ACC 575 ACC575 Week 5 Midterm

ACC 575 Week 5 Midterm

1.

Watts gave a mortgage on a vacant lot to Fast to secure payment of a note. Fast assigned the note and mortgage to Beal who paid 85% of the face value for it. Neither Fast nor Beal recorded the mortgage. Subsequently, Fast assigned the same note and mortgage to Rusk who paid 75% of the face value for it and who had no notice of the prior assignment to Beal. Rusk promptly recorded the mortgage and the assignment. Watts has made no payments on the note. The jurisdiction has a notice-type of recordation statute. Under the circumstances

2. 

Filing a valid petition in bankruptcy acts as an automatic stay of actions to

3. 

Dash has agreed to sell a warehouse for $300,000 to Bosch. The contract provided that Dash will convey to Bosch whatever interest Dash may have in the warehouse. Under the terms of the contract, Bosch is entitled to receive a(n)

4. 

Leslie, Kelly and Blair wanted to form a business. Which of the following business entities does notrequire the filing of organization documents with the state? 

5. 

Ivor, Queen, and Lear own a building as joint tenants with the right of survivorship. Ivor donated his interest in the building to Day Charity by executing and delivering a deed to Day. Both Queen and Lear refused to consent to Ivor’s transfer to Day. Subsequently, Queen and Lear died. After their deaths, Day’s interest in the building consisted of 

6. 

Train issued a note payable on June 1 to Blake in payment of contracted services that Blake was to perform. Blake endorsed the note “pay to bearer” and delivered it to Reed in satisfaction of a debt owed Reed. On June 3, Reed presented the note for payment to Train.  Train refused to pay Reed on the note because Blake had not yet performed the services. Under the Negotiable Instruments Article of the UCC, must Train pay Reed? 

7. 

Nix sent Castor a letter offering to employ Castor as controller of Nix's automobile dealership. Castor received the letter on February 19. The letter provided that Castor would have until February 23 to consider the offer and, in the meantime, Nix would not withdraw it. On February 20, Nix, after reconsidering the offer to Castor, decided to offer the job to Vick, who accepted immediately. That same day, Nix called Castor and revoked the offer. Castor told Nix that an acceptance of Nix's offer was mailed on February 19. Under the circumstances, 

8. 

Tweed Manufacturing, Inc. plans to issue $10 million of common stock to the public in interstate commerce after its registration statement with the SEC becomes effective. What, if anything, must Tweed do in respect to those states in which the securities are to be sold?

9. 

King sent Foster, a real estate developer, a signed offer to sell a specified parcel of land to Foster for $200,000.  King, an engineer, had inherited the land.  On the same day that King’s letter was received, Foster telephoned King and accepted the offer. Which of the following statements is correct under the Statute of Frauds? 

10. 

In June, Mullin, a general contractor, contracted with a town to renovate the town square. The town council wanted the project done quickly and the parties placed a clause in the contract that for each day the project extended beyond 90 working days, Mullin would forfeit $100 of the contract price. In August, Mullin took a three-week vacation. The project was completed in October, 120 working days after it was begun. What type of damages may the town recover from Mullin? 

11. 

Under the Negotiable Instruments Article of the UCC, which of the following defenses generally may be used against all holders of negotiable instruments? 

12. 

In connection with a check and a promissory note, which of the following is correct? 

13. 

Grandiose secured an option to purchase a tract of land for $100,000.  He then organized Dunbar Corporation and subscribed to 51% of the shares of stock of the corporation for $100,000, which was issued to him in exchange for his 3-month promissory note for $100,000.  Controlling the board of directors through his share ownership, he had the corporation authorize the purchase of the land from him for $200,000. He made no disclosure to the board or to other shareholders that he was making a $100,000 profit. He promptly paid the corporation for his shares and redeemed his promissory note.  A disgruntled shareholder subsequently learned the full details of the transaction and brought suit against Grandiose on the corporation’s behalf.  Which of the following is a correct statement? 

14. 

Peters Co. repairs computers.  On February 9, Stark Electronics Corp. sold Peters a circuit tester on credit.  Peters executed an installment note for the purchase price, a security agreement covering the tester, and a financing statement that Stark filed on February 11.  On April 13, creditors other than Stark filed an involuntary petition in bankruptcy against Peters. What is Stark’s status in Peters’ bankruptcy? 

15. 

