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Wiley CPA Exam Review Problems And Solutions Vol 2 2011-2012 38th Edition O. Ray Whittington, Patrick R. Delaney - Solutions
All of the following distributions to stockholders are considered asset or capital distributions, excepta. Liquidating dividends.b. Stock splits.c. Property distributions.d. Cash dividends.
Which of the following securities are corporate debt securities?Convertible bonds Debenture bonds Warrantsa. Yes Yes Yesb. Yes No Yesc. Yes Yes Nod. No Yes Yes
An owner of common stock will not have any liability beyond actual investment if the ownera. Paid less than par value for stock purchased in connection with an original issue of shares.b. Agreed to perform future services for the corporation in exchange for original issue par value shares.c.
Gallagher Corporation issued 100,000 shares of $40 par value stock for $50 per share to various investors. Subsequently, Gallagher purchased back 10,000 of those shares for $30 per share and held them as treasury stock. When the price of the stock recovered somewhat, Gallagher sold this treasury
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
Promoters of a corporation which is not yet in existencea. 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
Which of the following statements is correct concerning the similarities between a limited partnership and a corporation?a. Each is created under a statute and must file a copy of its certificate with the proper state authorities.b. All corporate stockholders and all partners in a limited
Absent a specific provision in its Articles of Incorporation, a corporation’s board of directors has the power to do all of the following, excepta. Repeal the bylaws.b. Declare dividends.c. Fix compensation of directors.d. Amend the Articles of Incorporation.
Which of the following facts is(are) generally included in a corporation’s articles of incorporation?Name of registered agent Number of authorized sharesa. Yes Yesb. Yes Noc. No Yesd. No No
Under the Revised Model Business Corporation Act, which of the following must be contained in a corporation’s articles of incorporation?a. Quorum voting requirements.b. Names of stockholders.c. Provisions for issuance of par and nonpar shares.d. The number of shares the corporation is authorized
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
Which of the following statements is true of professional corporations under the various state laws?I. The professionals in the corporation have personal liability for their professional acts.II. Normally under state laws, only licensed professionals are permitted to own shares in professional
Cleanit Corporation was incorporated in Colorado.Cleanit wishes to perform some transactions in other states but does not want to incorporate or obtain a certificate of authority to qualify to do business in those other states.Which of the following normally would require Cleanit to obtain a
Macro Corporation was incorporated and doing business in Illinois. It is doing business in various other states including Nevada. Which of the following statements is(are) true?a. Macro must incorporate in Nevada.b. Macro is a domestic corporation in Nevada.c. Macro is a domestic corporation in
Colby formed a professional corporation along with two other attorneys. They took out loans in the name of the corporation.During the first year, Colby failed to file some papers on time for a client causing the client to lose a very good case. For which does Colby have the corporate protection of
Bond Company is incorporated in Florida but not in Georgia. Bond has branch offices in both states. Which of the following is correct?I. Bond is a domestic corporation in Georgia.II. Bond is a domestic corporation in Florida.III. Bond needs to incorporate also in Georgia.a. I and II only.b. II
Which of the following is a disadvantage of a Subchapter C corporation?a. It may face higher tax burdens than a Subchapter S corporation.b. The shareholders lose their limited liability when they switch from a general partnership to a corporation.c. A Subchapter C corporation is not well defined
Which of the following are characteristics of the corporate form of doing business?a. Persons who manage corporations need not be shareholders.b. The corporation may convey or hold property in its own name.c. The corporation can sue or be sued in its own name.d. All of the above are true.
A corporation as a separate legal entity can do which of the following?a. Contract 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 a contract can be made.c. Contract in its own name with third
Which of the following is not a characteristic of a corporation?a. It has a continuous life.b. Shares in the corporation can normally be freely transferred.c. A corporation is treated as a legal entity separate from its shareholders.d. A corporation is automatically terminated upon the death of a
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
Which of the following statements best describes an advantage of the corporate form of doing business?a. Day-to-day management is strictly the responsibility of the directors.b. Ownership is contractually restricted and is not transferable.c. The operation of the business may continue
The main difference between Subchapter S corporations and Subchapter C corporations isa. Their tax treatment.b. That the federal Subchapter S Revision Act covers Subchapter S corporations but does not cover Subchapter C corporations.c. Their limited liability of their shareholders.d. Their
Which of the following statements is(are) true?a. Both Subchapter C corporations and Subchapter S corporations have limited liability for their shareholders.b. Both Subchapter C corporations and Subchapter S corporations are similar in their corporate management structure.c. All of the above are
Under the federal Subchapter S Revision Act all corporations area. Now treated as Subchapter S corporations.b. Divided into either a Subchapter C corporation or a Subchapter S corporation.c. Divided into either a Subchapter C corporation, a Subchapter E corporation, or a Subchapter S corporation.d.
