Test Bank For The Legal Environment Today Summarized Case Edition Business in its Ethical, Regulatory E-Commerce, And Global Setting 8th Edition by Roger LeRoy Miller
Legal Environment Today, 8th Edition – Miller/Cross All Rights Reserved – Cengage Learning©
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1. Heinz Kirche, GmbH, is a German Gesellschat mit beschranker, or “company with limited liability.” A significant difference between a GmbH and a U.S. limited liability company (LLC) is that a. German law imposes many restrictions on the operations of GmbHs. b. German law imposes no restrictions on the operations of GmbHs. c. U.S. law requires an LLC to have an operating agreement. d. U.S. law requires that an LLC be owned by shareholders. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States – AACSB Reflective LOCAL STANDARDS: United States – OH – Default City – AICPA Legal TOPICS: CHAPTER 14—BEYOND OUR BORDERS: LIMITED LIABILITY COMPANIES IN FOREIGN NATIONS KEYWORDS: Bloom’s: Application |
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2. Forms of business organizations that limit the liability of their owners are available to businesspersons around the world. Among the features that such firms have in common, in most nations a. articles of organization must be filed to form the enterprise. b. one of the owners must be a foreign entity. c. the organization can have an unlimited number of owners. d. the owners are not required to choose persons to manage the business. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Limited Liability Companies LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States – AACSB Analytic – AACSB: Group Dynamics LOCAL STANDARDS: United States – OH – Default City – AICPA Legal TOPICS: CHAPTER 14—BEYOND OUR BORDERS: LIMITED LIABILITY COMPANIES IN FOREIGN NATIONS KEYWORDS: Bloom’s: Application |
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3. Taco-Taco Pizza, Inc., offers entrepreneurs the opportunity to operate a franchise under the Taco-Taco Pizza trade name as a member of a select group of dealers. To possible investors, Taco-Taco Pizza makes claims about the earnings potential of a franchise. For those claims, the franchisor must have a. a hypothetical basis. b. a reasonable basis. c. an actual basis. d. no basis. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 14—INSIGHT INTO ETHICS: SHOULD FRANCHISORS HAVE TO GIVE PROSPECTIVE FRANCHISEES INFORMATION ABOUT POTENTIAL EARNINGS? KEYWORDS: Bloom’s: Application |
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4. Korean Hot Dogs Inc. offers entrepreneurs the opportunity to operate a franchise under the Korean Hot Dogs trade name as a member of a select group of dealers that engage in retail fast food sales. To potential investors, the franchisor must provide a. actual earnings figures. b. hypothetical earnings figures. c. projected earnings figures. d. none of the choices. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Franchises LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 14—INSIGHT INTO ETHICS: SHOULD FRANCHISORS HAVE TO GIVE PROSPECTIVE FRANCHISEES INFORMATION ABOUT POTENTIAL EARNINGS? KEYWORDS: Bloom’s: Application |
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5. Pond Stock Inc. is a start-up fishery with prospects but no profits as of yet. Pond Stock may be most likely to obtain financing successfully by a. applying to banks, which are generally willing to lend to start-ups. b. approaching foreign governments, under which investment laws are less strict than in the United States. c. attracting venture capital, of which there is more than enough available. d. crowdfunding. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-2 – LO – 2 NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 15—ONLINE DEVELOPMENTS: THE NEW ERA OF CROWDFUNDING KEYWORDS: Bloom’s: Application |
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6. Screenworx Inc. is a start-up film production firm with prospects but no profits as of yet. Under the JOBS Act, Screenworx and other similarly situated companies can look for financing by advertising investment opportunities to a. the public. b. accredited investors only. c. unaccredited investors only. d. banks and venture capitalists but not through crowd funding sites. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Formation and Powers LEARNING OBJECTIVES: LO-2 – LO – 2 NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 15—ONLINE DEVELOPMENTS: THE NEW ERA OF CROWDFUNDING KEYWORDS: Bloom’s: Application |
