1. On the Statement of Cash Flows, payments to purchase bonds and stocks of other companies are reported in the operating activities section.investing activities section.financing activities section.schedule of non cash investing and financing activities 2. On the Statement of Cash Flows, payments to lenders for interest are reported in the operating activities section.investing activities section.financing activities section.schedule of non cash investing and financing activities 3. When doing a horizontal analysis of Net Income for 2003, 2004, 2005, 2006, and 2007, the 2006 Net Income dollar amount is divided by the 2007 Net Income dollar amount.2006 Net Income dollar amount.2003 Net Income dollar amount.an average dollar amount calculated using all five years 4. A decrease in stockholders’ equity as a result of operating a business is investment.revenue.expense.dividends.Investors are
1. When a corporation splits its stock, the total par value of outstanding sharesincreases.decreases.does not change 2. Stockholders Equity created through the successful operation of the corporation ispaid-in capital.retained earnings.treasury stock.restricted retained earnings
3. At the end of the accounting period, the balances of which types of accounts are carried over to the next accounting period?revenue, liability, and dividendasset, expense, and dividendrevenue, expense, and dividendasset, liability, and stockholders’ equity 4. A decrease in stockholders’ equity as a result of operating a business isinvestment.revenue.expense.dividends.Investors are
1. Carrie owed Charlotte $20,000. Carrie offered Charlotte a promissory note (a negotiable instrument) worth $200,000 upon maturity, which occurred in six months, as payment for the debt. Carrie had actually stolen the promissory note from her friend Samantha. Charlotte probably won’t qualify as a holder in due course becauseA. Charlotte didn’t give value for the instrument.B. Charlotte didn’t take the instrument in good faith.C. Charlotte should have known the instrument was stolen.D. the instrument was stolen from Samantha.
2. Ella owed Mark $500. Since Ella didn’t have the money to pay Mark, she asked Mark if he would accept a negotiable instrument, such as a promissory note, as payment for the debt. Mark indicated he would accept a negotiable instrument as payment. Ella wrote out a promissory note in which she agreed to pay Mark $550 in 60 days if she failed to pay him the $500 in cash within the next 30 days. Ella’s promissory note isn’t negotiable because negotiable instrument mustA. be payable at a definite time.B. state a fixed amount of money.C. be payable to order or to bearer.D. give an unconditional promise or order to pay.
3. Don purchased a boat from Randy. Randy told Don that he owned the boat free and clear of all liens, which Randy knew to be false, because he had just put the boat up as collateral on a loan at the bank two weeks earlier. Don issued Randy a negotiable promissory note for $5,000 to pay for the boat. By the time the promissory note came due, the bank had repossessed the boat, making Don aware of Randy’s deception. Don will be able to avoid payment to Randy because there wasA. a failure of consideration.B. a breach of contract.C. some sort of illegality.D. fraud in the inducement
4. Joey makes a deposit at Hometown Bank in the amount of $500. Joey’s deposit consist of a 4500 check written to him by Ross, who banks with Crosstown Bank. Hometown Bank deposits the check with Friend’s Bank, which in turn sends the check to Crosstown Bank. Which of the following is true about this set of facts?A. Hometown Bank is the payor bank.B. Crosstown Bank is the payor bank.C. Hometown Bank is an intermediary bank.D. Crosstown Bank is the depository bank.
1. Eric wrote Donna a check for $50. Eric accidentally dated the check 3/1/07, even though it was actually 3/1/08 when he wrote the check. Eric thought that there was $75 in the account, but there was actually only $10 in the account. Which one of the following scenarios is most likely to occur?A. The bank will not honor the check because it’s stale.B. The bank will not honor the check because it’s postdated.C. The bank will honor the check, even though it will result in an overdraft.D. The bank will honor the check, even though a stop-payment order has been made.
2. Erica writes a $100 check to Sam. Sam takes the check to his bank, endorses the check, and deposits it into his bank. This process is best described asA. transfer by assignment.B. taking for value.C. transfer by negotiation.D. transfer to a holder in due course.
