R6 M3 Federal Laws and Regulations

Question 1

An employer who fails to withhold Federal Insurance Contributions Act (FICA) taxes from covered employees’ wages, but who pays both the employer and employee shares would:

Withhold = Refused to give (something that is due to or desired by another)

Answer 1

Have a right to be reimbursed by the employees for the employees’ share.
An employer who fails to withhold FICA taxes from an employee’s wages is liable for the employee’s portion. Once the employer pays both shares to the government, he/she has the right to be reimbursed by the employee for the employee’s share.
Employers are allowed a deduction for the employer’s portion.

Question 2

Funding from FICA contributions is provided to assist qualifying individuals in each of the following groups, except:

Answer 2

Unemployed workers.

The Federal Insurance Contributions Act (FICA) provides workers and their dependents with benefits in case of death, disability, or retirement. It does not provide benefits to unemployed workers.

The Federal Insurance Contributions Act (FICA) provides benefits:
1- for retirement pay to retirees.
2- to survivors of deceased workers.
3- under Medicare to elderly individuals requiring medical service or hospitalization.

Question 3

An employer having an experience unemployment tax rate of 3.2% in a state having a standard unemployment tax rate of 5.4% may take a credit against a 6.0% federal unemployment tax rate of:

Answer 3

5.4%
The employer may take a credit against the federal unemployment tax in an equal amount to the state rate up to 5.4%.

Question 4

Unemployment tax payable under the Federal Unemployment Tax Act (FUTA), is:

Answer 4

A tax-deductible employer’s expense.

Question 5

Which of the following statements is correct regarding the Federal Unemployment Tax Act?

Answer 5

The unemployment insurance system is administered by the states through their employment laws.
FUTA provides temporary help (about a year) and does not extend permanently.Unemployment benefits generally are available only when an employee’s job termination was not his or her fault.
FUTA is funded by the employer; employees make no FUTA contributions.

Question 6

An unemployed CPA generally would receive unemployment compensation benefits if the CPA:

embezzling = to secretly take money that is in your care or that belongs to an organization or business you work for

Answer 6

Was fired as a result of the employer’s business reversals.

Question 7

Which of the following parties generally is ineligible to collect workers’ compensation benefits?

Answer 7

Workers’ compensation programs are state run programs designed to enable employees to recover for injuries incurred while on the job. Most employers must participate in the programs; however, there are a few exceptions, including an exception for employers employing casual workers. A temporary office worker would be considered a casual employee.

Question 8

Generally, which of the following statements concerning workers’ compensation laws is correct?

Answer 8

Employers are strictly liable without regard to whether or not they are at fault.

Question 9

Worker’s compensation benefits are available to which of the following parties?

Answer 9

Only those employees injured while working within the scope of employment.

Question 10

Which of the following provisions is basic to all workers’ compensation systems?

Answer 10

The injured employee is allowed to recover on strict liability theory.
Generally, an employer is strictly liable for an employee’s injuries under a workers’ compensation statute.
The employer is liable for an employee’s injuries despite the employee’s negligence; contributory negligence is not a defense.

Question 11

Which of the following statements is a general requirement for the merger of two corporations?

Answer 11

The stockholders of both corporations must be given due notice of a special meeting, including a copy or summary of the merger plan.

Question 12

Which of the following actions may be taken by a corporation’s board of directors without stockholder approval?

Answer 12

Purchasing substantially all of the assets of another corporation.

Purchasing substantially all the assets of another corporation does not require approval of the buyer’s stockholders. Such a transaction would be relatively insignificant if a large corporation purchased substantially all the assets of a much smaller corporation.

Question 13

Tim, Peter, and Rick want to form a limited liability company. What document must they file with the state?

Answer 13

Articles of Organization.

The Articles of Organization must be filed with the secretary of state.

Articles of incorporation and bylaws are documents relating to corporations, not an LLC.

An operating agreement is an agreement between the members containing provisions relating to management, profit sharing, transferring interests, etc. and does not need to be filed with the state.

Question 14

Generally, a corporation’s articles of incorporation must include all of the following, except the:

Quorum = majority of the members of the board or committee unless provided otherwise.

Answer 14

Quorum requirements.

A corporation’s articles of incorporation need not contain any information regarding quorum requirements.

under the Revised Model Business Corporations Act a corporation’s articles of incorporation must include:

1- The name of the corporation,
2- The name and address of the corporation’s registered agent,
3- The names and addresses of each of the incorporators, and
4- The number of shares authorized to be issued.

Question 15

Heather, Erika, and Shelby are members in HES, a partnership. Heather works 40 hours per week and Erika and Shelby work 20 hours per week. Heather contributed $30,000 to the partnership and Erika and Shelby contributed $60,000 each. Erika and Shelby have each originated 45% of the partnership’s business and Heather has originated the other 10%.

If HES were a general partnership, who controls management?

