Questions and Answers of The Legal Environment

James Horne’s will provides that his estate is to be distributed to his heirs per capita. Upon his death, two of his three children are surviving and his deceased child left two children (James’s
Craig delivers bonds in the amount of $100,000 to White in trust to hold and to pay over the income in quarterly payments to Craig’s niece, Helen, during her minority. Who is the settlor or creator
On July 1, Sutter created a living trust by transferring the legal title to 500 shares of Pine Corporation common stock to Ellis as trustee and named Clay as the sole beneficiary. The trust granted
Match the letter in list A-D with the appropriate numbered item.A. Principal includes this.B. Income includes this.C. This is payable from principal.D. This is payable from income. 1. Shares of stock
Which of the following expenditures resulting from a trust’s ownership of commercial real estate should be allocated to the trust’s principal?a. Building management fees.b. Insurance premiums.c.
On June 16, 1992, Eble placed 800 shares of Singh Corp.’s common stock in a trust for the benefit of Eble’s child. On June 1, 1992, Singh’s board of directors had declared a cash dividend of $2
Cox transferred assets into a trust under which Smart is entitled to receive the income for life. After Smart’s death, the remaining assets are to be given to Mix.In 1998, the trust received rent
Edwin Edwards and Karen Davis owned EEE, Inc., which owned three convenience stores, all of which sold gasoline. Reid Ellis delivered to the three 1050 Part 7 Business Organizations convenience
Compare and contrast consolidations, mergers, and conglomerates.AppendixLO1
North Pole, Inc., approved a plan to merge with its subsidiary, Santa’s Workshop, Inc. The merger plan provided that certain of Workshop’s shareholders would receive $3.50 per share. The highest
Norman was organizing a new corporation: Collins Home Construction Co.Fairchild knew the corporation was not yet formed but made a contract by which he agreed to sell certain goods to Collins. The
Madison Associates purchased control of the majority of shares of 79 Realty Corp. from the Kimmelmans and the Zauders, who then resigned as directors.The Alpert group, which owned the remaining 26
William Sullivan was ousted from the presidency of the New England Patriots Football Club, Inc. Later, he borrowed $5,348,000 to buy 100 percent control of the voting shares of the corporation. A
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
Rice is a promoter of a corporation to be known as Dex Corp. On January 1, 1985, Rice signed a nine-month contract with Roe, a CPA, which provided that Roe would perform certain accounting services
In general, which of the following must be contained in articles of incorporation?a. The names of the states in which the corporation will be doing businessb. The name of the state in which the
Monica Beam, a shareholder of Martha Stewart Living Omnimedia, Inc.(MSO), filed a derivative action against Martha Stewart and the other MSO board of directors, alleging that Stewart breached her
Six members of the Weston family, who owned 6.8 percent of the stock of Weston Paper and Manufacturing Company, brought suit against three corporate directors and CFIS, a firm hired by the company to
Tomlinson and Hubbard were two of five shareholders in Multimedia Software Distributors, a corporation. The corporation was formed in 1992 and filed for bankruptcy in 1994. In 1996, Tomlinson filed a
The stock of West End Development Co. was subject to a transfer restriction.This restriction required that any shareholder selling shares first offer every other shareholder the right to purchase a
Siebrecht organized Siebrecht Realty Co., a corporation, and then transferred his building to the corporation in exchange for its stock. The corporation rented different parts of the building to
William Carter, a former officer and employee of Wilson Construction Co., Inc., owned 317 shares of stock in Wilson. Carter left Wilson to become part owner and employee of C&L Contracting Co., which
Harper owned corporate stock, and telling O’Brien that he was going to give the stock to O’Brien, he handed the stock certificate to O’Brien. O’Brien requested Harper to indorse the
Ed Klein was the sole shareholder, director, and chief executive officer of The Gun Exchange, Inc., a retail firearms dealership. The inventory of The Gun Chapter 45 Shareholder Rights in
Ibanez owned shares of stock in Farmers Underwriters. He left the stock certificate lying on top of his desk in his office. Many persons continually passed through the office, and one day Ibanez
On March 3, 2002, pursuant to a public offering, First All State Trucking Corp. (FAST) issued securities to investors in denominations of $1,000. The interest rate was 7 percent per year payable
Linhart owned shares of stock in First National Bank. She borrowed money from the bank and pledged the stock as security. She later decided to transfer 70 head of cattle and the shares of stock to
Ronald Naquin, an employee of Air Engineered Systems & Services, Inc., owned one-third of its outstanding shares. After six years, he was fired and an offer was made to buy out his interest in Air
