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CPA - REG Exam > R8 > Flashcards

R8 Flashcards

1
Q

What effect does a discharge have on bankruptcy?

A

relieves the debtor of any personal liability

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2
Q

What do the different chapters mean for bankruptcy?

A

Ch. 7 - debtor’s estate
Ch. 9 - municipal debt adjustment
Ch. 11 - debt reorganization (no requirement of liquidation)
Ch. 13 - adjustment of debts of individuals

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3
Q

T/F: Ch. 11 specifically excludes stockbrokers.

A

true

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4
Q

___________ may not participate in Ch. 7 or 11 bankruptcy proceedings.

A

savings and loan corporations

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5
Q

What does the automatic stay of actions do under bankruptcy proceedings?

A

-it’s created upon filing a petition in bankruptcy
-it stops any attempt by creditors to collect through the garnishment of the debtor’s wages (meaning they can’t use the debtor’s earnings as money toward bankruptcy needs and they can’t harass the debtor to pay them back)
-creditors can’t force collection from the debtor in any way (lawsuits, garnishments, etc.)
-does NOT stop the collection of alimony

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6
Q

T/F: A debtor does not need to be insolvent and does not need to have at least 3 creditors to file a voluntary petition under Ch. 7.

A

true

-it can be filed by the debtor if the debtor owes more than $18,600 in unsecured debt, is not paying its debts as they become due, and has 12 or more unsecured creditors (of which at least 3 would need to join the petition)

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7
Q

___________ cannot file an involuntary petition under Ch. 7.

A

farmers and non-profit charities; they also cannot be involuntarily petitioned into bankruptcy (by someone else)

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8
Q

T/F: The commencement of a bankruptcy case may be voluntary or involuntary.

A

true; ex. the creditor can file a petition for a debtor (involuntarily) to go into bankruptcy

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9
Q

What kind of property becomes part of the bankruptcy estate after filing the petition?

A

inheritances, proceeds from life insurance, divorce settlement, and municipal bond interest (rents, interest, and dividends) received by the debtor within 180 days after filing the petition

earned income is generally excluded

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10
Q

T/F: A debtor who filed voluntarily and received a discharge in bankruptcy under Ch. 7 must surrender for distribution to the creditors any amount received as an inheritance if received within 180 days after filing the petition.

A

true

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11
Q

When can a company be involuntarily petitioned into Ch. 11 bankruptcy by an unsecured creditor?

A

when they have fewer than 12 unsecured creditors and any one of the creditors is owed at least $18,600 in unsecured debt

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12
Q

T/F: A court-appointed trustee may serve as both a trustee of an estate and also be its tax return preparer if authorized by the court.

A

true; the CPA may receive a separate fee for services rendered as both trustee and tax return preparer

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13
Q

When would a voluntary petition in bankruptcy be denied?

A

if the debtor failed to keep or preserve adequate books and records

note: it doesn’t matter if the F/S are false, this would just deny them getting a loan

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14
Q

_________ are discharged in bankruptcy because the secured creditor is given the collateral or value of the collateral to the extent of the debt owed.

A

secured claims

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15
Q

The creditors’ committee, if appointed, under Ch. 11 is made up of ________ creditors.

A

unsecured

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16
Q

What happens in a reorganization once the plan is confirmed?

A

the debtor is released from all debts (except as provided in the plan or by law)

note: there needs to be a plan for the full payment of administrative expenses (and full payment of certain classes of creditors too)

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17
Q

Who can confirm a reorganization plan?

A

only the court; unsecured creditors and shareholders can only vote to accept the plan (2/3 of the outstanding shares)

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18
Q

What bankruptcy proceedings can a foreign entity file under?

A

Ch. 7, 11, and 15

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19
Q

Who does FICA provide for?

A

workers and their dependents with benefits in the case of death, disability, or retirement (not unemployed workers)

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20
Q

T/F: If an employer pays an employee’s portion of FICA and does not seek reimbursement of the payment from the employee, the payment is considered to be a business expense deductible by the employer and taxable income to the employee.

A

true

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21
Q

What types of benefits would social security include?

A
  1. payments to divorced spouses
  2. payments to disabled children
  3. medicare
  4. old age and survivors insurance
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22
Q

What would NOT be subject to taxation under FICA?

A
  1. interest on municipal bonds
  2. capital gains
  3. dividends
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23
Q

T/F: Employers can deduct the expense of FUTA (Federal Unemployment Tax Act) as an ordinary business expense.

A

true; help is given temporarily (about a year), not permanently

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24
Q

T/F: The unemployment insurance system is administered by the states through their employment laws.

A

true

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25
Q

T/F: All employers who have quarterly payrolls of at least $1,500 or who employ at least one person one day a week for 20 weeks in a year must participate in FUTA.

A

true

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26
Q

T/F: Unemployment compensation benefits are available to an unemployed person who was fired as a result of the employer’s business reversals.

A

true

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27
Q

T/F: Employers are strictly liable, regardless of whether they’re at fault, for worker compensation laws.

A

true

note: an employee can still receive worker compensation benefits if they were negligent, but not if they performed an intentional/self-inflicted action

note: a worker cannot receive worker compensation based on the negligence of the employer AND based on negligence of the employee

28
Q

What expenses do worker’s compensation benefits provide for?

A

-burial expenses
-cost of prosthetic devices
-monthly payments to surviving dependent children
-partial wages for disability

29
Q

Worker’s compensation benefits are available if _______.

A

the employee is injured within the scope of employment (not necessarily just on the workplace premises)

30
Q

What are the attributes of an LLC?

