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

Ames Construction Co. contracted to build a warehouse for White Corp. The construction specifications required Ames to use Ace lighting fixtures. Inadvertently, Ames installed Perfection lighting fixtures which are of slightly lesser quality than Ace fixtures, but in all other respects meet
Kaye contracted to sell Hodges a building for $310,000. The contract required Hodges to pay the entire amount at closing. Kaye refused to close the sale of the building. Hodges sued Kaye. To what relief is Hodges entitled?a. Punitive damages and compensatory damages.b. Specific performance and
Ordinarily, in an action for breach of a construction contract, the statute of limitations time period would be computed from the date thea. Contract is negotiated.b. Contract is breached.c. Construction is begun.d. Contract is signed.I. Remedies
To cancel a contract and to restore the parties to their original positions before the contract, the parties should execute aa. Novation.b. Release.c. Rescission.d. Revocation.
Which of the following actions will result in the discharge of a party to a contract?Prevention of performance Accord and satisfactiona. Yes Yesb. Yes Noc. No Yesd. No No
Which of the following actions if taken by one party to a contract generally will discharge the performance required of the other party to the contract?a. Material breach of the contract.b. Delay in performance.c. Tender.d. Assignment of rights.
Which of the following types of conditions affecting performance may validly be present in contracts?H. Discharge of Contracts Conditions precedent Conditions subsequent Current conditions a. Yes Yes. Yes b. Yes Yes. No c. Yes. No Yes d. No Yes Yes
Parc hired Glaze to remodel and furnish an office suite. Glaze submitted plans that Parc approved. After completing all the necessary construction and painting, Glaze purchased minor accessories that Parc rejected because they did not conform to the plans. Parc refused to allow Glaze to complete
Ferco, Inc. claims to be a creditor beneficiary of a contract between Bell and Allied Industries, Inc. Allied is indebted to Ferco.The contract between Bell and Allied provides that Bell is to purchase certain goods from Allied and pay the purchase price directly to Ferco until Allied’s
Mackay paid Manus $1,000 to deliver a painting to Mackay’s friend Mann. When they met and signed the contract, Mackay said she wanted the painting delivered as soon as possible because it was a gift for Mann’s birthday. Several months have passed without the delivery. Mann can maintain lawsuits
Baxter, Inc. and Globe entered into a contract. After receiving valuable consideration from Clay, Baxter assigned its rights under the contract to Clay. In which of the following circumstances would Baxter not be liable to Clay?a. Clay released Globe.b. Globe paid Baxter.c. Baxter released Globe.d.
Your client, Bugle, owns a parking lot near downtown San Francisco. One day Bugle is excited because he learns that Fargo, who owns a parking lot next door, has made a contract with ABC Company to sell her land. ABC Company can then construct a building that will contain several nice professional
Which of the following would describe Ness’ status under the contract and insurance policy?Contract Insurance policya. Donee beneficiary Donee beneficiaryb. Donee beneficiary Creditor beneficiaryc. Creditor beneficiary Donee beneficiaryd. Creditor beneficiary Creditor beneficiary
Barton’s contract rights were assigned to Vim, and Egan was notified of the assignment. Despite the assignment, Egan continued making payments to Barton. Egan died before completing payment and Vim sued Barton for the insurance proceeds and the other payments on the purchase price received by
One of the criteria for a valid assignment of a sales contract to a third party is that the assignment musta. Be supported by adequate consideration from the assignee.b. Be in writing and signed by the assignor.c. Not materially increase the other party’s risk or duty.d. Not be revocable by the
Generally, which of the following contract rights are assignable?Option contract rights Malpractice insurance policy rightsa. Yes Yesb. Yes Noc. No Yesd. No No
Joan Silver had viewed some land that she wished to purchase. It was offered for sale by Daniel Tweney over the Internet for$200,000. Silver believes this to be a good deal for her and thus wishes to purchase it. Silver and Tweney have communicated online and wish to make a contract for the land
