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Wiley CPA Exam Review Regulation 2012 9th Edition O. Ray Whittington, Patrick R. Delaney - Solutions

When an agent acts for an undisclosed principal, the principal will not be liable to third parties if thea. Principal ratifies a contract entered into by the agent.b. Agent acts within an implied grant of authority.c. Agent acts outside the grant of actual authority.d. Principal seeks to conceal
Pine, an employee of Global Messenger Co., was hired to deliver highly secret corporate documents for Global’s clients 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
Chiron employed Sherwin as a mechanic. Chiron has various rules that all employed mechanics must follow. One day a customer was injured severely when her car’s brakes failed. It was shown that her car’s brakes failed because Sherwin did not follow one of the specific rules of Chiron. Which of
Harris, while delivering parts to a customer for his employer, negligently ran into and injured Wolfe. Harris had been asked by his employer to make these deliveries even though Harris was using his personal pickup truck. Neither Harris nor the employer had insurance to cover this injury. Which of
Which of the following terms best describes the relationship between a corporation and the CPA it hires to audit corporate books?a. Employer and employee.b. Employer and independent contractor.c. Master and servant.d. Employer and principal.
Generally, a disclosed principal will be liable to third parties for its agent’s unauthorized misrepresentations if the agent is an Employee Independent Contractora. Yes Yesb. Yes Noc. No Yesd. No No
Lee repairs high-speed looms for Sew Corp., a clothing manufacturer. Which of the following circumstances best indicates that Lee is an employee of Sew and not an independent contractor?a. Lee’s work is not supervised by Sew personnel.b. Lee’s tools are owned by Lee.c. Lee is paid weekly by
A principal and agent relationship requires aa. Written agreement.b. Power of attorney.c. Meeting of the minds and consent to act.d. Specified consideration.
Noll gives Carr a written power of attorney. Which of the following statements is correct regarding this power of attorney?a. It must be signed by both Noll and Carr.b. It must be for a definite period of time.c. It may continue in existence after Noll’s death.d. It may limit Carr’s authority
Which of the following rights does one cosurety generally have against another cosurety?a. Exoneration.b. Subrogation.c. Reimbursement.d. Contribution.
Lane promised to lend Turner $240,000 if Turner obtained sureties to secure the loan. Turner agreed with Rivers, Clark, and Zane for them to act as cosureties on the loan from Lane. The agreement between Turner and the cosureties provided that compensation be paid to each of the cosureties. It
Mane Bank lent Eller $120,000 and received securities valued at$30,000 as collateral. At Mane’s request, Salem and Rey agreed to act as uncompensated cosureties on the loan. The agreement provided that Salem’s and Rey’s maximum liability would be$120,000 each.Mane released Rey without
Ingot Corp. lent Flange $50,000. At Ingot’s request, Flange entered into an agreement with Quill and West for them to act as compensated cosureties on the loan in the amount of $100,000 each.Ingot released West without Quill’s or Flange’s consent, and Flange later defaulted on the loan. Which
Nash, Owen, and Polk are cosureties with maximum liabilities of$40,000, $60,000, and $80,000, respectively. The amount of the loan on which they have agreed to act as cosureties is $180,000. The debtor defaulted at a time when the loan balance was $180,000. Nash paid the lender $36,000 in full
Ivor borrowed $420,000 from Lear Bank. At Lear’s request, Ivor entered into an agreement with Ash, Kane, and Queen for them to act as cosureties on the loan. The agreement between Ivor and the cosureties provided that the maximum liability of each cosurety was:Ash, $84,000; Kane, $126,000; and
A distinction between a surety and a cosurety is that only a cosurety is entitled toa. Reimbursement (Indemnification).b. Subrogation.c. Contribution.d. Exoneration.
