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Question 1

Which of the following is(are) a purchase money security interest(s) in consumer goods?

I. A department store purchases light fixtures on credit from Rampart Corporation who has a security interest in these light fixtures. The department store plans on selling this inventory primarily to consumers

II. A person purchases a dining room table for consumer use from a retail outlet on credit. The outlet has the consumer sign a security agreement and the set is delivered

Answer 1

II Only is correct.

This is a purchase money security interest in consumer goods because in the security agreement the item purchased would also be the collateral for the credit given and the table is for consumer use

Question 2

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

a) Garnish debtor’s wages
b) Collect alimony from debtor

(Answer with Yes/No)

Answer 2

Garnish debtors wages - Yes
Collect alimony from debtor - No

The automatic stay, which stops the collection of most debts and the enforcement of most legal proceedings against the debtor’s estate.

An automatic stay is valid against the garnishment of the debtor’s wages.

The automatic stay is not effective to prevent the collection of alimony, child support, or other matters related to domestic disputes

Question 3

What are characteristics of liquidated damages in a contract?

For example, in June, Mullin contracted with her town to renovate the town square. The parties placed a clause in the contract for each day the project extended beyond 90 days, Mullin would forfeit $100 of the contract price. Mullin took a 3 week vacation in August. The project was completed in October, 120 days after it was begun. What type of damages may the town recover from Mullin?

Answer 3

Liquidated damages is what the town can recover.

Liquidated damages are those agreed to in a contract to set the amount of damages in the event of breach of contract

Question 4

For a covenant not to compete to be enforceable, what must happen?

Answer 4

The agreement must protect the Company’s legitimate interests. In deciding the issue, the court will balance the individuals ability to obtain other employment against the Company’s right to protect its business

Question 5

Link Corp. is subject to the reporting provisions of the Securities Exchange Act of 1934. Which of the following situations would require Link to be subject to the reporting provisions of the 1934 Act?

a) Shares listed on a national securities exhcange
b) More than one class of stock

Answer with Yes/No

Answer 5

a) Yes
b) No

If the shares are listed on a national securities exchange, they are subject to the reporting provisions of the 1934 Act.

There is NO provision concerning a corporation owning more than 1 class of stock that by itself requires that it be subject to the reporting provisions of the 1934 Act

Question 6

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?

a) The right to purchase a proportionate share of a newly issued stock
b) The right to a proportionate share of corporate assets remaining on corporate dissolution

Answer 6

a) Yes
b) No

a) This act provides this right only if it is set forth in the Articles of Incorporation
b) The right to a proportionate share of assets upon dissolution is a right that all shareholders have and is not limited to preemptive shareholders

Question 7

Which of the following is a capital asset?

a) Delivery truck
b) Personal-use recreation equipment
c) Land used as a parking lot for customers
d) Treasure stock, at cost

Answer 7

Personal use recreation equipment is a capital asset.

Capital assets includes personal-use property but excludes property used in a trade or business

Question 8

What types of rights or powers does a trustee in bankruptcy have?

Answer 8

1) Power to prevail against a creditor with an unperfected secuity interest
2) Power to require persons holding the debtor’s property at the time the bankruptcy petition is filed to deliver the property to the trustee
3) Right to use any grounds available to the debtor to obtain the return of the debtor’s property
4) Trustee may set aside statutory liens that became effective when the bankruptcy petition is filed but may NOT set aside those that were effective BEFORE the bankruptcy petition was filed

Question 9

What must happen for a corporation to voluntarily dissolve?

Answer 9

A corp voluntarily dissolves when its board of directors passes a resolution to dissolve and liquidate

Question 10

In the case of a merchant seller (i.e. furniture retailer), when does risk of loss pass to the buyer?

Answer 10

Risk of loss passes upon physical receipt of the goods

Question 11

What items are considered part of the debtor’s bankruptcy estate?

Answer 11

Includes:
1) Property owned by the debtor when the bankruptcy petition is filed
2) Property owed to the debtor as of the filing as well as income from property owned by the debtor
3) Property received within 180 days after petition is filed if it is received by INHERITANCE, BEQUEST, or DEVISE, from LIFE INSURANCE, DIVORCE DECREE, or PROPERTY SETTLEMENT with one’s spouse

Question 12

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?

1) Valid home mortgage lien
2) Valid IRS tax lien

Answer 12

1) No
2) No

Although a homestead exemption can exempt a debtor’s equity in certain property from postjudgment collection by a creditor, the exemption applies to GENERAL creditors and the bankruptcy estate, NOT SECURED creditors or lien holders

Question 13

In deciding a controversy involving the question of who has the risk of loss, the court will look primarily to:

Answer 13

The intent of the parties manifested in the contract

The UCC rules concerning risk of loss only apply if the parties have not allocated risk of loss in their contract

Question 14

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 e a secured creditor of the limited partnership
d) A limited partnership can be formed with limited liability for all partners

Answer 14

C = correct. A general partner has a voice in management and has unlimited personal liability. Anyone, including a secured creditor of the limited partnership, may be a general partner if he takes on these responsibilities

Question 15

Florie is a compensated surety for a loan by Brenner to McDonald. In which of the following cases would Florie be released entirely from liability as a surety?

a) Brenner reduces the interest rate on the loan
b) When the loan is due, Brenner refuses McDonald’s tender of payment and then attempts to collect from Florie
c) Florie agrees to a material change in the debtor’s contract that substantially increases Florie’s risk
d) Brenner, without Florie’s consent, agrees to a modification in McDonald’s loan that increases Florie’s risk in a nonmaterial way

Answer 15

b= correct.

When the creditor refuses to accept the principal debtor’s tender of payment, the surety is released. However, the debtor remains liable as the accrual of additional interest stops

Question 16

Elrod is attempting to introduce oral evidence in court to explain or modify a written contract he made with Weaver. Weaver has pleaded the parol evidence rule. In which of the following circumstances will Elrod not be able to introduce the oral evidence?

a) The modification asserted was made several days after the written contract had been executed
b) The contract indicated that it was intended as the “entire contract” between the parties, and the point is covered in detail
c) There was a mutual mistake of fact by the parties regarding the subject matter of the contract
d) The contract contains an obvious ambiguity on the point at issue

Answer 16

b = correct

This is correct b/c the parole evidence rule states that once an agreement is reduced to a writing intended as the complete contract, the parties may not introduce oral or written evidence in an attempt to alter or contradict the terms of the agreement. Thus, Elrod would NOT be able to introduce the evidence if the contract indicates that it was intended as the entire contract, and the disputed point is covered in detail in the agreement.

Question 17

Six months ago Harold Walsh borrowed $4k from First Financial Credit Corporation. At that time, First Financial requested and received collateral valued at $4,500. Other creditors filed an involuntary petition in bankruptcy against Walsh one week ago. First Financial has since sold the collateral it held for its FMV. Under these circumstances:

a) First Financial has a voidable preference
b) If the collateral sold did not equal the amount due on the loan, First Financial has a priority over general creditors
c) The taking of $4,500 collateral to a secure $k loan is a fraudulent conveyance
d) If the collateral was of insufficient value to satisfy the debt, First Financial may file a claim in bankruptcy for any deficiency on the loan to Walsh

Answer 17

D = correct b/c First Financial may file a claim in bankruptcy when the loan is not fully satisfied by the proceeds obtained from disposition of the collateral. First financial will have the same priority as a general unsecured creditor concerning the unpaid portion of the debt

Question 18

What are the requirements for a security interest to attach?

Answer 18

1) Secured creditor gives value
2) Debtor has rights in the collateral
3) Security agreement exists

Question 19

One of the elements necessary to establish that a preferential transfer has been made under the Bankruptcy Code by the debtor to a creditor is that the

Answer 19

Debtor was insolvent at the time of the transfer

Question 20

Which form(s) of a business organization can have characteristics common to both the corporation and the general partnership?

I. Limited liability company
II. Subchapter S Corporation

Answer 20

I. Yes
II. Yes

Question 21

To which of the following parties may a CPA partnership provide its working papers, without being lawfully subpoenaed or without the client’s consent?

a) The IRS
b) The FASB
c) Any surviving partner(s) on the death of a partner
d) A CPA before purchasing a partnership interest in the firm

Answer 21

C = correct. Any of the partners of a CPA partnership can have access to the partnership’s working papers

Question 22

Prime Corporation’s building was destroyed by a tornado. The FMV of the building at the time of the tornado was $400k and its adjusted basis was $350k. The insurance proceeds totaled $500k, as follows:

$400k for the building
$100k for lost profits during rebuilding

Prime does not defer any gain under the involuntary conversion provisions of Code Sec. 1033.

What amount of the insurance proceeds is taxable to Prime?

Answer 22

$150k is taxable. This consists of the $50k excess of the $400k of insurance proceeds over the building’s basis of $350k, plus the $100k received for lost profits during rebuilding, which totals $150k

Question 23

When a limited partner participates in management and a third party believes they’re a general partner, what is the potential liability for this partner?

Answer 23

Since a limited partner acted like a general partner, and a 3rd party thought he was a general partner, the limited partner has the liability of a general partner to the 3rd party

Question 24

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 transferrable
c) Voting members (owners) but not all members can help choose the managers of the company
d) No formalities are required for its formation

Answer 24

b = correct

In the typical LLC, unlike the common corporation, the interests of the members are not freely transferrable. The other members have to agree to admit new partners

Question 25

Which of the following statements concerning agency law is not true?

a) The agent owes a fiduciary duty to the principal
b) The agent’s duties are by necessity based on contract law
c) The principal does not owe his/her agent fiduciary duties
d) The agent does not owe 3rd parties with which the principal asks the agent to deal fiduciary duties

Answer 25

b = correct for this MCQ purpose. Although there is typically a contract between the principal and agent in an agency relationship, this is not required.

Question 26

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) Hiring an employee

Answer 26

b = correct. In a general partnership, unanimous consent is required of all the partners to admit a new partner

Question 27

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:

a) A modification made several days after the contract was executed
b) A change in the meaning of an unambiguous provision in the contract
c) Fraud in the inducement
d) An obvious error in drafting

Answer 27

b = correct.

The parol evidence PROHIBITS prior or contemporaneous oral statements for the purpose of modifying or changing a written agreement intended by the parties to be the final and complete expression of their contract.

It would bar the admission of evidence which relates to a change in an unambiguous provision in the contract but would not bar the admission of evidence which clarifies an ambiguous provision

Question 28

What are the rules of limitation related to large fees charged by an attorney for a bankrupt client in a bankruptcy proceeding?

Answer 28

In bankruptcy proceeding, it is necessary to file a proof of claims against the debtor’s estate.

The filing must be timely (within 6 months) or the claim will be barred.

A claim that is filed on time is given prima facie validity and is approved unless there is an objection by 1 of the creditors. The filing would include a stmt of compensation paid/agreed

Question 29

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?

Answer 29

Admission of a new limited ptr requires the approval of ALL general partners AND ALL limited partners

Question 30

A common carrier bailee generally would avoid liability for loss of goods entrusted to its care if the goods are:

a) Stolen by an unknown person
b) Negligently destroyed by an employee
c) Destroyed by the derailment of the train carrying them due to railroad employee negligence
d) Improperly packed by the party shipping them

Answer 30

D = correct.

The standard of care required for a common carrier bailee is based on strict liability rather than reasonable care.

Common carrier bailees, however, are NOT Liable for acts of God, acts of the shipper, or acts of a public enemy.

Question 31

When computing a corporation’s income tax expense for estimated income tax purposes, which of the following should be taken into account?

i) Corporate tax credits
ii) Accumulated earnings tax

Answer 31

i) Yes
ii) Yes

A corp. must make estimated tax payments unless its tax liability can reasonably be expected to be less than $500. A corp’s estimated tax its expected tax liability (including the accumulated earnings tax) less its allowable credits

Question 32

When will challenges to bankruptcy’s fail?