Under the federal Subchapter S Revision Act, all corporations are designated asa. Subchapter S corporations only.b. Either a Subchapter S corporation or a Subchapter C corporation.c. One of seven different types of corporations.d. Both a Subchapter S corporation and a Subchapter C corporation at
In which of the following respects do general partnerships and limited liability partnerships differ?I. In the level of liability of the partners for torts they themselves commit.II. In the level of liability of the partners for torts committed by other partners in the same firm.III. In the amount
Which of the following is true of the typical limited liability company?a. It provides for limited liability for some of its members (owners), that is, those identified as limited members (owners).b. The members’ (owners’) interests are not freely transferable.c. Voting members (owners) but not
Owners and managers of a limited liability company(LLC) owea. A duty of due care.b. A duty of loyalty.c. Both a duty of due care and a duty of loyalty.d. None of the above.
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
Which of the following is true of a limited liability company under the laws of the majority of states?a. At least one of the owners must have personal liability.b. The limited liability company is a separate legal entity apart from its owners.c. Limited liability of the owners is lost if they fail
Which form(s) of a business organization can have characteristics common to both the corporation and the general partnership?Limited liability company Subchapter S corporationa. Yes Yesb. Yes Noc. No Yesd. No No
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 venturers owe each other fiduciary duties.d. Death of a joint
Riewerts, Morgar 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
The admission of a new limited partner to a limited partnership requires approval by I. A majority of the general partners.II. All of the general partners.III. A majority of the limited partners.IV. All of the limited partners.a. I only.b. II only.c. I and III only.d. II and IV only.
The admission of a new general partner to a limited partnership requires approval by I. A majority of the general partners.II. All of the general partners.III. A majority of the limited partners.IV. All of the limited partners.a. I only.b. II only.c. I and III only.d. II and IV only.
Hart and Grant formed Hart Limited Partnership. Hart put in a capital contribution of $20,000 and became a general partner. Grant put in a capital contribution of $10,000 and became a limited partner. During the second year of operation, a third party filed a tort action against the partnership and
In a limited partnership, the limited partners’ capital contribution may be in which of the following forms?a. A promise to perform services in the future for the partnership.b. An agreement to pay cash.c. A promise to give property.d. All of the above.
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
To create a limited partnership, a certificate of limited partnership must be filed with the Secretary of State. Which of the following must be included in this certificate under the Revised Uniform Limited Partnership Act?I. Names of all of the general partners.II. Names of the majority of the
Alchorn, Black, and Chan formed a limited partnership with Chan becoming the only limited partner. Capital contributions from these partners were $20,000, $40,000, and$50,000, respectively. Chan, however, helped in the management of the partnership and Ham, who had several contracts with the
Which of the following is(are) true of a limited partnership?I. Limited partnerships must have at least one general partner.II. The death of a limited partner terminates the partnership.a. I only.b. II only.c. Neither I nor II.d. Both I and II.
Sharif, Hirsch, and Wolff formed a partnership with Sharif and Hirsch as general partners. Wolff was the limited partner. They failed to agree upon a profit-sharing plan but put in capital contributions of $120,000, $140,000, and$150,000, respectively. At the end of the first year how should they
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%; Elgar, 30%; Frost, 20%; and Grant, 10%. There was no provision for allocating losses. At the end of its first year, the
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
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
Which of the following statements best describes the effect of the assignment of an interest in a general partnership?a. The assignee becomes a partner.b. The assignee is responsible for a proportionate share of past and future partnership debts.c. The assignment automatically dissolves the
Which of the following actions require(s) unanimous consent of the partners under partnership law?I. Making partnership a surety.II. Admission of a new partner.a. I only.b. II only.c. Both I and II.d. Neither I nor II.
Under the Revised Uniform Partnership Act, partners have joint and several liability fora. Breaches of contract.b. Torts committed by one of the partners within the scope of the partnership.c. Both of the above.d. None of the above.
In a general partnership, which of the following acts must be approved by all the partners?a. Dissolution of the partnership.b. Admission of a partner.c. Authorization of a partnership capital expenditure.d. Conveyance of real property owned by the partnership.
The apparent authority of a partner to bind the partnership in dealing with third partiesa. 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.
Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner.After the assignment, Bean asserts the rights to I. Participate in the management of TLC.II. Cobb’s share of TLC’s partnership profits.Bean is correct as to which of these rights?a. I
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
The partnership agreement for Owen Associates, a general partnership, provided that profits be paid to the partners in the ratio of their financial contribution to the partnership.Moore contributed $10,000, Noon contributed $30,000, and Kale contributed $50,000. For the year ended December 31,
Which of the following is not true of a general partnership?a. Ownership by the partners may be unequal.b. It is a separate legal entity.c. An important characteristic is that the partners share in the profits equally.d. Each partner has an equal right to participate in management.