Wright agreed to assure King’s loan from Ace Bank. Which of the following events would release Wright from the obligation to pay the loan?a. Ace seeking payment of the loan only from Wright.b. King is granted a discharge in bankruptcy.c. Ace is paid in full by King’s spouse.d. King is
Green was unable to repay a loan from State Bank when due.State refused to renew the loan unless Green provided an acceptable surety. Green asked Royal, a friend, to act as surety on the loan. To induce Royal to agree to become a surety, Green fraudulently represented Green’s financial condition
Which of the following acts always will result in the total release of a compensated surety?a. The creditor changes the manner of the principal debtor’s payment.b. The creditor extends the principal debtor’s time to pay.c. The principal debtor’s obligation is partially released.d. The
Which of the following is not a defense that a surety may use to avoid payment of a debtor’s obligation to a creditor?a. The creditor had committed fraud against the debtor to induce the debtor to take on the debt with this creditor.b. The creditor had committed fraud against the surety to induce
Which of the following events will release a noncompensated surety from liability?a. Release of the principal debtor’s obligation by the creditor but with the reservation of the creditor’s rights against the surety.b. Modification by the principal debtor and creditor of their contract that
Which of the following defenses would a surety be able to assert successfully to limit the surety’s liability to a creditor?a. A discharge in bankruptcy of the principal debtor.b. A personal defense the principal debtor has against the creditor.c. The incapacity of the surety.d. The incapacity of
Under the law of suretyship, which are generally among the rights that the surety may use?I. Subrogation.II. Exoneration.III. Reimbursement from debtor.a. I only.b. III only.c. I and II only.d. I, II, and III.
Which of the following rights does a surety have?Right to compel the creditor to collect from the principal debtor Right to compel the creditor to proceed against the principal debtor’s collaterala. Yes Yesb. Yes Noc. No Yesd. No No
Sorus and Ace have agreed, in writing, to act as guarantors of collection on a debt owed by Pepper to Towns, Inc. The debt is evidenced by a promissory note. If Pepper defaults, Towns will be entitled to recover from Sorus and Ace unlessa. Sorus and Ace are in the process of exercising their rights
A party contracts to guaranty the collection of the debts of another. As a result of the guaranty, which of the following statements is correct?a. The creditor may proceed against the guarantor without attempting to collect from the debtor.b. The guaranty must be in writing.c. The guarantor may use
Belmont acts as a surety for a loan to Diablo from Chaffin. In which of the following cases would Belmont be released from liability?I. Diablo dies.II. Diablo files bankruptcy.III. Chaffin modifies Diablo’s contract, increasing Diablo’s risk of nonpayment.a. I only.b. III only.c. I and III
Reuter Bank loaned Sabean Corporation $500,000 in writing. As part of the agreement, Reuter required that the three owners of Sabean act as sureties on the loan. The corporation also required that some real estate owned by Sabean Corporation be used as collateral for 40% of the loan. The collateral
Which of the following involve(s) a suretyship relationship?I. Transferee of a note requires transferor to obtain an accommodation endorser to guarantee payment.II. The purchaser of goods agrees to pay for the goods but to have them shipped to another party.III. The shareholders of a small, new
Which of the following events will reduce a surety’s liability to the creditor?a. The principal debtor was involuntarily petitioned into bankruptcy.b. The creditor failed to notify the surety of a partial surrender of the principal debtor’s collateral.c. The creditor was adjudicated incompetent
Which of the following prejudgment remedies would be available to a creditor when a debtor owns no real property?Writ of attachment Garnishmenta. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following liens generally require(s) the lienholder to give notice of legal action before selling the debtor’s property to satisfy the debt?Mechanic’s lien Artisan’s liena. Yes Yesb. Yes Noc. No Yesd. No No
Under the Federal Fair Debt Collection Practices Act, which of the following would a collection service using improper debt collection practices be subject to?a. Abolishment of the debt.b. Reduction of the debt.c. Civil lawsuit for damages for violating the Act.d. Criminal prosecution for violating
Which of the following statements is(are) correct regarding debtors’ rights?I. State exemption statutes prevent all of a debtor’s personal property from being sold to pay a federal tax lien.II. Federal social security benefits received by a debtor are exempt from garnishment by creditors.a. I