Answer 32

A challenge will fail if:
1) If debts are not paid as they become due
2) If a receiver was appointed to take control of the debtor’s property within 120 days prior to the filing of the involuntary petition

Question 33

When does risk of loss pass to goods when they are held in a warehouse for delivery without being moved?

Answer 33

Risk of loss will pass at the time the negotiable document of title is properly negotiated to the buyer (i.e. negotiable warehouse receipt). If the document of the title is nonnegotiable, then the risk of loss passes a reasonable time after the buyer receives the document.

Where there is no document of title representing the goods, risk of loss will pass once the warehouseman acknowledges the buyer’s right to the goods

Question 34

Article 9 of the UCC which govern 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) Both the mentioned security interests and after-acquired commercial tort claims are covered
d) Neither the mentioned security interests and after-acquired commercial tort claims are covered

Answer 34

a = correct. Security interests in tort claims are covered under the Revised UCC Secured transactions Article; this is NOT true of after-acquired commercial tort claims

Question 35

Under the Revised Uniform Limited Partnership Act, if the partners fail to agree upon a profit-sharing plan, how are profits split?

Answer 35

Profits are split in proportion of their capital contributions

Question 36

An accuracy related penalty equal to 20% of the underpayment of tax may be imposed if the underpayment of tax is attributable to what 3 things?

Answer 36

1) Negligence or disregard for the tax rules and regulations
2) Any substantial understatement of income tax
3) Any substantial valuation overstatement
4) Any substantial overstatement of pension liabilities
5) Any substantial gift or estate tax valuation understatement

Question 37

A requirement of a private action to recover damages for violation of the registration requirements of the Securities Act of 1933 is that

Answer 37

The plaintiff has acquired the securities in question

Question 38

For a sale on approval basis, when does title and risk of loss pass from the seller to the buyer?

For example, there is a 30 day return period in the purchse

Answer 38

Title and risk of loss remain with the seller until the sale is completed. If no indication of acceptance of the goods has been made, the sale is incomplete.

Question 39

To create a limited partnership, names of which groups of partners need to be listed in the certificate of limited partnership that is filed with the Secretary of State?

Answer 39

Names of all the general partners are required to be on that list.

NONE of the names of limited partners need to be on that list

Question 40

What is the liability type for common carriers?

Answer 40

Common law carriers’ liability is based on strict liability.

That said, the common carrier is liable for losses to property whether or not the common carrier was negligent. Common law exceptions to strict liability include natural disasters which are responsible for damages

Question 41

Under the Bankruptcy Abuse Prevention and Consumer Protection Act, which of the following types of debts is (are) non-dischargeable in bankruptcy?

I) Death caused while intoxicated when operating an aircraft
II) Injury caused while intoxicated when driving any motor vehicle
III) Debts for Homeowner Association fees

Answer 41

I, II, III are non-dischargeable in bankruptcy. The Bankruptcy Abuse Prevention and Consumer Prevention Act causes bankruptcy law to be much less friendly to debtors over previous law

Question 42

How are unused net capital losses that are carried back or carried forward to another tax year treated?

Answer 42

They are treated as a short-term capital loss whether or not it was short term when sustained

A corporation’s unused net capital loss carried back 3 years and forward up to 5 years to offset capital gains in the carryback and carryforward years.

AN UNUSED NET CAPITAL LOSS IS ALWAYS CARRIED BACK AND FORWARD AS A SHORT TERM CAPITAL LOSS

Question 43

Under the Secured Transactions Article of the UCC, for which of the following types of collateral must a financing statement be filed in order to perfect a purchase money security interest?

a) Stock certificates
b) Promissory notes
c) Personal jewelry
d) Inventory

Answer 43

d = correct. A financing statement must be filed to perfect an interest in inventory. Perfection by possession is not possible b/c the debtor has possession of the collateral for resale. Automatic perfection can only occur with consumer goods

Stock certificates - perfected through control/possession
Promissory notes - perfected through possession
Personal jewelry - perfected through possession