In negotiations with Andrews for the lease of Kemp’s warehouse, Kemp orally agreed to pay one-half of the cost of the utilities. The written lease, later prepared by Kemp’s attorney, provided that Andrews pay all of the utilities. Andrews failed to carefully read the lease and signed it. When
Where the parties have entered into a written contract intended as the final expression of their agreement, which of the following agreements will be admitted into evidence because they are not prohibited by the parol evidence rule?Subsequent oral agreements Prior written agreementsa. Yes Yesb. Yes
Rogers and Lennon entered into a written computer consulting agreement that required Lennon to provide certain weekly reports to Rogers. The agreement also stated that Lennon would provide the computer equipment necessary to perform the services, and that Rogers’ computer would not be used. As
Landry Company contracted orally with Newell to pay her$50,000 for the completion of an ethics audit of Landry Company.The report is to span a period of time of at least ten months and is due in fourteen months from now. Newell has agreed orally to perform the ethics audit and says that she will
Carson agreed orally to repair Ives’ rare book for $450. Before the work was started, Ives asked Carson to perform additional repairs to the book and agreed to increase the contract price to $650. After Carson completed the work, Ives refused to pay and Carson sued.Ives’ defense was based on
Which of the following statements is true with regard to the Statute of Frauds?a. All contracts involving consideration of more than $500 must be in writing.b. The written contract must be signed by all parties.c. The Statute of Frauds applies to contracts that can be fully performed within one
Cherry contracted orally to purchase Picks Company for$1,500,000 if it is profitable for one full year after the making of the oral contract. An auditor would be brought in at the end of the year to verify this. Even though the company turns out to be profitable during the upcoming year, Cherry
Nolan agreed orally with Train to sell Train a house for$100,000. Train sent Nolan a signed agreement and a downpayment of $10,000. Nolan did not sign the agreement, but allowed Train to move into the house. Before closing, Nolan refused to go through with the sale. Train sued Nolan to compel
On June 1, 2010, Decker orally guaranteed the payment of a$5,000 note Decker’s cousin owed Baker. Decker’s agreement with Baker provided that Decker’s guaranty would terminate in eighteen months. On June 3, 2010, Baker wrote Decker confirming Decker’s guaranty. Decker did not object to the
To prevail in a common law action for fraud in the inducement, a plaintiff must prove that thea. Defendant was an expert with regard to the misrepresentations.b. Defendant made the misrepresentations with knowledge of their falsity and with an intention to deceive.c. Misrepresentations were in
Maco, Inc. and Kent contracted for Kent to provide Maco certain consulting services at an hourly rate of $20. Kent’s normal hourly rate was $90 per hour, the fair market value of the services. Kent agreed to the $20 rate because Kent was having serious financial problems. At the time the
A building subcontractor submitted a bid for construction of a portion of a high-rise office building. The bid contained material computational errors. The general contractor accepted the bid with knowledge of the errors. Which of the following statements best represents the subcontractor’s
Petersen went to Jackson’s home to buy a used car advertised in the newspaper. Jackson told Petersen that “it is a great car” and that“the engine had been overhauled a year ago.” Shortly after he bought the car, Petersen began experiencing problems with the engine.When Jackson refused to
Long purchased a life insurance policy with Tempo Life Insurance Co. The policy named Long’s daughter as beneficiary. Six months after the policy was issued, Long died of a heart attack. Long had failed to disclose on the insurance application a known preexisting heart condition that caused the
If a person is induced to enter into a contract by another person because of the close relationship between the parties, the contract may be voidable under which of the following defenses?a. Fraud in the inducement.b. Unconscionability.c. Undue influence.d. Duress.
If a buyer accepts an offer containing an immaterial unilateral mistake, the resulting contract will bea. Void as a matter of law.b. Void at the election of the buyer.c. Valid as to both parties.d. Voidable at the election of the seller.
Which of the following, if intentionally misstated by a seller to a buyer, would be considered a fraudulent inducement to make a contract?a. Nonexpert opinion.b. Appraised value.c. Prediction.d. Immaterial fact.
