Professional Documents
Culture Documents
Quiz 1
Quiz 1
Question: Best friends since college, Juan, Rico, and Sue agree to be partners in
Yellow Bus Holdings. Rico quickly earns his CPA license and makes
more money than the other two friends. Rico contributes 80% of the
capital. The partners agree to split the profits equally. After three
years of no profits, Yellow Bus eventually dissolves. Yellow Bus’
liabilities are greater than its assets. The losses are paid by:
Your
Answer: Rico, because he is the majority partner.
Juan and Sue because they contributed less of the
capital.
All of the partners in proportion to their capital
contributions.
All of the partners in proportion to their profit-
CORRECT
sharing percentages.
Instructor Choice “d” is correct. Unless there is an agreement to the contrary,
Explanation: losses in a partnership will be shared in the same manner as profits are
shared. The facts state that the friends agreed to be partners; thus they
formed a partnership.
Choices “a”, “b”, and “c” are incorrect per the above explanation.
Points 10 of 10
Received:
Comments:
2. Question: Generally, a partner who devotes his time and energy to partnership
business will:
Your Be entitled to compensation if he or she is an
Answer: equity partner.
Be entitled to compensation if the partnership
agreement is silent.
Not be entitled to compensation if the
CORRECT
partnership agreement is silent.
None of the above.
Instructor Choice “c” is correct. Partners are entitled to share in the profits of the
Explanation: partnership but are not entitled to compensation unless otherwise
agreed to in the partnership agreement or in the case of winding up by
the surviving partner.
Choices “a”, “b”, and “d” are incorrect per the above explanation.
Points 10 of 10
Received:
Comments:
3. Question: Tom is one of the original partners in a 6-month-old general
partnership. If debts of the firm become due and the firm cannot pay
them, Tom will be:
Your Personally liable for those debts and
Answer: CORRECT
obligations.
Liable for those debts and obligations only up to
the amount of his capital contribution.
Not required to contribute any money toward the
satisfaction of these debts and obligations.
None of the above.
Instructor Choice “a” is correct. Partners of general partnerships are jointly and
Explanation: severally liable for the debts and obligations of the partnership incurred
within the scope of partnership business.
Choices “b” and "c" are incorrect. General partners are personally
liable for all obligations of their partnership, even beyond their capital
contributions.
Choice “d” is incorrect per the above explanation.
Points 10 of 10
Received:
Comments:
4. Question: Bubbas, LLC has two members, Johnny and Betty Sue. Johnny
agrees to provide all of Bubbas, LLC’s capital needs. On its federal tax
return, unless an election was otherwise made, Bubbas, LLC, will be
taxed as:
Your
Answer: A corporation.
CORREC
A partnership.
T
A sole proprietorship.
Your
Answer: Collateral instruments.
CORREC
Debt securities.
T
Equity securities.
Indentures.
Instructor Choice “b” is correct. Bonds are also referred to as debt securities.
Explanation:
Choice “a” is incorrect. A collateral instrument is a writing that
evidences a right to the payment of money and may be transferred,
such as a check, note, or draft.
Choice “c” is incorrect. Equity securities are instruments representing
an investment in a corporation, such as stock.
Choice “d” is incorrect. An indenture is an agreement or deed between
parties specifying the terms of any debt. This should not be confused
with debentures, which are certificates evidencing unsecured debt.
Points 10 of 10
Received:
Comments:
9. Question: Texas Cat Chow, Inc. has only four shareholders. Each shareholder
will have the right to approve:
Your
Answer: The hiring of an officer.
A principal.
A trustee.
Instructor Choice “a” is correct. Each director owes the corporation fiduciary
Explanation: duties and must act in the best interest of the corporation.
Choice “b” is incorrect. Absent a vote giving a director authority to act
on behalf of the corporation, a director is not an agent of the
corporation and cannot bind the corporation in contract.
Choice “c” is incorrect. A principal is the person on whose behalf an
agent acts. The corporation does not act on behalf of the directions,
and while the directors may delegate some of their power to agents of
the corporation, the agents act on behalf of the corporation (i.e., the
corporation is the principal) and not the directors.
Choice “d” is incorrect. Directors are not trustees of the corporation, as
they do not hold legal title to anything belonging to the corporation for
the benefit of another.
Points 10 of 10
Received:
Comments: