Question 1

A partner may personally profit from a partnership transaction when he or she deals in good faith with the partnership.

Accepted Answer

A) True 
 B)False  False

Question 2

________ authority exists because it seems reasonable to a third party that a partner has authority to do an act.

Accepted Answer

A) Fixed 
B) Express 
C) Apparent 
D) Actual 
A) Fixed 
B) Express 
C) Apparent 
D) Actual C

Question 3

A partner of a firm that leases residential property to college students allows his daughter to live in a partnership-owned apartment.Based on this situation,this partner:

Accepted Answer

A) has a duty to relinquish his management rights for misusing partnership property. 
B) has a duty to account for the use of partnership property. 
C) has a duty to return the personal profits secured through this transaction. 
D) has a right to be indemnified for payments made from his personal funds. 
A) has a duty to relinquish his management rights for misusing partnership property. 
B) has a duty to account for the use of partnership property. 
C) has a duty to return the personal profits secured through this transaction. 
D) has a right to be indemnified for payments made from his personal funds. B

Question 4

Which of the following remedies is appropriate for a partner's breach of the duty to serve?

Accepted Answer

A) Assessing the partner the cost of hiring a person to do his work. 
B) Paying the other partners double compensation. 
C) Charging the partner a 10 percent penalty against any profits he may be entitled to. 
D) Ousting the partner from the partnership. 
A) Assessing the partner the cost of hiring a person to do his work. 
B) Paying the other partners double compensation. 
C) Charging the partner a 10 percent penalty against any profits he may be entitled to. 
D) Ousting the partner from the partnership.

Question 5

Which of the following is not a requirement for a partner to personally profit from partnership transactions?

Accepted Answer

A) She must deal in good faith. 
B) She must make a full disclosure of all material facts affecting the transaction. 
C) She must disclose all facts to her knowledge regarding the transaction. 
D) She must obtain approval from her partners. 
A) She must deal in good faith. 
B) She must make a full disclosure of all material facts affecting the transaction. 
C) She must disclose all facts to her knowledge regarding the transaction. 
D) She must obtain approval from her partners.

Question 6

Donna is a partner of Don-Tel Lawn Care,a partnership in the business of providing lawn care services.While mowing a lawn using a partnership mower,Donna negligently runs over a piece of metal,sending pieces of metal flying through the air.One piece hits the client's patio door and shatters the glass.Is Donna liable to the client? Are Donna's partners liable to the client?

Accepted Answer

First,Donna is liable because a person i

Question 7

Any notice given to a partner is deemed to be a notice given to the partnership firm.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements regarding lawsuits and partnerships is false?

Accepted Answer

A) A partnership may sue in its own name. 
B) Any partner has authority to initiate a lawsuit. 
C) A partnership may be sued in its own name. 
D) Partners cannot be sued individually on partnership obligations. 
A) A partnership may sue in its own name. 
B) Any partner has authority to initiate a lawsuit. 
C) A partnership may be sued in its own name. 
D) Partners cannot be sued individually on partnership obligations.

Question 9

________ occur(s)when partners accept an act of a partner who had no actual or apparent authority to do the act when it was done.

Accepted Answer

A) Arbitration 
B) Defamation 
C) Indemnification 
D) Ratification 
A) Arbitration 
B) Defamation 
C) Indemnification 
D) Ratification

Question 10

Which of the following statements about silent partners is false?

Accepted Answer

A) Silent partners are responsible for the cost of hiring a person to do their work. 
B) Silent partners merely contribute capital to the partnership. 
C) Silent partners do not have the duty to serve. 
D) Silent partners have the same liability for partnership debts as any other partner. 
A) Silent partners are responsible for the cost of hiring a person to do their work. 
B) Silent partners merely contribute capital to the partnership. 
C) Silent partners do not have the duty to serve. 
D) Silent partners have the same liability for partnership debts as any other partner.

Question 11

In Mortgage Grader,Inc.v.Ward & Olivo,L.L.P. ,the case in the text,the court held that:

Accepted Answer

A) when one partner commits malpractice,the other partners in the LLP can be held jointly and severally liable for the malpractice. 
B) when one partner commits malpractice,the other partners in the LLP cannot be held vicariously liable for the malpractice. 
C) when one partner commits malpractice,the other partners in the LLP cannot be held jointly and severally liable for the malpractice. 
D) when one partner commits malpractice,the other partners in the LLP can be held vicariously liable for the malpractice. 
A) when one partner commits malpractice,the other partners in the LLP can be held jointly and severally liable for the malpractice. 
B) when one partner commits malpractice,the other partners in the LLP cannot be held vicariously liable for the malpractice. 
C) when one partner commits malpractice,the other partners in the LLP cannot be held jointly and severally liable for the malpractice. 
D) when one partner commits malpractice,the other partners in the LLP can be held vicariously liable for the malpractice.

Question 12

A partner of a trading partnership ordinarily has implied authority to borrow money for the partnership.

Accepted Answer

A) True 
 B)False

Question 13

A partner may not compete against the partnership unless he or she obtains consent from the other partners.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements regarding lawsuits and limited liability partnerships is false?

Accepted Answer

A) Only the LLP is liable on a contractual obligation. 
B) Only the LLP may be sued for a contractual obligation. 
C) The LLP and the partner who committed the tort are liable. 
D) Even LLP members who had no role in the commission of a tort have liability. 
A) Only the LLP is liable on a contractual obligation. 
B) Only the LLP may be sued for a contractual obligation. 
C) The LLP and the partner who committed the tort are liable. 
D) Even LLP members who had no role in the commission of a tort have liability.