Which of the following would be unenforceable because the subject matter is illegal?a. A contingent fee charged by an attorney to represent a plaintiff in a negligence action.b. An arbitration clause in a supply contract.c. A restrictive covenant in an employment contract prohibiting a former
Under a personal services contract, which of the following circumstances will cause the discharge of a party’s duties?a. Death of the party who is to receive the services.b. Cost of performing the services has doubled.c. Bankruptcy of the party who is to receive the services.d. Illegality of the
All of the following are effective methods of ratifying a contract entered into by a minor excepta. Expressly ratifying the contract after reaching the age of majority.b. Failing to disaffirm the contract within a reasonable time after reaching the age of majority.c. Ratifying the contract before
Green was adjudicated incompetent by a court having proper jurisdiction. Which of the following statements is correct regarding contracts subsequently entered into by Green?a. All contracts are voidable.b. All contracts are valid.c. All contracts are void.d. All contracts are enforceable.
Rail, who was sixteen years old, purchased an $800 computer from Elco Electronics. Rail and Elco are located in a state where the age of majority is eighteen. On several occasions Rail returned the computer to Elco for repairs. Rail was very unhappy with the computer. Two days after reaching the
Which of the following will be legally binding despite lack of consideration?a. An employer’s promise to make a cash payment to a deceased employee’s family in recognition of the employee’s many years of service.b. A promise to donate money to a charity on which the charity relied in
In which of the following situations does the first promise serve as valid consideration for the second promise?a. A police officer’s promise to catch a thief for a victim’s promise to pay a reward.b. A builder’s promise to complete a contract for a purchaser’s promise to extend the time
Dunne and Cook signed a contract requiring Cook to rebind 500 of Dunne’s books at $0.80 per book. Later, Dunne requested, in good faith, that the price be reduced to $.70 per book. Cook agreed orally to reduce the price to $.70. Under the circumstances, the oral agreement isa. Enforceable, but
Grove is seeking to avoid performing a promise to pay Brook$1,500. Grove is relying on lack of consideration on Brook’s part.Grove will prevail if he can establish thata. Prior to Grove’s promise, Brook had already performed the requested act.b. Brooks’ only claim of consideration was the
Wick Company made a contract in writing to hire Zake for five years for $150,000 per year. After two years, Zake asked Wick for a raise of $20,000 per year. Wick at first refused but agreed after Zake put on some pressure. After the fifth year, Zake left and Wick sued to get back the extra $20,000
On September 27, Summers sent Fox a letter offering to sell Fox a vacation home for $150,000. On October 2, Fox replied by mail agreeing to buy the home for $145,000. Summers did not reply to Fox. Do Fox and Summers have a binding contract?a. No, because Fox failed to sign and return Summers’
Kay, an art collector, promised Hammer, an art student, that if Hammer could obtain certain rare artifacts within two weeks, Kay would pay for Hammer’s postgraduate education. At considerable effort and expense, Hammer obtained the specified artifacts within the two-week period. When Hammer
On February 12, Harris sent Fresno a written offer to purchase Fresno’s land. The offer included the following provision:“Acceptance of this offer must be by registered or certified mail, received by Harris no later than February 18 by 5:00 p.m. CST.” On February 18, Fresno sent Harris a
On April 1, Fine Corp. faxed Moss an offer to purchase Moss’warehouse for $500,000. The offer stated that it would remain open only until April 4 and that acceptance must be received to be effective. Moss sent an acceptance on April 4 by overnight mail and Fine received it on April 5.Which of the
Opal offered, in writing, to sell Larkin a parcel of land for$300,000. If Opal dies, the offer willa. Terminate prior to Larkin’s acceptance only if Larkin received notice of Opal’s death.b. Remain open for a reasonable period of time after Opal’s death.c. Automatically terminate despite
Calistoga offers to sell her home to Drake for $300,000. Drake asks her if she would accept $250,000. Which of the following is true?a. Drake’s response is mere inquiry; therefore, the $300,000 offer by Calistoga is still in force.b. Drake’s response is a counteroffer effectively terminating
On June 15, Peters orally offered to sell a used lawn mower to Mason for $125. Peters specified that Mason had until June 20 to accept the offer. On June 16, Peters received an offer to purchase the lawn mower for $150 from Bronson, Mason’s neighbor. Peters accepted Bronson’s offer. On June 17,
On September 10, Harris, Inc., a new car dealer, placed a newspaper advertisement stating that Harris would sell ten cars at its showroom for a special discount only on September 12, 13, and 14.On September 12, King called Harris and expressed an interest in buying one of the advertised cars. King
Carson Corp., a retail chain, asked Alto Construction to fix a broken window at one of Carson’s stores. Alto offered to make the repairs within three days at a price to be agreed on after the work was completed. A contract based on Alto’s offer would fail because of indefiniteness as to thea.
