Business Law for Accountants - D216

Created post PA attempt 2 (1:09 AM - 5/14/26) // Study: Ethical..., IP in Business, Contracts, Contractual Duties, Creditor Protections, Chapter 7, 11, and 13 Bankruptcies

A hardware store proactively informs clients whenever recalls happen. It is always willing to replace defective items at no cost even if the warranty has expired. Its philosophy is to maximize benefits and minimize harm. This approach is known as outcome-based ethics.

It focuses on the consequences of an action.

Which source of law is considered primary?

Common law doctrines

What is a purpose of the Uniform Commercial Code?

Reduce difficulties for businesses conducting trade and commerce

Which kind of mark is "Cheesy" in connection with a spa company?

Arbitrary

When an offeree changes the quantity of items to be exchanged from the offeror's initial offer, what is the likely effect for the parties?

The offeree’s response was a counteroffer.

The doctrine of substantial performance states that a party, who in good faith, performs substantially all the terms of a contract can enforce the contract against the other party.

What is a basic requirement for performance to qualify as substantial?

There is a minor omission that can be remedied by monetary damages.

A seller wishes to sell his old sedan for $10,000. The buyer, who was in desperate need of a car, saw the ad and called the seller to ask questions about the car. The buyer seemed very interested in the car and agreed to buy it. However, nothing was said about the time of delivery. Three days passed and the seller started to fear that the buyer will not buy the car. The seller called the buyer at 3:00 am and demanded that she pick up the car within 25 minutes and also threatened to sue her for breach of contract.

It was an unreasonable hour and manner.

What is an example of a secured creditor?

Car loan provider

A creditor agrees to loan a debtor $250,000 to start a business. The guarantor agreed to be responsible for the debtor’s obligation under the agreement. Without the guarantor knowing, the creditor and debtor increased the amount of the loan to $500,000.
 
Is the guarantor liable to the creditor?

No, because they made a material change to the agreement without the guarantor's knowledge

What is the time period for filing Chapter 7 Schedules after the filing of the petition?

Within 45 days after filing the petition in bankruptcy

What is the purpose of the means test?

To keep upper-income people from abusing the bankruptcy process by filing Chapter 7 

Which bankruptcy filing requires a debtor to receive credit counseling?

Voluntary filing under Chapter 7 Liquidation

Which bankruptcy filing requires a debtor to receive credit counseling?

Voluntary filing under Chapter 7 Liquidation

Which type of relief does Chapter 7 of the Bankruptcy Code provide to a debtor?

The debtor has an opportunity for a fresh start as most or all debts are discharged on liquidation and distribution to creditors.

Which bankruptcy filing has the advantage of being the least expensive and complicated?

Debtor-initiated filing under Chapter 13 Repayment Plan

What is a cramdown provision?

Confirmation of the reorganization plan by the court over the objections of a class of creditors

What is the duty of the principal to the agent in order to terminate an agency at will?

To give the agent reasonable notice of the termination of the agency

Which form of business organization should someone have if flexibility in decision-making is valued over asset protection?”

Sole proprietorship

Which fiduciary duty is exercised when a partner refrains from intentional misconduct? 

Duty of care

How is the liability determined for members of a limited liability company, absent a member’s significant contribution to any tortious conduct? 

Limited to the amount of the member’s investment

Which type of law primarily governs limited liability companies?

State law

When winding up a limited liability company (LLC), who would be paid first from the sales proceeds? 

Members who are creditors of the LLC

A corporation wants to conduct business in a state other than the state of its formation.
 
Which filing gives the corporation the right to conduct business in a state other than the state of its formation?

Certificate of authority

A father and son want to formalize their family cattle ranching operations into a legal business entity. They want the business entity to offer liability protection and perpetual existence as well as have a flow-through status for tax purposes.

Which business entity is appropriate for this situation?

S corporation

A corporate officer enters into a contract with a supplier for the purchase of raw materials for the corporation.

What is the agency status between the corporate officer and the corporation?

Agent and principal, agency relationship

Actions from a principal cause a third-party to reasonably believe that another person with no agency relationship with the principal is the principal’s agent. The third-party, relying on the principal’s actions, enters into a contract with that agent and incurs a loss.

Agency by estoppel

For which reason may the agent be liable in a gratuitous principal-agent relationship?

Negligence

Generally, the agent owes the principal the five following duties: performance, notification, loyalty, obedience, and accounting.

Which statement describes accounting?

The duty to keep and make available to the principal an account of all property and funds received and paid out on the principal’s behalf

A motivational speaker agrees to fly to another country to train a new group of employees. The flight home is delayed due to a labor union strike, and the speaker must pay to stay in a hotel overnight.
 
Which duty does the company who requested this training owe the motivational speaker? 

Duty to reimburse

What is the standard for violating the Securities Act of 1933?

Intentionally defrauding investors by misrepresenting facts in a prospectus

What is a written offer that describes the issuer and indicates that more information can be obtained on the Securities and Exchange Commission (SEC) website?

Free-writing prospectus

What is the entity created by the Sarbanes-Oxley Act of 2002?

Public Company Accounting Oversight Board (PCAOB)

Which measure of the Sarbanes-Oxley Act ensures corporate accountability for the information in the financial reports? 

Certification by the CEO and CFO for the accuracy of information in the financial statements

To which party does a warranty impose a duty?

Seller

Under which type of exemption must an issuer believe that each unaccredited investor has sufficient knowledge to be capable of evaluating the investment’s potential return and risk?

Private placement

Who is responsible for filing the management’s assessment of internal controls report with the SEC?

Independent auditor

What is the Sarbanes-Oxley Act certification requirement for systems of internal control by the CEO and CFO?

To maintain an internal control system and disclose any deficiencies in the system to the independent auditors