An instrument complies with the requirements for negotiability contained in the Commercial Paper Article of the Uniform Commercial Code. The instrument contains language expressly acknowledging the receipt of $10,000 by the First Bank of Grand Rapids and an agreement to repay principal with interest at 15% 1 year from date. This instrument is 

16. 

Which of the following is necessary in order to have a security interest attach? 

17. 

In general, the third-party (primary) beneficiary rule as applied to a CPA’s legal liability in conducting an audit is relevant to which of the following causes of action against a CPA?

18. 

19. 

This instrument is not negotiable because it 

20. 

On May 5, Bold obtained a $90,000 judgment in a malpractice action against Aker, a physician. On June 2, 2009, Aker obtained a $75,000 loan from Tint Finance Co. by knowingly making certain false representations to Tint.  On July 7, Aker filed a voluntary petition in bankruptcy under the liquidation provisions of the Bankruptcy Code.  Both Bold and Tint filed claims in Aker’s bankruptcy proceeding.  Assets in Aker’s bankruptcy estate are exempt.  Bold’s claim

21. 

Under the Sales Article of the UCC, which of the following statements is correct regarding risk of loss and title to the goods under a sale or return contract? 

22.

A limited partnership was formed under the Revised Uniform Limited Partnership Act with several general partners and several limited partners.  In order to admit a new limited partner, what written approval is needed?

23. 

Ball borrowed $10,000 from Link. Ball, unable to repay the debt on its due date, fraudulently induced Park to purchase a piece of worthless costume jewelry for $10,000. Ball had Park write a check for that amount naming Link as the payee. Ball gave the check to Link in satisfaction of the debt Ball owed Link. Unaware of Ball’s fraud, Link cashed the check. When Park discovered Ball’s fraud, Park demanded that Link repay the $10,000. Under the Negotiable Instruments Article of the UCC, will Link be required to repay Park? 

24. 

Ward is attempting to introduce oral evidence in an action relating to a written contract between Ward and Weaver. Weaver has pleaded the parol evidence rule. Ward will be prohibited from introducing parol evidence if it relates to 

26. 

A preparer of a tax return may incur penalties under the Internal Revenue Code in all of the following cases except where the taxpayer 

27. 

Harp Corp. is offering to issue $450,000 of its securities pursuant to Regulation D of the Securities Act of 1933. Harp is not required to deliver a disclosure document in the states where the offering is being conducted. The exemption for small issues of $1,000,000 or less (Rule 504) under Regulation D 

28. 

According to Treasury Department Circular 230, a practitioner may not 

29. 

Management of Tyler Company, a nonpublic company, materially misstated the company’s financial statements that were audited by Ted & Ted, CPAs.  Ted & Ted was negligent in the performance of the audit and failed to detect the misstatements.  In reliance on the audited financial statements, Second Bank extended a loan in the amount of $500,000, and Tyler Company went bankrupt and was unable to repay any of the loan.  Assume that Ted & Ted is determined to be 40% responsible for Second Bank’s losses and management of Tyler Company is determined to be 60% liable.  Which of the following is not true regarding this situation? 

30. 

Ford was unable to repay a loan from City Bank when due. City refused to renew the loan to Ford unless an acceptable surety could be provided. Ford asked Owens, a friend, to act as surety on the loan. To induce Owens to agree to become a surety, Ford made fraudulent representations about Ford’s financial condition and promised Owens discounts on merchandise sold at Ford’s store. Owens agreed to act as surety and the loan was made to Ford. Subsequently, Ford’s obligation to City was discharged in Ford’s bankruptcy and City wishes to hold Owens liable. Owens may avoid liability 

31. 

Ore Corp. sold 10 tons of steel to Bay Corp. with payment to be by Bay’s check. Since the price of steel was fluctuating daily, Ore requested that the amount of Bay’s check be left blank and it would fill in the current market price. Bay complied with Ore’s request. Within 2 days Ore received Bay’s check. Although the market price of 10 tons of steel at the time Ore received Bay’s check was $40,000, Ore filled in the check for $50,000 and negotiated it to Cam Corp. Cam took the check in good faith, without notice of Ore’s act or any other defense, and in payment of an antecedent debt. Bay will 

32. 

Kirk Corp. sold Nix an Ajax freezer, Model 24, for $490. The contract required delivery to be made by June 23. On June 12, Kirk delivered an Ajax freezer, Model 52, to Nix. Nix immediately notified Kirk that the wrong freezer had been delivered and indicated that the delivery of a correct freezer would not be acceptable. Kirk wishes to deliver an Ajax freezer, Model 24, on June 23. Which of the following statements is correct? 