Question 44

The intent, or scienter, element necessary to establish a cause of action for fraud will be met if the plaintiff can show that the

a) Defendant made a misrepresentation with a reckless disregard for the truth
b) Defendant made a false representation of fact
c) Plaintiff actually relied on the defendant’s misrepresentation
d) Plaintiff justifiably relied on the defendant’s misrepresentation

Answer 44

a = correct. Scienter must be evidenced by either intent to deceive or reckless disregard for the truth

Question 45

Which form(s) of a business organization can have characteristics common to both the corporation and the general partnership?

i) Limited liability company
ii) S-Corporation

Answer 45

i) Yes
ii) Yes

Question 46

Under certain conditions, perfection of a security interest is accomplished by completing attachment with no further steps required. Which of the following will qualify?

i) Purchase money security interest in tables that are purchased to be used in the buyer’s restaurant
ii) Purchase money security interest in tables that are purchased by a retailer to sell in the buyer’s furniture store primarily to customers

Answer 46

Neither i nor ii.

Automatic perfection applies to purchase money security interests in consumer goods

Question 47

Which of the following corporate shareholder rights is enforcable by means of a derivative suit?

a) Compelling payment of properly declared dividends
b) Enforcing access to corporate records
c) Recovering damages to the corporation from a third party
d) Protecting preemptive rights

Answer 47

c = correct. Recovering damages to the corporation from a third party. This is a derivative suit because the shareholder is suing on behalf of the corporation

Other options - the SH would sue on their own behalf

Question 48

Which of the following is considered a corporate equity security?

a) A shareholder’s preemptive right
b) A shareholder’s appraisal right
c) A callable bond
d) A share of callable preferred stock

Answer 48

d = correct. Stock, whether preferred or common, whether callable or not, is still an ownership interest

Question 49

In which year should money received in consideration for a covenant not-to-compete be included in income?

Answer 49

The full amount of money received will be consideration for such an agreement and must be reported as ORDINARY income in the year received.

It is NOT spread throughout the number of years of the not to compete covenant

Question 50

Which of the following is not a possible result of an AICPA investigation of a member for an ethics violation?

a) Revocation of rights to prepare tax returns
b) Admonishment
c) Corrective action
d) Expulsion

Answer 50

a = correct. The AICPA cannot revoke the right to prepare a tax return hence this is the correct answer.

The other options are possible results of an AICPA ethics investigation

Question 51

On July 1, Y8, Kim sold an antique for $12k that she had bought for her personal use in Y6 at a cost of $15k. In her Y8 return, how should Kim treat the sale of the antique as a transaction?

Answer 51

It would be treated as a nondeductible loss.

Since the antiques was held for personal use, the sale of the antique at a loss is not deductible

Question 52

Under the Revised Uniform Partnership Act, which of the following have the right to inspect partnership books and records?

a) Employees
b) Former partners
c) Inactive partners
d) Transferees of partners’ interests

Answer 52

Inactive partners = correct.

Question 53

In which of the following statements concerning a CPA firm’s action is scienter or its equivalent absent?

a) Reckless disregard for the truth
b) Actual knowledge of fraud
c) Intent to gain monetarily by concealing fraud
d) Performance of substandard auditing procedures

Answer 53

d = correct. This is correct b/c the intent to deceive is not present in the performance of substandard auditing procedures; however, such performance would constitute negligence which does not require scienter

Question 54

What can the accountant be held liable for in an S-1 Review?

Answer 54

The accountant can be held liable for either fraud or negligence or both in the S-1 Review whenever the facts support them. This is true even though the S-1 Review is not a full audit

Question 55

In general, the 3rd 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?

1) Fraud
2) Constructive fraud
3) Negligence

Answer 55

Fraud - No
Constructive fraud - No
Negligence - Yes

The CPA will be liable for negligence to a 3rd party only if it can be established that the party was intended to be the primary beneficiary

Since a CPA is generally liable to all 3rd parties, including foreseen and foreseeable third parties, for fraud and constructive fraud, the 3rd party (primary) beneficiary rule is relevant only in those cases based on negligence

Question 56

If a stockholder sues a CPA for common-law fraud based upon false statements contained in the financial statements audited by the CPA, which of the following is the CPA’s best defense?

a) The stockholder lacks privity to use
b) The CPA disclaimed liability to all 3rd parties in the engagement letter
c) The contributory negligence of the client
d) The false statements were material

Answer 56

d = correct.