A stockholder’s right to inspect books and records of a corporation will be properly denied if the stockholder:a. Wants to use corporate stockholder records for a personal businessb. Employs an
The limited liability of a stockholder in a closely held corporation may be challenged successfully if the stockholder:a. Undercapitalized the corporation when it was formedb. Formed the corporation
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
Under the Revised Model Business Corporation Act, a dissenting stockholder’s appraisal right generally applies to which of the following corporate actions?Consolidations Shares from mergersa. Yes
What is the major distinction between the Securities Act of 1933 and the Securities Exchange Act of 1934?AppendixLO1
On what rationale does the SEC allow the private placement of securities with accredited investors without any limitation on the amount that may be raised?AppendixLO1
Business Week magazine is sent to a national distributor of magazines, Curtis Circulations Co., which sells the magazines to various wholesalers, including Hudson News. Business Week publishes a
Dorozhko hacked into the corporate network of Thomson Financial on October 17, 2007 at 2:15 P.M. and gained access to IMS Health’s soon-to-bereleased negative earnings announcement due out at 5:00
Mary Dale worked in the law office of Emory Stone, an attorney practicing securities law. While proofreading Mary’s keying of a document relating to the Chapter 46 Securities Regulation 1107 merger
International Advertising, Inc. (IA), would like to raise $10 million in new capital to open new offices in eastern Europe. It believes it could raise the capital by selling shares of stock to its
Dubois sold Hocking a condominium that included an option to participate in a rental pool arrangement. Hocking elected to participate in the arrangement.Under it, the rental pool’s agent rented
William Rubin, president of Tri-State Mining Co., sought a loan from Bankers Trust Co. To secure the loan, he pledged worthless stock in six companies and represented that the stock was worth $1.7
J. C. Cowdin, a director of Curtis-Wright Co., phoned Robert Gintel, a partner of Cady, Roberts & Co., a stock brokerage house, and advised him that Curtis-Wright’s quarterly dividend had been cut.
In a January 2000 prospectus for its initial public offering of shares, Apex Oil Discovery Co. (AODC) estimated a sizable volume of oil production based on the studies of two geologists and a test
Melvin J. Ford, president of International Loan Network, Inc. (ILN), promoted ILN’s financial enrichment programs to ILN members and prospective Chapter 46 Securities Regulation 1109 members with
Which of the following is least likely to be considered a security under the Securities Act of 1933?a. Stock optionsb. Warrantsc. General partnership interestsd. Limited partnership interests
Which of the following statements is correct regarding a common stock offering that requires registration under the Securities Act of 1933?a. The registration statement is automatically effective
Hamilton Corp. is making a $4,500,000 securities offering under Rule 505 of Regulation D of the Securities Act of 1933. Under this regulation, Hamilton is:a. Required to provide full financial
Under the liability provisions of Section 11 of the Securities Act of 1933, an auditor may help to establish the defense of due diligence if:I. The auditor performed an additional review of the
Under the Securities Exchange Act of 1934, which of the following conditions generally will allow an issuer of securities to terminate the registration of a class of securities and suspend the duty
What is the major distinction between the Securities Act of 1933 and the Securities Exchange Act of 1934?AppendixLO1
On what rationale does the SEC allow the private placement of securities with accredited investors without any limitation on the amount that may be raised?AppendixLO1
Business Week magazine is sent to a national distributor of magazines, Curtis Circulations Co., which sells the magazines to various wholesalers, including Hudson News. Business Week publishes a
Dorozhko hacked into the corporate network of Thomson Financial on October 17, 2007 at 2:15 P.M. and gained access to IMS Health’s soon-to-bereleased negative earnings announcement due out at 5:00
Mary Dale worked in the law office of Emory Stone, an attorney practicing securities law. While proofreading Mary’s keying of a document relating to the Chapter 46 Securities Regulation 1107 merger
International Advertising, Inc. (IA), would like to raise $10 million in new capital to open new offices in eastern Europe. It believes it could raise the capital by selling shares of stock to its
Dubois sold Hocking a condominium that included an option to participate in a rental pool arrangement. Hocking elected to participate in the arrangement.Under it, the rental pool’s agent rented
William Rubin, president of Tri-State Mining Co., sought a loan from Bankers Trust Co. To secure the loan, he pledged worthless stock in six companies and represented that the stock was worth $1.7
J. C. Cowdin, a director of Curtis-Wright Co., phoned Robert Gintel, a partner of Cady, Roberts & Co., a stock brokerage house, and advised him that Curtis-Wright’s quarterly dividend had been cut.