3. Sara wrote a check to Steven in the amount of $100 to be drawn from her account at Big Money Bank. When took the check to Big Money Bank to be cashed, Big Money refused to pay the check because Sara’s deposit wasn’t made in time to be credited to her account for that day and wouldn’t be available until the next day. Which of the following is true about this turn of events?A. Sara is liable to Steven for the $100.B. Sara is not liable to Steven for the $100.C. Big Money Bank is liable to Sara for the $100.D. Big Money Bank is liable to Steven for the $100.
4. Joan noticed one day that her bank debit card was missing from her purse. Joan notified her bank immediately. When Joan received her statement the next month, the bank charged her $500 for withdrawals made after the debit card disappeared. Which one of the following laws do the charged violate?A. Federal Trade Commission Act of 1914B. Electronic Fund Transfer Act of 1978C. Banking Act of 1999D. Electronic Communications Privacy Act of 1986
1. Josie wants to purchase a car at an auction, and needs a check that will serve as the equivalent to cash to pay for the car. Josie should take a __________ check to the auction.A. traveler’sB. certifiedC. guaranteedD. cashier’s 2. Sally borrowed $500 from Burt. Sally signed a note stating that in five years she would pay Burt whatever amount he deemed fair to repay the loan. The note isn’t negotiable, because negotiable instruments mustA. state an unconditional promise or order to pay.B. state a fixed amount of money. C. be payable on demand or at a definite time.D. be payable to order or to bearer.
3. Pete sets up an account with Ben’s Movie Gallery, whereby whenever Pete rents movies at the Movie Gallery, the amount for the movie rental is deducted from Pete’s card account and Ben’s Movie Gallery’s account is credited for that amount. This set of facts is an example of a/an ______ payment system.A. onlineB. cyberbankingC. smart cardD. credit card 4. Samantha writes a check to Miranda for $2,500, to be drawn from her account with Mahopani Bank. Miranda deposits the check into her account with Central Bank. Central Bank sends the check to Buffalo Bank, which sends the check to Mahopani Bank for payment. Which of the following is true about this set of facts?A. Buffalo Bank is an intermediary and collec1. Sara enters an agreement with Darryl in which Darryl agrees to purchase a vacuum cleaner from Sara. Darryl signs a valid promissory note in favor of Sara, agreeing to pay $1,500 within 12 months. To close the sale, Sara misleads Darryl into believing that the vacuum cleaner is absolutely guaranteed to remove 100% of all dust particles in the home or he can be released from the promissory note, or get his money back if he has already paid the promissory note in full. In fact, no such money-back guarantee exists, and the vacuum cleaner doesn’t remove 100% of all dust particles in Darryl’s home. Twelve months later, Darryl refuses to pay the balance due on the promissory note. Which one of the following defenses may Darryl successfully raise to avoid payment of the note?A. ForgeryB. Material alterationC. Fraud in the inducement D. Fraud in the execution
2. Leroy writes a 450 check made payable to “Cash,” and gives the check to Laurie. Which one of the following best describes what has happened?A. transfer by assignmentB. Taking for valueC. Transfer by negotiationD. Transfer to a holder in due course
3. Janice gives Chandler a promissory note made out in her favor, signed by Joey for $1,000. When the note comes due, Joey asserts a personal defense to avoid liability on the note. Chandler isn’t a holder in due course, and thus doesn’t benefit from the protections afforded a holder in due course, because ChandlerA. did not take the note in good faith.B. should have known a defense existed to the note.C. should have known the note would be dishonored.D. did not take the note for value.