Sydney, Bailey, and Calle form a partnership under the Revised Uniform Partnership Act. During the first year of operation, the partners have fundamental questions regarding the rights and obligations of the partnership as well as the individual partners. Which of the following questions can
A partnership agreement must be in writing ifa. 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.
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
A silent partner in a general partnershipa. Helps manage the partnership without letting those outside the partnership know this.b. Retains unlimited liability for the debts of the partnership.c. Both of the above are correct.d. None of the above is correct.
Which of the following can be a partnership?a. Karen and Sharon form a charitable organization in which they received donations to give to their favorite charities.b. Frank and Pablo are members of a union at work that has 150 members.c. Janice and Stanley form a club to encourage business contacts
A general partnership musta. Pay federal income tax.b. Have two or more partners.c. Have written articles of partnership.d. Provide for apportionment of liability for partnership debts.
Which of the following statements is not true of a sole proprietorship?a. Federal and state governments typically require a formal filing with the appropriate government officials whether or not the sole proprietorship uses a fictitious name.b. The sole proprietorship is not a separate legal entity
Burk Corporation has issued securities that must be registered with the Securities Exchange Commission under the Securities Exchange Act of 1934. A material event took place yesterday, that is, there was a change in the control of Burk Corporation. Which of the following statements is correct?a.
Which of the following is correct concerning financial statements in annual reports (Form 10-K) and quarterly reports(Form 10-Q)?a. Both Form 10-K and Form 10-Q must be audited by independent public accountants and both must be filed with the SEC.b. Both Form 10-K and Form 10-Q must be audited by
Adler, Inc. is a reporting company under the Securities Exchange Act of 1934. The only security it has issued is voting common stock. Which of the following statements is correct?a. Because Adler is a reporting company, it is not required to file a registration statement under the Securities Act of
Which of the following events must be reported to the SEC under the reporting provisions of the Securities Exchange Act of 1934?Tender offers Insider trading Soliciting proxiesa. Yes Yes Yesb. Yes Yes Noc. Yes No Yesd. No Yes Yes
Which of the following reports must also be submitted to the SEC?Report by any party making a tender offer to purchase Link’s stock Report of proxy solicitations by Link stockholdersa. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following documents must Link file with the SEC?Quarterly reports(Form 10-Q) Proxy Statementsa. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following situations would require Link to be subject to the reporting provisions of the 1934 Act?Shares listed on a national securities exchange More than one class of stocka. Yes Yesb. Yes Noc. No Yesd. No No
The antifraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934a. Apply only if the securities involved were registered under either the Securities Act of 1933 or the Securities Exchange Act of 1934.b. Require that the plaintiff show negligence on the part of the defendant in
The Securities Exchange Commission promulgated Rule 10b-5 from power it was given the Securities Exchange Act of 1934. Under this rule, it is unlawful for any person to use a scheme to defraud another in connection with the Purchase of any security Sale of any securitya. Yes Yesb. Yes Noc. No Yesd.
Which of the following persons is not an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements?a. An attorney for the corporation.b. An owner of 5% of the corporation’s outstanding debentures.c. A member of the board of directors.d. A
Under the Securities Act of 1933, which of the following statements is correct concerning a public issuer of securities who has made a registered offering?a. The issuer is required to distribute an annual report to its stockholders.b. The issuer is subject to the proxy rules of the SEC.c. The
The registration provisions of the Securities Exchange Act of 1934 require disclosure of all of the following information except thea. Names of owners of at least 5% of any class of nonexempt equity security.b. Bonus and profit-sharing arrangements.c. Financial structure and nature of the
Which of the following factors, by itself, requires a corporation to comply with the reporting requirements of the Securities Exchange Act of 1934?a. Six hundred employees.b. Shares listed on a national securities exchange.c. Total assets of $2 million.d. Four hundred holders of equity securities.
Integral Corp. has assets in excess of $4 million, has 350 stockholders, and has issued common and preferred stock. Integral is subject to the reporting provisions of the Securities Exchange Act of 1934. For its 2008 fiscal year, Integral filed the following with the SEC: quarterly reports, an
The Securities Exchange Commission promulgated Rule 10b-5 under Section 10(b) of the Securities Exchange Act of 1934. Which of the following is(are) purpose(s) of the Act?To rate securities so investors can choose more wisely To encourage disclosure of information relevant to investors To deter
Dean, Inc., a publicly traded corporation, paid a$10,000 bribe to a local zoning official. The bribe was recorded in Dean’s financial statements as a consulting fee.Dean’s unaudited financial statements were submitted to the SEC as part of a quarterly filing. Which of the following federal
Under Rule 504 of Regulation D of the Securities Act of 1933, which of the following is(are) required?I. No general offering or solicitation is permitted.II. The issuer must restrict the purchasers’ right to resell the securities.a. I only.b. II only.c. Both I and II.d. Neither I nor II.