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7. Drew, an officer of Energy Resources Inc., uses special software to help identify employees who might commit embezzlement. One reason for Drew’s use of this software may be to avoid liability for a. embezzlement. b. negligence. c. violation of the business judgment rule. d. violation of the duty of loyalty. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 – explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation. NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 15—INSIGHT INTO ETHICS: SOFTWARE TO HELP OFFICERS SPOT POTENTIAL EMBEZZLERS KEYWORDS: Bloom’s: Application |
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8. Odell, an officer of Professional Sportsgear Corporation, uses special software to help identify employees who might commit embezzlement and other wrongful acts. The software performs this function by a. scanning e-mail for certain words and phrases. b. looking for anomalies in the firm’s financial records. c. recording phone calls for a third party’s review. d. archiving all electronic communication as potential evidence. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Directors and Officers LEARNING OBJECTIVES: LO-3 – explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation. NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 15—INSIGHT INTO ETHICS: SOFTWARE TO HELP OFFICERS SPOT POTENTIAL EMBEZZLERS KEYWORDS: Bloom’s: Application |
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9. Roshini is a shareholder of Satsui, Ltd., a Japanese firm. Roshini brings a derivative action against the company. If the action is unsuccessful, Satsui a. can sue Roshini for damages. b. must pay Roshini’s legal fees. c. must apologize to Roshini. d. must accept Roshini’s apology in lieu of costs, fees, or damages. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States – AACSB Diversity LOCAL STANDARDS: United States – OH – Default City – AICPA Critical Thinking TOPICS: CHAPTER 15—BEYOND OUR BORDERS: DERIVATIVE ACTIONS IN OTHER NATIONS KEYWORDS: Bloom’s: Application |
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10. Eduard is a shareholder of Deutsche Internationale, a German firm. In Germany a. most claims against firms are alleged in shareholders’ derivative suits. b. the law does not provide for derivative litigation. c. derivative actions can only challenge directors’ actions that shareholders could not legally ratify. d. if a derivative action is unsuccessful, a firm can sue the plaintiff. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Shareholders LEARNING OBJECTIVES: LO-5 NATIONAL STANDARDS: United States – AACSB Diversity LOCAL STANDARDS: United States – OH – Default City – AICPA Critical Thinking TOPICS: CHAPTER 15—BEYOND OUR BORDERS: DERIVATIVE ACTIONS IN OTHER NATIONS KEYWORDS: Bloom’s: Application |
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11. AdGraphix Inc. hires permalancers. From AdGraphix’s perspective, the advantages of employing these individuals include a. paying workers’ compensation. b. providing healthcare benefits. c. letting permalancers go quickly and without cost. d. avoiding IRS worker-classification regulations. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 16—INSIGHT INTO ETHICS: SHOULD SMALL BUSINESSES BE ALLOWED TO HIRE “PERMALANCERS”? KEYWORDS: Bloom’s: Application |
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12. Game Apps Corporation hires independent contractors instead of employees. If these workers are determined to have been misclassified, Game Apps may be liable for a. a seniority and tenure system. b. back payroll taxes. c. copyright and trademark royalties. d. job reinstatement. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: Agency Relationships LEARNING OBJECTIVES: LO-1 NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 16—INSIGHT INTO ETHICS: SHOULD SMALL BUSINESSES BE ALLOWED TO HIRE “PERMALANCERS”? KEYWORDS: Bloom’s: Application |
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13. Nikita, an employee-agent of Operational Processes, Inc., is authorized to access company trade secrets. Nikita downloads those secrets onto a thumb drive. She then quits Operational’s employ and goes to work for Quantum Analysis, Inc., an Operational competitor, with whom she shares the secrets. With respect to the agent’s duty of loyalty to her principal, this is a. unethical, but not illegal. b. neither unethical nor illegal. c. illegal, but not unethical. d. unethical and illegal. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: Duties of Agents and Principals LEARNING OBJECTIVES: LO-3 – explain reasons and ways organizations may pursue diversity and inclusion even in the absence of legislation. NATIONAL STANDARDS: United States – AICPA: BB-Legal TOPICS: CHAPTER 16—ONLINE DEVELOPMENTS: WHAT HAPPENS WHEN AN AGENT BREACHES COMPANY POLICY ON THE USE OF ELECTRONIC DATA? KEYWORDS: Bloom’s: Application |
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