In a January 2000 prospectus for its initial public offering of shares, Apex Oil Discovery Co. (AODC) estimated a sizable volume of oil production based on the studies of two geologists and a test
Melvin J. Ford, president of International Loan Network, Inc. (ILN), promoted ILN’s financial enrichment programs to ILN members and prospective Chapter 46 Securities Regulation 1109 members with
Which of the following is least likely to be considered a security under the Securities Act of 1933?a. Stock optionsb. Warrantsc. General partnership interestsd. Limited partnership interests
Which of the following statements is correct regarding a common stock offering that requires registration under the Securities Act of 1933?a. The registration statement is automatically effective
Hamilton Corp. is making a $4,500,000 securities offering under Rule 505 of Regulation D of the Securities Act of 1933. Under this regulation, Hamilton is:a. Required to provide full financial
Under the liability provisions of Section 11 of the Securities Act of 1933, an auditor may help to establish the defense of due diligence if:I. The auditor performed an additional review of the
Under the Securities Exchange Act of 1934, which of the following conditions generally will allow an issuer of securities to terminate the registration of a class of securities and suspend the duty
Shareholders of Bear Stearns sued the directors of the corporation for damages for violation of the directors’ fiduciary duties in effecting a stock-for-stock Chapter 48 Management of Corporations
The majority shareholder and president of Dunaway Drug Stores, Inc., William B. Dunaway, was structuring and executing the sale of virtually all of the corporation’s assets to Eckerd Drug Co. While
Directors must always own stock of the corporation to ensure they will be attentive to their duties. Appraise this statement.AppendixLO1
Discuss the power of a corporation president to employ a sales manager and to agree that the manager should be paid a stated amount per year plus a percentage of any increase in the dollar volume of
Danny Hill, the general manager of Southeastern Floor Covering Co., Inc.(SE), had full authority to run the business. His responsibilities included preparing and submitting bid proposals to general
A director of a corporation cannot lend money to the corporation because that would create the danger of a conflict of interest between the director’s status as a director and as a creditor.