Which of the following transactions will be exempt from the full registration requirements of the Securities Act of 1933?a. All intrastate offerings.b. All offerings made under Regulation A.c. Any resale of a security purchased under a Regulation D offering.d. Any stockbroker transaction.
Pix Corp. is making a $6,000,000 stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933. Which of the following requirments would Pix have to comply with when selling the securities?a. No more than thirty-five investors.b. No more than thirty-five
Which of the following statements concerning an initial intrastate securities offering made by an issuer residing in and doing business in that state is correct?a. The offering would be exempt from the registration requirements of the Securities Act of 1933.b. The offering would be subject to the
Under Regulation D of the Securities Act of 1933, which of the following conditions apply to private placement offerings? The securitiesa. Cannot be sold for longer than a six-month period.b. Cannot be the subject of an immediate unregistered reoffering to the public.c. Must be sold to accredited
Frey, Inc. intends to make a $2,000,000 common stock offering under Rule 505 of Regulation D of the Securities Act of 1933. Freya. May sell the stock to an unlimited number of investors.b. May make the offering through a general advertising.c. Must notify the SEC within fifteen days after the first
Regulation D of the Securities Act of 1933a. Restricts the number of purchasers of an offering to thirty-five.b. Permits an exempt offering to be sold to both accredited and nonaccredited investors.c. Is limited to offers and sales of common stock that do not exceed $1.5 million.d. Is exclusively
Which of the following facts will result in an offering of securities being exempt from registration under the Securities Act of 1933?a. The securities are nonvoting preferred stock.b. The issuing corporation was closely held prior to the offering.c. The sale or offer to sell the securities is made
An offering made under the provisions of Regulation A of the Securities Act of 1933 requires that the issuera. File an offering circular with the SEC.b. Sell only to accredited investors.c. Provide investors with the prior four years’ audited financial statements.d. Provide investors with a proxy
Eldridge Corporation is seeking to offer $7,000,000 of securities under Regulation D of the Securities Act of 1933.Which of the following is(are) true if Eldridge wants an exemption from registration under the Securities Act of 1933?I. Eldridge must comply with Rule 506 of Regulation D.II. These
Pix Corp. is making a $6,000,000 stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933. Which of the following provisions of the Act would Pix have to comply with for the offering to be exempt?a. Regulation A.b. Regulation D, Rule 504.c. Regulation D, Rule
Regulation D provides for important exemptions to registration of securities under the Securities Act of 1933.Which of the following would be exempt?I. Issuance of $500,000 of securities sold in a twelve-month period to forty investors.II. Issuance of $2,000,000 of securities sold in a twelvemonth
Issuers of securities are normally required under the Securities Act of 1933 to file a registration statement with the Securities Exchange Commission before these securities are either offered or sold to the general public. Which of the following is a reason why the SEC adopted the registration
If securities are exempt from the registration provisions of the Securities Act of 1933, any fraud committed in the course of selling such securities can be challenged by SEC Person defraudeda. Yes Yesb. Yes Noc. No Yesd. No No
Universal Corp. intends to sell its common stock to the public in an interstate offering that will be registered under the Securities Act of 1933. Under the Act,a. Universal can make offers to sell its stock before filing a registration statement, provided that it does not actually issue stock
Which of the following securities is exempt from registration under the Securities Act of 1933?a. Shares of nonvoting common stock, provided their par value is less than $1.00.b. A class of stock given in exchange for another class by the issuer to its existing stockholders without the issuer
Which of the following securities would be regulated by the provisions of the Securities Act of 1933?a. Securities issued by not-for-profit, charitable organizations.b. Securities guaranteed by domestic governmental organizations.c. Securities issued by savings and loan associations.d. Securities
Which of the following requirements must be met by an issuer of securities who wants to make an offering by using shelf registration?Original registration statement must be kept updated The offer must be a first-time issuer of securitiesa. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following is not a security under the definition for the Securities Act of 1933?a. Any note.b. Bond certificate of interest.c. Debenture.d. All of the above are securities under the Act.
Which of the above notes is(are) subject to the antifraud provisions of the Securities Act of 1933?a. I only.b. II only.c. I and III only.d. I, II, and III.
Which of the above notes is(are) exempt securities and need not be registered under the Securities Act of 1933?a. I only.b. II only.c. I and III only.d. I, II, and III.
Which of the following statements concerning the prospectus required by the Securities Act of 1933 is correct?a. The prospectus is a part of the registration statement.b. The prospectus should enable the SEC to pass on the merits of the securities.c. The prospectus must be filed after an offer to
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