When a corporation elects to be a Subchapter S corporation, which of the following statements is (are) true regarding the federal tax treatment of the corporation’s income or loss?I. The corporation’s income is taxed at the corporate level and not the shareholders’ level.II. The shareholders
When a consolidation takes place under the law of corporations, which of the following is true?a. Two or more corporations are joined into one new corporation.b. All assets are acquired by the new corporation.c. The new corporation is liable for the debts of each of the old corporations.d. All of
A corporate stockholder is entitled to which of the following rights?a. Elect officers.b. Receive annual dividends.c. Approve dissolution.d. Prevent corporate borrowing.
Which of the following must take place for a corporation to be voluntarily dissolved?a. Passage by the board of directors of a resolution to dissolve.b. Approval by the officers of a resolution to dissolve.c. Amendment of the certificate of incorporation.d. Unanimous vote of the stockholders.
Which of the following statements is a general requirement for the merger of two corporations?a. The merger plan must be approved unanimously by the stockholders of both corporations.b. The merger plan must be approved unanimously by the boards of both corporations.c. The absorbed corporation must
Under the Revised Model Business Corporation Act, a merger of two public corporations usually requires all of the following excepta. A formal plan of merger.b. An affirmative vote by the holders of a majority of each corporation’s voting shares.c. Receipt of voting stock by all stockholders of
A parent corporation owned more than 90% of each class of the outstanding stock issued by a subsidiary corporation and decided to merge that subsidiary into itself. Under the Revised Model Business Corporation Act, which of the following actions must be taken?a. The subsidiary corporation’s board
Which of the following is correct about the law of corporations?a. Each shareholder owes a fiduciary duty to his or her corporation.b. Majority shareholders owe a fiduciary duty to their corporation.c. Majority shareholders do not owe a fiduciary duty to minority shareholders.d. All of the above
The corporate veil is most likely to be pierced and the shareholders held personally liable ifa. The corporation has elected S corporation status under the Internal Revenue Code.b. The shareholders have commingled their personal funds with those of the corporation.c. An ultra vires act has been
The limited liability of a stockholder in a closely held corporation may be challenged successfully if the stockholdera. Undercapitalized the corporation when it was formed.b. Formed the corporation solely to have limited personal liability.c. Sold property to the corporation.d. Was a corporate
Which of the following is correct pertaining to the rights of stockholders in a corporation?a. Stockholders have no right to manage their corporation unless they are also directors or officers.b. Stockholders have a right to receive dividends.c. Stockholders have no right to inspect the books and
To which of the following rights is a stockholder of a public corporation entitled?a. The right to have annual dividends declared and paid.b. The right to vote for the election of officers.c. The right to a reasonable inspection of corporate records.d. The right to have the corporation issue a new
Under the Revised Model Business Corporation Act, which of the following actions by a corporation would entitle a stockholder to dissent from the action and obtain payment of the fair value of his/her shares?I. An amendment to the articles of incorporation that materially and adversely affects
Under the Revised Model Business Corporation Act, when a corporation’s Articles of Incorporation grant stockholders preemptive rights, which of the following rights is (are) included in that grant?The right to purchase a proportionate share of a newly issued stock The right to a proportionate
Price owns 2,000 shares of Universal Corp.’s $10 cumulative preferred stock. During its first year of operations, cash dividends of $5 per share were declared on the preferred stock but were never paid. In the second year, dividends on the preferred stock were neither declared nor paid. If
Acorn Corp. wants to acquire the entire business of Trend Corp.Which of the following methods of business combination will best satisfy Acorn’s objectives without requiring the approval of the shareholders of either corporation?a. A merger of Trend into Acorn, whereby Trend shareholders receive
McGarry is an officer of Norton Corporation. McGarry has committed a tort while acting for Norton Corporation within the scope of her authority. Which of the following is(are) true?a. Only McGarry is liable for the tort committed.b. Only Norton Corporation is liable for the tort committed.c. Both
Which of the following is(are) true concerning corporations?a. Directors owe a fiduciary duty to the corporation.b. Officers owe a fiduciary duty to the corporation.c. Both of the above are true.d. None of the above are true.