33.

An appliance seller promised a restaurant owner that a home dishwasher would fulfill the dishwashing requirements of a large restaurant. The dishwasher was purchased but it was not powerful enough for the restaurant. 

34.

Under the Revised Model Business Corporation Act, following what type of corporate acquisition does the acquiring corporation automatically become liable for all obligations of the acquired corporation? 

35. 

Balquist sold a negotiable instrument payable to her order to Farley. In transferring the instrument to Farley, she forgot to endorse it. Accordingly 

36. 

The right of subrogation 

37. 

Which of the following statements describes the same characteristics for both an S corporation and a C corporation? 

38. 

Which of the following entities must pay taxes for federal income tax purposes? 

39. 

The Securities Act of 1933 specifically exempts from registration, securities offered by any person 

40. 

Myers entered into a contract to purchase a valuable rare coin from Eisen. Myers tendered payment which was refused by Eisen.  Upon Eisen’s breach, Myers brought suit to obtain the coin.  The court will grant Myers 

41. 

Ted Fein, a partner in the ABC Partnership, wishes to withdraw from the partnership and sell his interest to Gold. All of the other partners in ABC have agreed to admit Gold as a partner and to hold Fein harmless for the past, present, and future liabilities of ABC.  A provision in the original partnership agreement states that the partnership will continue upon the death or withdrawal of one or more of the partners.
As a result of Fein’s withdrawal and Gold’s admission to the partnership, Gold 

42. 

Under the Negotiable Instruments Article of the UCC, a holder in due course in a nonconsumer transaction takes a negotiable instrument free from which of the following defenses that may be asserted by a party with whom the holder in due course had notdealt? 

43. 

On February 2, Mazo deeded a warehouse to Parko for $450,000. Parko did not record the deed.  On February 12, Mazo deeded the same warehouse to Nexis for $430,000. Nexis was aware of the prior conveyance to Parko. Nexis recorded its deed before Parko recorded. Who would prevail under the following recording statutes?

44. 

Mini, Inc. entered into a 5-year lease with Rein Realtors. The lease was signed by both parties and immediately recorded. The leased building was to be used by Mini in connection with its business operations. To make it suitable for that purpose, Mini attached a piece of equipment to the wall of the building. Which of the following is most important in determining whether the equipment became a fixture? 

45. 

Sand Corp. sold and delivered a photocopier to Barr for use in Barr’s business. According to their agreement, Barr may return the copier within 30 days. During the 30-day period, if Barr has not returned the copier or indicated acceptance of it, which of the following statements is correct with respect to risk of loss and title? 

46. 

All of the following statements regarding compliance with the statute of frauds are correct except:

47. 

Jefferson Hardware ordered three hundred Ram hammers from Ajax Hardware. Ajax accepted the order in writing. On the final date allowed for delivery, Ajax discovered it did not have enough Ram hammers to fill the order.
Instead, Ajax sent three hundred Strong hammers. Ajax stated on the invoice that the shipment was sent only as an accommodation. 

48. 

Which of the following circumstances may permit the piercing of the corporate veil of a closely held corporation and thus may cause its shareholders to be held personally liable? 

49. 

Stubble sold some office furniture to Darwin, who gave Stubble a check for the purchase price, and immediately resold the furniture to Hernandez. Darwin’s check was subsequently returned due to insufficient funds. Hernandez had purchased this furniture in good faith, not knowing that Darwin had insufficient funds in his checking account. Which of the following is correct? 

50. 

Plant purchased a plot of land from Sano 30 years ago. Although neither party knew, the deed contained an error giving Plant some land he did not buy. Plant built his home on the plot. Part of the home was constructed on the land he received in error. Now 30 years later, Plant’s neighbor, Wallace, is complaining for the first time about the error. Wallace is now asking Plant for a huge sum of money or he “will sue to get Plant off the land.” What is the legal result? 

51. 

When there has been noperformance by either party, which of the following events generally will result in the discharge of a party’s obligation to perform as required under the original contract?

52. 

According to the Securities Act of 1933, which of the following statements is correct regarding an issuer of securities? 

53. 

Hamilton Corp. is making a $4,500,000 securities offering under Rule 505 of Regulation D of the Securities Act of 1933. Under this regulation, Hamilton is 

54. 