Anthony Yee was the president of Waipahu Auto Exchange, a corporation.As part of his corporate duties, he arranged financing for the company. Federal Services Finance Corp. drew 12 checks payable to
Rudolph Redmont, the president of Abbott Thinlite Corp., left Abbott to run Circle Corp. in competition with his former employer. It was claimed that he diverted contracts from his former employer to
William Gurtler was president and a board member of Unichem Corp., which produced and sold chemical laundry products. While president of Unichem, he encouraged his plant manager to leave to join a
Davis, a director of Active Corp., is entitled to:a. Serve on the board of a competing businessb. Take sole advantage of a business opportunity that would benefit Activec. Rely on information
Absent a specific provision in its articles of incorporation, a corporation’s board of directors has the power to do all of the following except:a. Repeal the bylawsb. Declare dividendsc. Fix
Which of the following statements is correct regarding fiduciary duty?a. A director’s fiduciary duty to the corporation may be discharged by merely disclosing his or her self-interest.b. A director
Cronin, an employee of Epicycle, cashed his final paycheck at Money Mart Check Cashing Center. Epicycle had issued a stop payment order on the check.Money Mart deposited the check through normal
Halleck executed a promissory note payable to the order of Leopold. Halleck did not pay the note when due, and Leopold brought suit on the note, producing it in court. Halleck admitted that he had
Statham drew a check. The payee indorsed it to Kemp Motor Sales. Statham then stopped payment on the check on the grounds that there was a failure of Chapter 30 Liability of the Parties Under
Can check cashing companies be holders in due course? What arguments can you make for and against their holder-in-due-course status? [Dal-Tile Corp. v Cash N’ Go, 487 SE2d 529 (Ga App)]AppendixLO1
Jones, wishing to retire from a business enterprise that he had been conducting for a number of years, sold all of the assets of the business to Jackson Corp.Included in the assets were a number of
Elliot, an officer of Impact Marketing, drew six postdated checks on Impact’s account. The checks were payable to Bell for legal services to be subsequently performed for Impact. Financial
D drew a check to the order of P. P took the check postdated. P knew that D was having financial difficulties and that the particular checking account on which this check was drawn had been
Daniel, Joel, and Claire Guerrette are the adult children of Elden Guerrette, who died on September 24, 1995. Before his death, Elden purchased a life insurance policy from Sun Life Assurance Company
A bank customer purchased a bank money order and paid for it with a forged check. The money order was negotiable and was acquired by N, who was a holder in due course. When N sued the bank on the
GRAS is a Michigan corporation engaged in the business of buying and selling cars. Between 1997 and 2000, Katrina Stewart was employed as a manager by GRAS. During that period, Stewart wrote checks,
Shade asked Dow to give him a check for $100 in return for Shade’s delivery the next day of a television set. Dow gave the check, but Shade never delivered the television set. Does Dow have a
Under the Commercial Paper Article of the UCC, which of the following requirements must be met for a person to be a holder in due course of a promissory note?a. The note must be payable to bearer.b.
A maker of a note will have a real defense against a holder in due course as a result of any of the following conditions except:a. Discharge in bankruptcyb. Forgery 684 Part 4 Negotiable
Under the commercial paper article of the UCC, in a nonconsumer transaction, which of the following are real (universal) defenses available against a holder in due course?Material Alteration
A holder in due course will take free of which of the following defenses?a. Infancy, to the extent that it is a defense to a simple contractb. Discharge of the maker in bankruptcyc. A wrongful
Mask stole one of Bloom’s checks. The check was already signed by Bloom and made payable to Duval. The check was drawn on United Trust Company.Mask forged Duval’s signature on the back of the
Robb stole one of Markum’s blank checks, made it payable to himself, and forged Markum’s signature to it. The check was drawn on the Unity Trust Company. Robb cashed the check at the Friendly
Kiernan Construction Co. entered into a contract with Jackson for Jackson to build a house for her. Century Surety Co. executed a bond to protect Jackson from loss if Kiernan failed to construct the
In May 1989, Alma Equities Corp., owned by its sole shareholder and president, Lewis Futterman, purchased a hotel and restaurant in Vail, Colorado, from Alien for $3,900,000. Alma paid $600,000 in
Charles Fontaine completed a form for Gordon Contractors in which he signed that portion of the form labeled “Name of Guarantor.” His signature followed immediately after a paragraph beginning,
In June 1995, Southern Energy and Gesellschaft Fur Bauen und Wohnen Hannover (GBH) entered into a construction contract for the second of two housing projects known as “socialized housing” to be
Donaldson sold plumbing supplies. The St. Paul-Mercury Indemnity Co., as surety for him, executed and delivered a bond to the state of California for the payment of all sales taxes. Donaldson failed
Paul owed Charles a $1,000 debt due September 1. On August 15, George, for consideration, orally promised Charles to pay the debt if Paul did not. On September 1, Paul did not pay, so Charles
Jack Smith was required by his bank to obtain two sureties for his line of credit of $100,000. Ellen Weiss has agreed to act as a surety for $50,000, and Allen Fox has agreed to act as a surety for

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