Which of the following statements is (are) true under the law affecting corporations?I. A corporation may indemnify directors against lawsuits based on their good-faith actions for the corporation.II. A corporation may indemnify officers against lawsuits based on their good-faith actions for the
Which of the following is not a power of the board of directors?a. May select the officers of the corporation.b. May declare the dividends to be paid to the shareholders.c. May amend the Articles of Incorporation.d. All of the above are powers of the board of directors.
Hogan is a director of a large corporation. Hogan owns a piece of land that the corporation wishes to purchase and Hogan desires to sell this land at the fair market price. If he sells the land to the corporation, has he breached any fiduciary duty?a. No, a director does not owe a fiduciary duty to
The following are two statements concerning a fiduciary duty in a corporation.I. Officers and directors of a corporation owe a fiduciary duty to that corporation.II. Majority shareholders of a corporation can owe a fiduciary duty to the minority shareholders.Which of the statements is (are)
The officers of West Corporation wish to buy some used equipment for West Corporation. The used equipment is actually owned by Parks, a director of West Corporation. For this transaction to not be a conflict of interest for Parks, which of the following is (are) required to be true?I. Parks sells
Under the Revised Model Business Corporation Act, which of the following statements is correct regarding corporate officers of a public corporation?a. An officer may not simultaneously serve as a director.b. A corporation may be authorized to indemnify its officers for liability incurred in a suit
Norwood was a promoter of Parker Corporation. On March 15, Norwood purchased some real estate from Burrows in Parker’s name and signed the contract “Norwood, as agent of Parker Corporation.”Parker Corporation, however, did not legally come into existence until June 10.Norwood never informed
Which of the following statements is (are) true?I. Corporations can be found liable for crimes.II. Directors can face prison sentences for crimes committed by their corporations.III. Employees can be found guilty of crimes they commit while working for their corporation.a. I only.b. I and II
Murphy is an employee of Landtry Corporation. Which of the following acts would make the corporation liable for Murphy’s actions?I. Murphy deceived a customer to convince him to purchase one of Landtry’s products.II. Murphy hit a customer with his fist, breaking his jaw. The management had
Corporations generally have which of the following powers without shareholder approval?I. Power to acquire their own shares.II. Power to make charitable contributions.III. Power to make loans to directors.a. I only.b. I and II only.c. II and III only.d. I, II, and III.
Stock of a corporation is called watered stock when the cash or property exchanged to acquire the stock isa. Less than the market value of the stock.b. More than the market value of the stock.c. Less than the par value or stated value of the stock.d. More than the par value or stated value of the
Mesa Corporation is planning on issuing some debt securities.Which of the following statements is true?a. The holders of debt securities are owners of the corporation.b. A bond is an instrument for long-term secured debt.c. A debenture is an instrument for long-term secured debt.d. None of the
By law, a corporationa. Must issue both common stock and preferred stock.b. May issue more than one class of common stock as well as more than one class of preferred stock.c. Must issue dividends if it has earned a profit.d. Must issue at least some cumulative preferred stock.
Treasury stock of a corporation is stock thata. Has been issued by that corporation but is not outstanding.b. Was purchased from another corporation and is retained for a specified purpose.c. Has been cancelled.d. None of the above is true.
Pearl Corporation has some treasury stock on hand. Which of the following is (are) true?a. Pearl may not vote these shares of treasury stock.b. Pearl’s treasury stock does not receive any dividends.c. Both of the above statements are true.d. None of the above statements are true.
Brawn subscribed to 1,000 shares of $1 par value stock of Caldo Corporation at the agreed amount of $20 per share. She paid $5,000 on April 1 and then paid $9,000 on August 1.Caldo Corporation filed for bankruptcy on December 1 and the creditors of the corporation sought to hold Brawn liable under
Which of the following constitute(s) valid consideration or value to purchase shares of stock?a. Services performed.b. Intangible property.c. Services contracted to be performed in the future.d. All of the above.
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 Debenture bonds bonds Warrants a. Yes Yes Yes b. Yes No Yes c. Yes Yes No d. 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

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