A homestead exemption ordinarily could exempt a debtor’s equity in certain property from postjudgment collection by a creditor. To which of the following creditors will this exemption apply?Valid home mortgage lien Valid IRS tax liena. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following statements is(are) correct regarding debtors’ rights?I. State exemption statutes prevent all of a debtor’s personal property from being sold to pay a federal tax lien.II. Federal social security benefits received by a debtor are exempt from garnishment by creditors.a. I
A homestead exemption ordinarily could exempt a debtor’s equity in certain property from postjudgment collection by a creditor. To which of the following creditors will this exemption apply?Valid home mortgage lien Valid IRS tax liena. Yes Yesb. Yes Noc. No Yesd. No No
A debtor may attempt to conceal or transfer property to prevent a creditor from satisfying a judgment. Which of the following actions will be considered an indication of fraudulent conveyance? possession a. Yes Debtor remaining in Secret after conveyance conveyance Debtor retains an equitable
Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which of the following type(s) of debts is (are)nondischargeable in bankruptcy?I. Death caused while intoxicated when operating an aircraft.II. Injury caused while intoxicated when driving any motor vehicle.III. Debts for
Which of the following is false regarding a Chapter 13 bankruptcy?a. Individuals in general need not have regular income.b. Creditors may not file involuntary petitions under this chapter.c. It is initiated when the debtor files a voluntary petition in a bankruptcy court.d. All of the above are
Under Chapter 11 of the Federal Bankruptcy Code, which of the following would not be eligible for reorganization?a. Retail sole proprietorship.b. Advertising partnership.c. CPA professional corporation.d. Savings and loan corporation.
Which of the following statements is correct with respect to the reorganization provisions of Chapter 11 of the Federal Bankruptcy Code?a. A trustee must always be appointed.b. The debtor must be insolvent if the bankruptcy petition was filed voluntarily.c. A reorganization plan may be filed by a
Strong Corp. filed a voluntary petition in bankruptcy under the reorganization provisions of Chapter 11 of the Federal Bankruptcy Code. A reorganization plan was filed and agreed to by all necessary parties. The court confirmed the plan and a final decree was entered.Which of the following
By signing a reaffirmation agreement on April 15, 2010, a debtor agreed to pay certain debts that would be discharged in bankruptcy. On June 20, 2010, the debtor’s attorney filed the reaffirmation agreement and an affidavit with the court indicating that the debtor understood the consequences of
Which of the following claims will not be discharged in bankruptcy?a. A claim that arises from alimony or maintenance.b. A claim that arises out of the debtor’s breach of contract.c. A claim brought by a secured creditor that remains unsatisfied after the sale of the collateral.d. A claim brought
Which of the following debts will not be discharged by bankruptcy even though a general discharge is allowed?I. Debt owed to a corporation because the debtor was caught embezzling from it.II. Money owed to a bank because the debtor was found to have committed fraud about her financial condition to
Which of the following acts by a debtor could result in a bankruptcy court revoking the debtor’s discharge?I. Failure to list one creditor.II. Failure to answer correctly material questions on the bankruptcy petition.a. I only.b. II only.c. Both I and II.d. Neither I nor II.
Eckson was granted an order for relief after having filed a petition in bankruptcy. Which of the following actions would bar a general discharge in bankruptcy?I. Ten months before the bankruptcy proceedings, Eckson had obtained credit from Cardinal Corporation by using false information on the
Chapter 7 of the Federal Bankruptcy Code will deny a debtor a discharge when the debtora. Made a preferential transfer to a creditor.b. Accidentally destroyed information relevant to the bankruptcy proceeding.c. Obtained a Chapter 7 discharge ten years previously.d. Is a corporation or a
Which of the following acts will not bar a general discharge in bankruptcy?a. The debtor tried to hide some property to prevent the estate from getting it.b. The debtor intentionally injured a creditor during an argument about the bankruptcy proceedings.c. The debtor is unwilling to explain
Kessler Company has filed a voluntary bankruptcy petition.Kessler’s debts include administration costs owed to accountants, attorneys, and appraisers. It also owes federal and state taxes. Kessler still owes various employees for the previous month’s wages accrued before the petition was filed.