Question 15

Stella,Bob,and Chris are the partners of Sole Services,a general partnership that runs a small shoe store.Stella and Bob want to buy the building that they are currently renting,but Chris does not agree.How will this disagreement be resolved?

Accepted Answer

A) Sole Services will buy the building because this management decision can be made by a majority vote of the partners. 
B) Sole Services will buy the building because one partner can never stand in the way of the will of the majority of partners. 
C) Sole Services will not buy the building because this decision requires a unanimous vote of the partners. 
D) Sole Services will not buy the building because all partnership management decisions require a unanimous vote of the partners. 
A) Sole Services will buy the building because this management decision can be made by a majority vote of the partners. 
B) Sole Services will buy the building because one partner can never stand in the way of the will of the majority of partners. 
C) Sole Services will not buy the building because this decision requires a unanimous vote of the partners. 
D) Sole Services will not buy the building because all partnership management decisions require a unanimous vote of the partners.

Question 16

Stella,Bob,and Chris are the partners of Sole Services,a general partnership that operates a shoe store.One day Stella's ex-husband Dan comes into the store to buy shoes.Stella is still angry over the divorce.While Dan's back is turned to Stella,she stabs him with a knife,inflicting serious injuries.Dan wants to sue Stella,the partnership,and each partner.Who could be required to pay for Dan's injuries?

Accepted Answer

A) Stella only 
B) Stella and the partnership only 
C) Stella and each partner 
D) Stella,the partnership,and each partner 
A) Stella only 
B) Stella and the partnership only 
C) Stella and each partner 
D) Stella,the partnership,and each partner

Question 17

In the absence of a specific provision in a general partnership agreement,partnership losses will be allocated:

Accepted Answer

A) equally among the partners irrespective of the allocation of partnership profits. 
B) in the same proportion that profits are shared. 
C) in proportion to the partners' capital contributions. 
D) in proportion to the partners' capital contributions and outstanding loan balances. 
A) equally among the partners irrespective of the allocation of partnership profits. 
B) in the same proportion that profits are shared. 
C) in proportion to the partners' capital contributions. 
D) in proportion to the partners' capital contributions and outstanding loan balances.

Question 18

A partnership agreement of a large auditing firm states that no partner shall provide auditing services except on behalf of the partnership.Violation of this clause is an example of:

Accepted Answer

A) a breach of a partner's duty to account. 
B) a breach of a partner's duty to serve. 
C) a breach of a partner's duty of care. 
D) conduct that would constitute competing with the partnership. 
A) a breach of a partner's duty to account. 
B) a breach of a partner's duty to serve. 
C) a breach of a partner's duty of care. 
D) conduct that would constitute competing with the partnership.

Question 19

Morgan is a silent partner at Mathers & Sons,a general partnership.Because he is only a silent partner,he does not have:

Accepted Answer

A) the duty to contribute capital to the firm. 
B) the duty to serve in the day-to-day operations of the firm. 
C) the same liability for partnership debts as other partners. 
D) the duty to act within actual authority. 
A) the duty to contribute capital to the firm. 
B) the duty to serve in the day-to-day operations of the firm. 
C) the same liability for partnership debts as other partners. 
D) the duty to act within actual authority.

Question 20

Which of the following is true about a nontrading partnership?

Accepted Answer

A) Its regular business is buying and selling merchandise. 
B) It has no normal borrowing needs. 
C) It borrows money to avoid cash flow problems. 
D) It has an inventory. 
A) Its regular business is buying and selling merchandise. 
B) It has no normal borrowing needs. 
C) It borrows money to avoid cash flow problems. 
D) It has an inventory.

Exam 38: Operation of Partnerships and Related Forms

A partner may personally profit from a partnership transaction when he or she deals in good faith with the partnership.

________ authority exists because it seems reasonable to a third party that a partner has authority to do an act.

A partner of a firm that leases residential property to college students allows his daughter to live in a partnership-owned apartment.Based on this situation,this partner:

Which of the following remedies is appropriate for a partner's breach of the duty to serve?

Which of the following is not a requirement for a partner to personally profit from partnership transactions?

Any notice given to a partner is deemed to be a notice given to the partnership firm.

Which of the following statements regarding lawsuits and partnerships is false?

________ occur(s)when partners accept an act of a partner who had no actual or apparent authority to do the act when it was done.

Which of the following statements about silent partners is false?

In Mortgage Grader,Inc.v.Ward & Olivo,L.L.P. ,the case in the text,the court held that:

A partner of a trading partnership ordinarily has implied authority to borrow money for the partnership.

A partner may not compete against the partnership unless he or she obtains consent from the other partners.

Which of the following statements regarding lawsuits and limited liability partnerships is false?

Stella,Bob,and Chris are the partners of Sole Services,a general partnership that runs a small shoe store.Stella and Bob want to buy the building that they are currently renting,but Chris does not agree.How will this disagreement be resolved?

In the absence of a specific provision in a general partnership agreement,partnership losses will be allocated:

A partnership agreement of a large auditing firm states that no partner shall provide auditing services except on behalf of the partnership.Violation of this clause is an example of:

Morgan is a silent partner at Mathers & Sons,a general partnership.Because he is only a silent partner,he does not have:

Which of the following is true about a nontrading partnership?

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Organization and Financial Structure of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Law

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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