4. Jacobs arranged for his utility bill to be paid by automatic draft from his checking account. One month later, Jacob’s utility bill tripled in amount from the month before, even though Jacob knew that he had used less electricity than the month before. Because Jacob believed the utility company his bank, five days before the draft was scheduled to be deducted, to refuse payment on the draft. The bank paid the draft. The bank’s payment likely violated which one of the following laws?A. Federal Trade Commission Act of 1914B. Electronic Fund Transfer Act of 1978C. Banking Act of 1999D. Electronic Communications Privacy Act of 1986
1. Brenda wrote a check to KelliHGY for $50, to be drawn from her account at Beverly Bank. Beverly Bank refused to cash the check. Which one of the following correctly states Brenda’s liability in this situation?A. Brenda is secondarily liable if she is given timely notice of the dishonor.B. Brenda is primarily liable if she is given timely notice of the dishonor.C. Brenda is secondarily liable regardless of any notice of the dishonor.D. Brenda is primarily liable regardless of any notice of the dishonor.
2. Jayla and Jamal enter an agreement in which Jamal agrees to pay Jayla $500 over the next 3 months for a new stereo. Jamal calls Jayla on the phone and promises to pay her the entire $500 no later than 90 days from that date. This agreement fails to constitute a negotiable instrument, because negotiable instruments mustA. be payable on demand or at a definite time.B. state an unconditional promise or order to pay.C. state a fixed amount of money.D. be in writing.
3. Liza purchased a car from Chad, and signed a promissory note in Chad’s favor promising to pay $1,000 for the car within 1 year. Despite Chad’s written and oral promises about the car’s condition. Liza had to have the car in the shop for repairs the entire first year. Liza refused to pay the balance due under the promissory note. Which one of the following is Liza’s best defense to avoid liability?A. IllegalityB. Fraud in the inducementC. Breach of warrantyD. Fraud in the execution
4. Lee offered Beth a promissory note signed by Joe in favor of Lee paying $10,000 in 6 months, in exchange for $1,000 cash. Beth readily accepted the deal. Beth may not be classified as a holder in due course because BethA. did not give value for the note.B. did not take the note in good faith.C. may have had notice of a defense against the note.D. may have had notice that the note would be dishonored.
1. Jack is a very mature looking seventeen-year-old who lives at home with his parents. Jack wants to purchase an automobile. Jack goes to Discount Car Sales where Bud, the car salesman, never considers that Jack may be a minor because Jack looks at least twenty-five. Bud sells Jack a car, with the agreement that Jack will pay Bud $100 per month over the next five years for the car. Which one of the following is true?
A. Despite Jack’s minor status, Bud can prohibit Jack from disaffirming a contract for a necessary (or basic need).B. Jack can disaffirm the contract because of his minor status at the time the contract was formed.C. Bud can disaffirm the contract because of Jack’s minor status at the time the contract was formed.D. Bud can hold Jack’s parents liable for Jack’s contract, because Jack was a minor living in their home at the time the contract was formed.
2. Edward offers Austin one million dollars to break into the World Museum and steal a priceless Egyptian diamond. Austin readily accepts the offer. Both Edward and Austin have reached the age of majority and possess the capacity to contract. Which of the following requirements for the formation of a contract is missing?A. LegalityB. ConsiderationC. Contractual capacityD. Agreement
3. Paul wants to buy an antique car from Betty. Paul believes that the car is worth $30,000, even though Betty is asking only $10,000 for the car. In actuality, the car is worth only $5,000. The result of this chain of events would be aA. mistake of fact.B. fraudulent misrepresentation.C. mutual mistake.D. mistake of value.
4. Jason contracts with Mountaintop Life Insurance to purchase life insurance. Jason lists his wife, Melba, as the beneficiary. Melba is a/anA. donee beneficiary.B. creditor beneficiary.C. incidental beneficiary.D. obligee.
1. Lisa and Chad had been dating for several years. Chad gave Lisa an expensive birthstone ring for her birthday. Despite the lengthy courtship, Chad unceremoniously dumped Lisa the day after her birthday. Lisa went out to a club with a few friends, where the group had a few drinks. Obviously intoxicated and distraught, Lisa said, I’ll sell this ring for $5.00 to anyone who agrees to give Chad a black eye. Lisa’s friend Ty quickly said, I accept. A contract probably hasn’t been formed because of what basic principle of contract law?A. Freedom of contractB. Quasi-contractsC. Objective theory of contractsD. Plain-meaning rule
2. Ty and Cher went out for dinner to discuss a business venture the two had been discussing. Cher had a few glasses of wine, and became visibly intoxicated. Ty and Cher continued to discuss the venture, and the two formed a contract in which Ty received 80% of the profits resulting from the venture, and Cher received 20% of the profits, even though Cher agreed to invest the majority of the money. Ty agreed to contribute her expertise and services to the venture. When Cher wakes up the next morning, she realizes her terrible mistake. Cher’s best chance at avoiding the contract with Ty is to assert thatA. she didn’t know what she was doing at the time the contract was formed.B. she was drunk at the time the contract was formed.C. the contract is unconscionable.D. the contract is illegal.