Flax telephoned Sky Corp. and ordered a specially manufactured air conditioner for $1,900. Subsequently, Flax realized that he miscalculated the area which was to be cooled and concluded that the air conditioner would not be acceptable. Sky had already completed work on the air conditioner, demanded payment, and was unable to resell the unit at a reasonable price. If Flax refuses to pay and Sky brings an action seeking as damages the price plus reasonable storage charges of $50, Sky will recover 

55. 

The owners of a limited liability company are known as which of the following? 

56. 

Which of the following on the face of an otherwise negotiable instrument will affect the instrument’s negotiability? 

57. 

Kent suffered an injury due to a malfunction of a chain saw he had purchased from Grey Hardware. The saw was manufactured by Dill Tool Corp. Kent has commenced an action against Grey and Dill based upon strict liability. Which of the following is a correct statement? 

58. 

Which of the following requirements must be met, by any type of deed, in order for title to real property to be transferred? 

59. 

Curator contracted to sell Train’s painting. Train issued a $10,000 note to Curator that was payable within 10 days after Curator sold Train’s painting. Curator sold the painting on May 1. Train, alleging that the note was not a negotiable instrument, refused to pay the note. Under the Negotiable Instruments Article of the UCC, which of the following statements is correct regarding the status of the note? 

60. 

Silk was employed at Rosco Corp. as a chauffeur. While in the course of employment, Silk was involved in an automobile accident with Lake who was employed by Stone Corp. as a truck driver. While making a delivery for Stone, Lake negligently drove through a red light, causing the accident with Silk. Both Silk and Lake have received workers’ compensation benefits as a result of the accident. Silk 

61. 

Harrison obtained from Bristow his $11,500 check drawn on the Union National Bank in payment for bogus uranium stock. He immediately negotiated it by a blank endorsement to Dunlop in return for $1,000 in cash and her check for $10,500. Dunlop qualified as a holder in due course. She deposited the check in her checking account in the Oceanside Bank. Upon discovering that the stock was bogus, Bristow notified Union National to stop payment on his check, which it did. The check was returned to Oceanside Bank, which in turn debited Dunlop’s account and returned the check to her. Which of the following statements is correct? 

62. 

The primary purpose for enacting workers’ compensation statutes was to 

63. 

Wally, a CPA and a neighbor of Rita’s, offered to sell Rita his power chain saw for $400. Rita stated that she knew nothing about chain saws but would buy the saw if it were capable of cutting down the trees in her backyard, which had an average diameter of five feet. Wally assured Rita that the saw “would do the job.” Relying on Wally’s assurance, Rita purchased the saw. Wally has created a warranty that 

64. 

Marcross is an agent for Fashion Frocks, Ltd.  As such, Marcross made a contract for and on behalf of Fashion Frocks with Sowinski Fabrics which was not authorized and upon which Fashion has disclaimed liability.  Sowinski has sued Fashion on the contract asserting that Marcross had the apparent authority to make it. In considering the factors which will determine the scope of Marcross’ apparent authority, which of the following would not be important? 

65. 

A CPA partnership may, without being lawfully subpoenaed or without the client’s consent, make client workpapers available to 

66. 

Carson Corp. asked Alto Construction to fix a broken window at one of Carson’s stores.  Alto offered to make repairs within 3 days at a price to be agreed upon after the work was completed.  A contract based on Alto’s offer would fail because of the indefiniteness as to the 

67. 

Shea Corp. owns a factory that has a fair market value of $50,000. Deal Bank holds a first mortgage and Rift Finance holds a second mortgage on the factory. Shea has discontinued payments to Deal and Rift. As a result, Deal, which is owed $45,000, and Rift, which is owed $15,000, have foreclosed on their respective mortgages. If the factory is properly sold to Bean at a judicial sale for $50,000, after expenses, 

68. 

Food Corp. owned a restaurant called The Ambers. The corporation president, T.J. Jones, hired a contractor to make repairs at the restaurant, signing the contract, “T.J. Jones for The Ambers.” Two invoices for the restaurant repairs were paid by Food Corp. with corporate checks. Upon presenting the final invoice, the contractor was told that it would not be paid. The contractor sued Food Corp. Which of the following statements is correct regarding the liability of Food Corp.?

69. 

Which of the following statements is correct?

70. 

The perfection of a security interest by filing a financing statement

71.

Smith, an executive of Apex Corporation, became emotionally involved with Jones.  At the urging of Jones, and fearing that Jones would sever their relationship, Smith reluctantly signed a contract which was grossly unfair to Apex.  Apex’s best basis to rescind the contract would be

72.

Under the Federal Fair Labor Standards Act, which of the following would be regulated?