Answer 15

Heather, Erika, and Shelby equally.

Absent an agreement to the contrary, partners have equal management authority.

Question 16

Which of the following acts, if committed by an agent, will cause a principal to be liable to a third party?

Answer 16

An employee’s failure to notify the employer of a dangerous condition that results in injury to a third party

An employer is liable for his or her own negligent acts. Under the doctrine of respondeat superior, an employer is also liable for the negligence of employees committed within the scope of employment. Failure to correct a dangerous condition that resulted in injury would be negligence by the employer. Failure of an employee to warn the employer would also be negligence by the employee. This would also subject the employer to liability under the doctrine of respondeat superior.

Question 17

XYZ Corporation has common and preferred shares outstanding. If the preferred stock is cumulative, which of the following statements is correct?

Answer 17

If the board of directors does not declare a dividend in a particular year, the right of the preferred shareholders to receive a dividend accumulates and must be paid before the common shareholders can be paid any dividend.

The dividends of cumulative preferred shares accumulate even if not paid in a given year. Once the board declares a dividend, the dividends to the cumulative preferred shareholders must be paid for the current and unpaid previous year(s) prior to any dividends being paid to common shareholders.

Although the dividends of cumulative preferred shares accumulate, a dividend is only actually paid in a year that the board declares a dividend.

If the board declares a dividend, the preferred shareholders are paid first, and if there is a remaining amount, the excess is available to the common shareholders.

Generally, in a year where the board does not declare a dividend, shareholders are not entitled to dividends from previous year(s), unless, like here, the preferred shares are cumulative.

Question 18

Deft, CPA, is an unsecured creditor of Golf Co. for $19,000. Golf has a total of 10 creditors, all of whom are unsecured. Golf has not paid any of the creditors for three months. Under Chapter 11 of the U.S. Bankruptcy Code, which of the following statements is correct?

Answer 18

Deft may file an involuntary petition in bankruptcy against Golf.

When there are fewer than 12 unsecured creditors, any one creditor who is owed at least $18,600 (as adjusted for inflation) in unsecured debt or more may file an involuntary petition in bankruptcy.

A debtor who is not paying debts as they become due is subject to being involuntarily petitioned into bankruptcy under the provisions of Chapter 11.

When there are fewer than 12 unsecured creditors, any one or more of the creditors may file the involuntary petition, but the petitioner(s) must be owed in aggregate at least $18,600 in unsecured debt.

Question 19

Which of the following provisions is basic to all workers’ compensation systems?

Answer 19

The injured employee is allowed to recover on strict liability theory.

The employer is liable for an employee’s injuries despite the employee’s negligence; contributory negligence is not a defense.

Question 20

Downs, Frey, and Vick formed the DFV general partnership to act as manufacturers’ representatives. The partners agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that the partnership would not terminate for five years. After the fourth year, the partners agreed to terminate the partnership. At that time, the partners’ capital accounts were as follows: Downs, $20,000; Frey, $15,000; and Vick, $10,000. There also were undistributed losses of $30,000.

Answer 20

It must be in writing because the partnership was to last for longer than one year.

Under the statute of frauds, an agreement that by its terms cannot be performed within a year must be evidenced by a writing containing the material terms and signed by the parties to be charged. Absent a writing, the partnership will be treated as a partnership at will.

The statute of frauds requires contracts that cannot by their terms be performed within one year to be evidenced by a writing containing the material terms and signed by the parties to be charged.

Question 21

Knox, president of Quick Corp., contracted with Tine Office Supplies, Inc. to supply Quick’s stationery on customary terms and at a cost less than that charged by any other supplier. Knox later informed Quick’s board of directors that Knox was a majority stockholder in Tine. Quick’s contract with Tine is:

Answer 21

Valid because the contract is fair to Quick.

If a corporation enters into a contract and a director has a conflict of interest in the transaction, the contract is voidable unless the director makes full disclosure of all of the facts to the disinterested directors or the shareholders, who then approve the transaction, or the director can prove that the transaction was fair to the corporation. The stationery purchase was fair to Quick, since it was purchased at a below-market price. Thus, the contract is valid.

If a corporation enters into a contract and a director has a conflict of interest in the transaction, the contract is voidable unless the director makes full disclosure of all of the facts to the disinterested directors or shareholders, who then approve the transaction, or the director can prove that the transaction was fair. Mere disclosure after the contract was adopted does not automatically render the contract valid.

Question 22

What term is used to describe a partnership without a specified duration?

Answer 22

A partnership at will.

A partnership at will is a partnership with no definite term (i.e., without specified duration). Such a partnership can be terminated at any time.

A partnership by estoppel is the appearance of a partnership when there is no formal partnership. If parties who are not partners give the appearance to third parties that they are partners, the law may deem the parties to be a partnership by estoppel. The parties will be treated as partners, even though they are not.