Mr. B was charged with caring for an elderly aunt who had been declared by a court to be mentally incompetent. The aunt disagreed the court's decision and insisted that she could manage her own affairs. One day while the aunt was home alone, a salesman came by selling security systems, and the aunt decided to purchase a system. She gave the salesman a check for $3,000 to cover equipment and installation. Mr. B found out about the purchase and stopped payment on the check.what defense did Mr. B apply?
A. Discharge by reacquisition
B. Tender of payment
C. Good faith
D. Universal defense
E. Personal defense

ANSWER :

45

45. What is a bank's liability regarding an altered check that has been honored?
A. It is not liable because it will recover from all transactions as they warrant that the check is unaltered upon presentation
B. It is not liable if the customer fails o report the alteration within one year from the date of the bank statement
C. It is not liable if it asserts customer contributory negligence and the bank has exercised ordinary care
D. It is not liable as long as it properly maintains its explicit duty to examine checks before making final payment

ANSWER :

46

46. What is one challenge of electronic fund transfer (EFT)?
A. Banks are no longer required to provide monthly statements to accounts with only EFT activity
B. Consumers risk potential unauthorized access to personal data and fraudulent transactions
C. Consumers are liable for up to $1,000 in fraudulent charges if they report a lost debit card five days after its loss
D. Banks are not liable for punitive damages if they violate the Electronic Fund Transfer Act (EFTA)

ANSWER :

47

47. What is the function of a garnishment when a debtor defaults?
A. It permits a creditor to collect a debt by seizing property from the debtor for a sum less than what is owed
B. It permits a creditor to collect a debt by seizing property directly from the debtor but is limited by the debtor's monthly pay
C. It permits a creditor to collect a debt by seizing property of the debtor that is held by a third party
D. It permits a creditor to collect a debt by seizing property from the debtor directly

ANSWER :

48

48. What is one characteristic of a fixed rate mortgage?
A. It shifts the risk that the interest rate will change from the borrower to the lender
B. It includes the principal, interest, property taxes, and insurance
C. It incorporates a workout agreement with a forbearance and waiver of standing requirement option for the debtor
D. It has an interest rate that is set for the duration of the mortgage loan

ANSWER :

49

49. Under the statute of frauds, what would affect the surety's obligation to pay a third parties debt?
A. A surety's obligation is released if a creditor does not exhaust its collection efforts within the time period required by the statute of limitations
B. A surety's obligation is not released if an undisclosed credit risk is not disclosed to the surety
C. A compensated surety is partially released if a creditor's modification of the obligation is not disclosed to the surety
D. A suretyship is null and void if a debtor modifies the debt and does not disclose the modification to the surety

ANSWER :

50

50. When is a debtor's real property exempt from creditors' actions?
A. All real property is exempt from execution or attachment in some states by state law
B. Some low income housing property is exempt from execution or attachment by state law
C. Some real property is exempt from execution or attachment to ensure the debtor retains shelter
D. All real property is exempt from execution or attachment pursuant to federal statute

ANSWER :

51

51. What is the definition of a security agreement?
A. An agreement between a secured debtor and a filing officer
B. An agreement to pay between a secured party and financial institution
C. An agreement that secures a debtor's home from creditors
D. An agreement that creates or provides for a security interest

ANSWER :

52

52. What is a Uniform Commercial Code-1 (UCC-1) financing statement?
A. A document that provides a creditor with ownership rights to collateral in the event of a debtor's default
B. A document that the creditor files for immediate ownership and rights
C. A document that supplies information to an appropriate government office for internal control
D. A document that the creditor files with a description of collateral that is about to be designated for resale

ANSWER :

53

53. What is one step the creditor must perform when creating a security interest?
A. Amending a financing statement for collateral acquired within two months of a debtor's name change
B. Listing members of an organization on a financing statement
C. Including material variations in names in order to prevent the financing statement from being rules as misleading
D. Listing all equipment owned by the debtor in a financing statement

ANSWER :

54

54. What are two requirements for creating a security interest (2 answers)?
A. The security agreement contains a description that reasonably identifies the collateral
B. The secured party gives to the debtor something of sufficient enough value to support the contract
C. The creditor establishes that it has priority over other creditors or buyers who may have superior rights in the same collateral
D. The creditor determines if the debt can be satisfied through the possession and sale of the collateral

ANSWER :

55

55. What is one of the general rules of priority between debtor's and creditors in secured transactions?
A. Conflicting unperfected security interests share equally in the collateral
B. Perfected security interests generally have priority over other interests
C. Conflicting perfected security interests share equally in the collateral
D. Perfected security interests have no priority in bankruptcy agreements

ANSWER :

56

56. In which circumstance does a buyer have a priority claim to the collateral perfected by a creditor?
A. When the buyer acquires the item at a fundraising event for personal use
B. When the buyer purchases the item for personal use and is unaware that the secured creditor has a perfected security interest
C. When the buyer pays value to the seller and is using it as a business asset
D. When the buyer purchases the item and the creditor fails to file another financing statement before the date of the purchase

ANSWER :

57

57. How does Chapter 7 of the Bankruptcy Code provide relief for debtors?
A. Through forgiveness of a person's debts and protection of assets
B. Through reorganization of a person's debts and assets
C. Through adjustment of a person's debts and protection of nonexempt assets
D. Through liquidation of a person's nonexempt assets and distributes to creditors

ANSWER :

58

58. Why is a reorganization bankruptcy filed?
A. To allow a creditor to reorganize its operations and financial affairs over a period of time using a formulated plan with the debtor
B. To allow a fast track procedure for small businesses whose assets do not exceed $2, 490,000 and do not own or manage real estate
C. To allow a creditor to discharge a portion of its debt while reorganizing its operations and financial affairs using a formulated plan with the debtor
D. To allow a debtor to continue its debtor to continue its business operations while working with its creditors to form a reorganization plan for the remaining debt

ANSWER :

59

59. Which provision within a repayment plan determines approval for debt adjustment?
A. Creditor performance of means testing to assure sufficiency of disposable income to repay debts
B. Payments of claims entitled to priority, such as taxes
C. Identical treatment for secured and unsecured claims as one population
D. Payments that begin no later than forty five days after the plan has been filed

ANSWER :

60

60. Which factor describes a family farmer under Chapter 13 of the Bankruptcy Code?
A. Gross income is more than 50% farm dependent, and debt at least 50% farm related
B. Gross income is at least 50% farm dependent, and debt is at least 50% farm related
C. Gross income is at least 50% farm dependent, and the debt is less than 50% farm related
D. Gross income is less than 50% farm dependent, and debt is less than 50% farm related

ANSWER :