Brook Corporation has filed for bankruptcy. Of the following debts Brook owes, indicate their priorities from the highest to the lowest.I. Federal taxes unpaid for the previous year.II. Wages of $3,000 owed to employees.III. Balance of $5,000 owed to a creditor that had a security interest.This
On May 1, 2010, two months after becoming insolvent, Quick Corp., an appliance wholesaler, filed a voluntary petition for bankruptcy under the provisions of Chapter 7 of the Federal Bankruptcy Code. On October 15, 2009, Quick’s board of directors had authorized and paid Erly $50,000 to repay
Under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code, a debtor will be denied a discharge in bankruptcy if the debtora. Fails to list a creditor.b. Owes alimony and support payments.c. Cannot pay administration expenses.d. Refuses to satisfactorily explain a loss of assets.
The payment to Olsen wasa. Preferential, because the payment was made within ninety days of the filing of the petition.b. Preferential, because the payment enabled Olsen to receive more than the other general creditors.c. Not preferential, because Hall is presumed insolvent when the payment was
The National mortgage wasa. Preferential, because National would be considered an insider.b. Preferential, because the mortgage was given to secure an antecedent debt.c. Not preferential, because Hall is presumed insolvent when the mortgage was given.d. Not preferential, because the mortgage was a
Which of the following transfers by a debtor, within 90 days of filing for bankruptcy, could be set aside as a preferential payment?a. Making a gift to charity.b. Paying a business utility bill.c. Borrowing money from a bank secured by giving a mortgage on business property.d. Prepaying an
Flax, a sole proprietor, has been petitioned involuntarily into bankruptcy under the Federal Bankruptcy Code’s liquidation provisions. Simon & Co., CPAs, has been appointed trustee of the bankruptcy estate. If Simon also wishes to act as the tax return preparer for the estate, which of the
Which of the following is not allowed as a federal exemption under the Federal Bankruptcy Code?a. Some specified amount of equity in one motor vehicle.b. Unemployment compensation.c. Some specified amount of value in books and tools of one’s trade.d. All of the above are allowed.
What dollar amount would the IRS receive?a. $0b. $ 8,000c. $10,000d. $12,000
What total dollar amount would Fracon Bank receive on its secured and unsecured claims?a. $70,000b. $72,000c. $74,000d. $75,000
What dollar amount would Nanstar Electric Co. receive?a. $0b. $ 800c. $1,000d. $1,200
Which of the following events will follow the filing of the Chapter 7 involuntary petition?A trustee will be appointed A stay against creditor collection proceedings will go into effecta. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following statements would correctly describe the result of Dart’s opposing the petition?a. Dart will win because the petition should have been filed under Chapter 11.b. Dart will win because there are not more than 12 creditors.c. Dart will lose because it is not paying its debts as
Brenner Corporation is trying to avoid bankruptcy but its four creditors are trying to force Brenner into bankruptcy. The four creditors are owed the following amounts:Anteed Corporation - $7,000 of unsecured debt Bounty Corporation - $5,000 of unsecured debt and $8,500 of secured debt Courtney
Which of the following conditions, if any, must a debtor meet to file a voluntary bankruptcy petition under Chapter 7 of the Federal Bankruptcy Code?Insolvency Three or more creditorsa. Yes Yesb. Yes Noc. No Yesd. No No
On February 28, 2010, Master, Inc. had total assets with a fair market value of $1,200,000 and total liabilities of $990,000. On January 15, 2010, Master made a monthly installment note payment to Acme Distributors Corp., a creditor holding a properly perfected security interest in equipment having
A voluntary petition filed under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Codea. Is not available to a corporation unless it has previously filed a petition under the reorganization provisions of Chapter 11 of the Federal Bankruptcy Code.b. Automatically stays collection