3. Jack and Jane formed a contract in which Jack agreed to sell Jane a large amount of apples. Jack knew that Jane planned to resell the apples at the farmers’ market the following weekend. Jack failed to deliver the apples as promised. Jane will likely be able to recoverA. compensatory damages only.B. nominal damages only.C. punitive damages only.D. both compensatory damages and consequential damages.
4. Elliot and Richard went out to paint the town. Both Elliot and Richard were known to be pranksters, and nobody in town ever took either of them seriously. Elliot and Richard started talking to Steve in a local tavern. Elliot and Richard told Steve that they owned the Brooklyn Bridge, and would sell it to him for $10,000. Elliot and Richard even wrote out the terms of the agreement on a cocktail napkin. Steve agreed to the terms of the contract. Steve honestly believed that a contract had been formed, and he could sue Elliot and Richard if they failed to uphold the terms of the contract. A contract probably doesn’t exist becauseA. Elliot and Richard lacked the capacity to contract.B. Steve lacked the capacity to contract.C. no reasonable person would have believed a contract was formed.D. Elliot and Richard were intoxicated.
1. Jackie told a group of her friends that she plans to sell her home one day. Meg asked how much she hoped to get for the house, and Jackie replied, Meg said, I accept your offer to purchase your house for $50,000. No contract exists becauseA. the terms of the offer were not reasonably certain.B. Jackie didn’t objectively intend to enter a contract.C. the offer wasn’t properly communicated.D. Jackie’s statements were merely preliminary negotiations.
2. Josey is a seventeen-year-old who lives on her own in the city. Josey’s parents are deceased, and she once lived with her grandmother, although her grandmother doesn’t have legal custody of Josey. She signs a lease to rent an apartment with Syd Landlord. Josey violates the terms of the lease, and moves out six months early. Syd sues Josey for breach of contract. The most likely result will be thatA. Josey may disaffirm the contract, but will have to pay for the reasonable value of the rent.B. Josey may disaffirm and avoid the contract.C. Syd may disaffirm and avoid the contract.D. Josey’s grandmother may be forced to uphold the contract.
3. Joe made Mandie an offer of employment. Joe gave Mandie a copy of the employment contract, and stated, If you accept, I must receive your acceptance by December 1 at 5:00 P.M. The written contract stated the same requirement. Mandie lived 30 miles from Joe’s office. Mandie signed the employment contract, and placed it in a correctly addressed, stamped envelope, and deposited it in the mail on December 1 at 12:00 P.M. Joe receives the acceptance on December 3. The result is that a contractA. was formed because of the mailbox rule.B. wasn’t formed because mailing the acceptance wasn’t authorized.C. wasn’t formed because Joe specifically conditioned his offer on acceptance by a certain time.D. was formed because Mandie unequivocally accepted the terms of the contract.
4. Tom contracts with Jerry to purchase an oil painting. Tom and Jerry mistakenly think that the oil painting was painted by Monet, the famous artist, and that it’s worth hundreds of thousands of dollars. When Tom discovers the mistake, he seeks to rescind the contract. The most likely result will be that the contract willA. not be rescinded because the mistake was one of value.B. be rescinded because the mistake was one of fact.C. be rescinded due to fraudulent misrepresentation.D. be rescinded due to undue influence.
ting bank. B. Mahopani Bank is an intermediary and collecting bank.C. Central Bank is the payor bank.D. Buffalo Bank is the depository bank.
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