A

-limited liability for all its owners
-can permit all its owners to participate in management and control of the entity
-absent an agreement to the contrary, is dissolved on the death, withdrawal, or bankruptcy of an owner (member) UNLESS the other members consent to continue
-taxed as a flow-through to its owners (members)

31
Q

What is one of the main advantages of a C Corp?

A

stockholders, directors, and officers are generally not personally liable for the obligations of the corporation

32
Q

What are the attributes of a limited partnership (LP)?

A

-at least one limited partner and one general partner
-the limited partner has limited personal liability (they avoid personal liability for the malpractice of the other partners regarding errors and omissions) but is not allowed to actively participate in management
-the general partner does not have limited personal liability but is allowed to actively participate in management

33
Q

What is not necessary to create an express partnership?

A

execution of a written partnership agreement

34
Q

T/F: A partnership is created for a business to make a profit, and the partners share the business profits and losses (not gross receipts).

A

true

35
Q

T/F: A transaction which cannot be completed within a year must be in writing to be enforceable.

A

true

36
Q

What is the difference between a general partnership and a joint venture?

A

they are generally treated the same, but a joint venture is where each person has their own business outside of this one endeavor with the goal to make a profit

37
Q

T/F: Any partnership matters not in the ordinary course of business needs to be approved by ALL of the partners (not just majority) unless there is an agreement to the contrary in the partnership agreement.

A

true

ex. admitting a new partner

(otherwise, only a majority vote is needed for ordinary events/transactions)

38
Q

T/F: The assignee (receiver) of an interest in a partnership receives the assignor’s rights to profits and surplus.

A

true

39
Q

T/F: Profits and losses are to be divided equally (not proportionately) among the partners.

A

true; partners share losses in the same manner that they share profits according to the agreement

40
Q

T/F: Partners have at least apparent authority to enter into contracts with third parties without the consent of the other partners.

A

true

41
Q

T/F: Where a partnership agreement does not state the duration of the partnership, the partners may withdraw at any time. The partner doesn’t need to obtain consent of the other partner(s) or of the court.

A

true

42
Q

T/F: Partners are entitled to share in the profits of the partnership but are not entitled to compensation unless otherwise agreed to in the partnership agreement.

A

true

43
Q

Upon termination of a partnership, how are the profits/losses distributed?

A
  1. creditors are paid first (amount in AP or L-T debt)
  2. each partner would be credited the amount of their contribution + their % share of the profit or loss
44
Q

T/F: A general partner in an LP may be a secured creditor of the limited partnership. Also, a general partner can also be a limited partner at the same time.

A

true

45
Q

T/F: General partners, as opposed to limited partners, are personally liable for all obligations of the partnership.

A

true

46
Q

What document must be filed for an LLC?

A

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

47
Q

T/F: LLC members cannot transfer interest without the consent of the other members.

A

true

48
Q

The voting power of members in an LLC is determined by ________.

A

each member’s capital contribution (% of ownership interest)

49
Q

T/F: S Corps are prohibited from having foreign country shareholders.

A

true

50
Q

T/F: Both C Corp and S Corp shareholders can contribute property into a corporation without being taxed.

A

true

51
Q

What is a registered agent?

A

an agent for the corporation who would accept service of process in the event the corporation is involved in a lawsuit

52
Q

T/F: Promoters are personally held liable until the corporation assumed the debts in novation.

A

true

53
Q

T/F: If shareholders comingle their funds with a corporation, courts are likely to ignore the corporate form.

A

true; known as piercing the corporate veil

note: this can also happen if the corporation was thinly (inadequately) capitalized at the time of its formation

54
Q

What do the bylaws contain?

A

specific rules for the management of a business corporation

55
Q

T/F: Once a dividend is declared, a shareholder becomes an unsecured creditor of the corporation for the amount of the unpaid dividend.

A

true

56
Q

T/F: Shareholders have the right to elect and remove DIRECTORS (not officers) through the voting process.

A

true; officers are selected by the directors

57
Q

T/F: A shareholder in a corporation can inspect its books upon 5 days notice if the shareholder gives an appropriate purpose for doing so.

A

true

58
Q

What is a derivative action?

A

an action by a stockholder in the name of the corporation to recover damages or to seek some other remedy on behalf of the corporation when the corporation does not enforce its own rights; this usually happens when the officers or directors have breached their duty to the corporation and have refused to sue themselves

59
Q

What is the business judgment rule?

A

if a director acts in good faith and in a manner the director believes is in the best interest of the corporation, and the director exercises the care that a reasonably prudent person would exercise in a similar position, the director is protected against personal liability for decisions the director makes that turn out poorly for the corporation

60
Q

What does insolvent mean?

A

unable to pay debts owed

61
Q

What is a pre-emptive right?

A

the right to purchase new issuances of additional stock in order to maintain current proportional ownership

62
Q

T/F: Amendment of the articles of incorporation cannot usually be effected without the affirmative vote of the shareholders.

A

true

63
Q

What can the board of directors do without stockholder approval?

A

purchase substantially all the assets of another corporation

64
Q

T/F: In a short-form merger (one between a parent and a subsidiary 90% of which is owned by the parent), the subsidiary’s (not the parent’s) shareholders have a right to dissent and take advantage of the appraisal remedy.

A

true; both corporations must give shareholders notice and a summary of the merger plan

65
Q

T/F: A foreign corporation must obtain a certificate of authority from each state in which it does intrastate business (like maintaining an office in that state).

A

true

66
Q

What is the order for relief granted (people who need to be paid) for bankruptcy matters?

A
  1. secured creditors
  2. unsecured creditors
    –first priority: alimony
67
Q
A

CPA - REG Exam (8 decks)

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