Which of the following statements is correct concerning the voluntary filing of a petition in bankruptcy?a. If the debtor has twelve or more creditors, the unsecured claims must total at least $14,425.b. The debtor must be insolvent.c. If the debtor has less than twelve creditors, the unsecured
In what order are the following obligations paid after a secured creditor rightfully sells the debtor’s collateral after repossession?I. Debt owed to any junior security holder.II. Secured party’s reasonable sale expenses.III. Debt owed to the secured party.a. I, II, III.b. II, I, III.c. II,
Under the Revised Secured Transactions Article of the UCC, which of the following remedies is available to a secured creditor when a debtor fails to make a payment when due?Proceed against the collateral Obtain a general judgment against the debtora. Yes Yesb. Yes Noc. No Yesd. No No
Bean defaulted on a promissory note payable to Gray Co. The note was secured by a piece of equipment owned by Bean. Gray perfected its security interest on May 29, 2010 Bean had also pledged the same equipment as collateral for another loan from Smith Co. after he had given the security interest to
Under the Revised UCC Secured Transaction Article, which of the following statements is correct concerning the disposition of collateral by a secured creditor after a debtor’s default?a. A good-faith purchaser for value and without knowledge of any defects in the sale takes free of any
Under the Revised UCC Secured Transaction Article, which of the following rights will Drew have?a. Redeem the computer after Hale sells it.b. Recover the sale price from Hale after Hale sells the computer.c. Force Hale to sell the computer.d. Prevent Hale from selling the computer.
Under the Revised UCC Secured Transaction Article, which of the following remedies will Hale have?a. Obtain a deficiency judgment against Drew for the amount owed.b. Sell the computer and retain any surplus over the amount owed.c. Retain the computer over Drew’s objection.d. Sell the computer
On June 15, Harper purchased equipment for $100,000 from Imperial Corp. for use in its manufacturing process. Harper paid for the equipment with funds borrowed from Eastern Bank. Harper gave Eastern a security agreement and financing statement covering Harper’s existing and after-acquired
Rally Co. has purchased some inventory from Kantar Corporation to sell to customers who will use the inventory primarily for consumer use. Which of the following is not correct?a. If Kantar sells the inventory to Rally on credit and takes out a security interest using the inventory as collateral,
Wine purchased a computer using the proceeds of a loan from MJC Finance Company. Wine gave MJC a security interest in the computer. Wine executed a security agreement and financing statement, which was filed by MJC. Wine used the computer to monitor Wine’s personal investments. Later, Wine sold
Rand purchased a sofa from Abby Department Store for use in her home. Abby had her sign a security agreement for the balance Rand owed. Rand did not pay the balance and sold the sofa to her neighbor, Gram, for use in his home. Gram did not realize that Rand had not paid off the balance. Abby filed
W & B, a wholesaler, sold on credit some furniture to Broadmore Company, a retailer. W & B perfected its security interest by filing a financing statement. Lean purchased some furniture from Broadmore for his home. He was unaware of W & B’s perfected security interest. McCoy purchased some
A party who filed a security interest in inventory on April 1, 2010, would have a superior interest to which of the following parties?a. A holder of a mechanic’s lien whose lien was filed on March 15, 2010.b. A holder of a purchase money security interest in after-acquired property filed on March
Under the Revised Secured Transaction Article of the UCC, what would be the order of priority for the following security interests in consumer goods?I. Financing statement filed on April 1.II. Possession of the collateral by a creditor on April 10.III. Financing statement perfected on April 15.a.
Noninventory goods were purchased and delivered on June 15, 2010. Several security interests exist in these goods. Which of the following security interests has priority over the others?a. Security interest in future goods attached June 10, 2010.b. Security interest attached June 15, 2010.c.