Question 57

What is the max Section 179 deduction for 2022? 2023?

Answer 57

2023 - $1.16 mil and gets reduced if property placed in service exceeds $2.89 mil

2022 - $1.080 mil and get reduced id property placed in service exceeds $2.7 mil

Question 58

The following are 2 statements concering 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 statement(s) is (are) correct

Answer 58

Both i and ii are correct

Question 59

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) Baxter breached the contract

Answer 59

a = correct.

In an assignment, the assignee (clay) acquire’s the assignor’s (Baxter) rights against the obligor (Globe) and has the right to performance. Baxter is still liable to the assignee if Globe does not perform. However, if Clay released Globe from the contract, Baxter would also be released and no longer liable to Clay.

Question 60

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 transferrable
c) The managers in the corporation and shareholders have limited liability
d) Persons who manage the corporation are not necessarily shareholders

Answer 60

c = correct for MCQ purposes.

Managers to not have limited liability for their actions as managers

Question 61

When a partnership agreement is silent with how losses are split up but has determined how profits are distributed, how are they handled?

Answer 61

The partners will share in losses according to the allocation of profits specified in the partnership agreement

Question 62

In Y5, Iris King bought shares of stock as an investment, at a cost of $10k. During Y8, when the FM was $8k, Iris gave the stock to her daughter, Ruth. Ruth’s holding period of the stock for purposes for determining her loss started when?

Answer 62

It started in Y8. If property is received as a gift, and the property’s FMV on the date of gift is used to determine a loss, the donee’s holding period begins when the gift was received. Thus, Ruth’s holding period starts in Y8

Question 63

No penalty will be imposed on a corporation for underpayment of estimated tax for a particular year if

a) The tax for that year is less than $500
b) Estimated tax payments for that year equal at least 93% of the tax shown on the return for that year
c) The corporation is a personal holding company
d) The accumulated earnings tax is at least $1k

Answer 63

a = correct. No penalty will be imposed on a corporation for underpayment of estimated tax for a particular year if the tax for that year is less than $500.

b = incorrect b/c a corp with $1mil + of TI in any of its 3 preceding tax years must pay at least 100% of the CY tax liability as estimated tax to avoid penalty

Question 64

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 corporations

Answer 64

Both i and ii are true

Question 65

Chapter 11 bankruptcy:

a) Is exclusively available to corporations
b) Permits the debtor-in-possession to continue to operate the business in the same manner as a Chapter 11 trustee
c) Provides for filing of voluntary petitions but prohibits the filing of involuntary petitions
d) Provides separate procedures for corporations with publicly held securities

Answer 65

b = correct.

Ch 11 is available to most individuals, pships, and corps that are eligible for chapter 7

Ch 11 provides reorganization to be voluntary or involuntary

No separate procedures in Chapter 11 are used for corporations with publicly held securities

Question 66

In general, which of the following must be contained in the Articles of Incorporation?

a) Names of the initial officers and their terms of office
b) The name and address of each incorporator
c) Names of states in which the corporation will be doing business
d) Name of the state in which the corporation will remain its principal place of business

Answer 66

b = correct.

Question 67

A seller of goods on credit required the buyer to obtain a surety to guarantee payment for the goods purchased. Which of the following defenses may the surety use to avoid payment?

i) The seller of the goods committed fraud against the buyer to induce him to buy the goods
ii) The seller of the goods committed fraud against the surety to induce the surety to guarantee payment

Answer 67

both i and ii are correct.

The surety may generally exercise the defenses on the contract that would be available to the debtor such as the fraud committed against the debtor by the seller.

The surety may also take advantage of his/her own contractual defenses such as the fraud committed against the surety by the seller