Under the Revised UCC Secured Transaction Article, what is the order of priority for the following security interests in store equipment?I. Security interest perfected by filing on April 15, 2010.II. Security interest attached on April 1, 2010.III. Purchase money security interest in noninventory
Under the Revised Secured Transaction Article of the UCC, which of the following purchasers will own consumer goods free of a perfected security interest in the goods?a. A merchant who purchases the goods for resale.b. A merchant who purchases the goods for use in its business.c. A consumer who
Mars, Inc. manufactures and sells VCRs on credit directly to wholesalers, retailers, and consumers. Mars can perfect its security interest in the VCRs it sells without having to file a financing statement or take possession of the VCRs if the sale is made toa. Retailers.b. Wholesalers that sell to
In which of the following cases does a seller have automatic perfection of a security interest as soon as attachment takes place?I. Purchase money security interest in consumer goods.II. Purchase money security interest in inventory.III. Purchase money security interest in equipment.a. I only.b. I
Grey Corp. sells computers to the public. Grey sold and delivered a computer to West on credit. West executed and delivered to Grey a promissory note for the purchase price and a security agreement covering the computer. West purchased the computer for personal use. Grey did not file a financing
Under the Revised UCC Secured Transaction Article, which of the following actions will best perfect a security interest in a negotiable instrument against any other party?a. Filing a security agreement.b. Taking possession of the instrument.c. Perfecting by attachment.d. Obtaining a duly executed
Which of the following transactions would illustrate a secured party perfecting its security interest by taking possession of the collateral?a. A bank receiving a mortgage on real property.b. A wholesaler borrowing to purchase inventory.c. A consumer borrowing to buy a car.d. A pawnbroker lending
A secured creditor wants to file a financing statement to perfect its security interest. Under the Revised UCC Secured Transaction Article, which of the following must be included in the financing statement?a. A listing or description of the collateral.b. An after-acquired property provision.c. The
Under the Revised UCC Secured Transaction Article, what is the effect of perfecting a security interest by filing a financing statement?a. The secured party can enforce its security interest against the debtor.b. The secured party has permanent priority in the collateral even if the collateral is
Perfection of a security interest permits the secured party to protect its interest bya. Avoiding the need to file a financing statement.b. Preventing another creditor from obtaining a security interest in the same collateral.c. Establishing priority over the claims of most subsequent secured
Under the Revised UCC Secured Transaction Article, which of the following events will always prevent a security interest from attaching?a. Failure to have a written security agreement.b. Failure of the creditor to have possession of the collateral.c. Failure of the debtor to have rights in the
Under the Revised Secured Transactions Article of the UCC, which of the following requirements is necessary to have a security interest attach? Debtor had rights in the collateral Proper filing of a security agreement Value given by the creditor a. Yes Yes Yes b. Yes Yes No c. Yes No Yes d. No Yes
Article 9 of the UCC which governs security interests has added some items that now are covered by security interests law. Which of the following is true?a. Security interests in tort claims already assessed by a court of law are covered.b. After-acquired commercial tort claims are covered.c.
Gardner Bank loaned Holland Company $20,000 to purchase some inventory to resell in its store. Gardner had Holland sign a security agreement that listed as collateral all present and future inventory of Holland as well as the proceeds of any sales of the inventory. Later, Boldon Company, who was
Under the Revised UCC Secured Transaction Article, which of the following after-acquired property may be attached to a security agreement given to a secured lender?Inventory Equipmenta. Yes Yesb. Yes Noc. No Yesd. No No
Under the Revised UCC Secured Transaction Article, when collateral is in a secured party’s possession, which of the following conditions must also be satisfied to have attachment?a. There must be a written security agreement.b. The public must be notified.c. The secured party must receive
Under the UCC, a warehouse receipta. Will not be negotiable if it contains a contractual limitation on the warehouseman’s liability.b. May qualify as both a negotiable warehouse receipt and negotiable commercial paper if the instrument is payable either in cash or by the delivery of goods.c. May

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