Question 1

Which of the following is true about partnership agreements?

Accepted Answer

A)  The removal or delegation of a partner's management power eliminates that partner's apparent authority. 
B)  A partnership agreement may create classes of partners,some of whom may have greater voting rights. 
C)  In large partnerships,decisions such as hiring employees and making contracts require the unanimous agreement of all partners. 
D)  Unequal voting rights are often found in small partnerships. 
A)  The removal or delegation of a partner's management power eliminates that partner's apparent authority. 
B)  A partnership agreement may create classes of partners,some of whom may have greater voting rights. 
C)  In large partnerships,decisions such as hiring employees and making contracts require the unanimous agreement of all partners. 
D)  Unequal voting rights are often found in small partnerships.

Question 2

Lloyd is a partner in an ordinary partnership firm in the business of providing tax services.While serving a client on behalf of the partnership,Lloyd's partner Janet intentionally understates the client's taxable income on a federal tax return.When the true income is reported a few years later,the client is required to pay a penalty.The client sues the partnership and its partners.Which of the following is correct?

Accepted Answer

A)  Janet is not liable to the client because she was acting on behalf of the partnership. 
B)  Lloyd is not liable to the client,unless he authorized Janet to understate the client's income. 
C)  The partnership is not liable to the client because the intentional tort is outside the scope of business. 
D)  Janet is not liable to the client because she was acting in the ordinary course of business. 
A)  Janet is not liable to the client because she was acting on behalf of the partnership. 
B)  Lloyd is not liable to the client,unless he authorized Janet to understate the client's income. 
C)  The partnership is not liable to the client because the intentional tort is outside the scope of business. 
D)  Janet is not liable to the client because she was acting in the ordinary course of business.

Question 3

Partners have a right to be indemnified for expenditures they make for the partnership from their personal funds.

Accepted Answer

A) True 
 B)False

Question 4

Kate is a partner in a limited liability partnership (LLP)which provides accounting services.Acting within her authority,Allie,who is one of Kate's subordinates,negligently provides accounting services to a client.The client sues the LLP and its partners.Which of the following is incorrect?

Accepted Answer

A)  The LLP is liable to the client. 
B)  Allie is liable to the client,and the judgment may be satisfied out of her personal assets. 
C)  Kate is not liable for Allie's negligence. 
D)  Kate is liable to the client,and the judgment may be satisfied out of her partner's personal assets. 
A)  The LLP is liable to the client. 
B)  Allie is liable to the client,and the judgment may be satisfied out of her personal assets. 
C)  Kate is not liable for Allie's negligence. 
D)  Kate is liable to the client,and the judgment may be satisfied out of her partner's personal assets.

Question 5

LLP partners are personally liable for the actions of the business.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is NOT true about the management powers of partners?

Accepted Answer

A)  A partner whose name is not on the signature card filed with the bank does not have apparent authority to issue checks. 
B)  A partner's knowledge of material information relating to partnership affairs is imputed to the partnership. 
C)  A partner has implied and apparent authority to indorse and cash checks drawn payable to the order of the partnership. 
D)  A partner who has the authority to borrow money also has authority to issue negotiable instruments. 
A)  A partner whose name is not on the signature card filed with the bank does not have apparent authority to issue checks. 
B)  A partner's knowledge of material information relating to partnership affairs is imputed to the partnership. 
C)  A partner has implied and apparent authority to indorse and cash checks drawn payable to the order of the partnership. 
D)  A partner who has the authority to borrow money also has authority to issue negotiable instruments.

Question 7

Mark and Bonnie are partners.Mark contributed $30,000 of capital to the partnership and Bonnie contributed $15,000.Mark does 70 percent of the partnership's work,while Bonnie does 30 percent.They agree that Mark will assume 60 percent of partnership losses and Bonnie 40 percent.They have not decided how to share profits.The partnership earns a profit of $90,000.What is Bonnie's share of the profits?

Accepted Answer

A)  $45,000 
B)  $30,000 
C)  $27,000 
D)  $36,000 
A)  $45,000 
B)  $30,000 
C)  $27,000 
D)  $36,000

Question 8

The standards and principles of agency law's respondeat superior are applied in determining the liability of the partnership and of the other partners for the torts of a partner and other partnership employees.

Accepted Answer

A) True 
 B)False

Question 9

Express authority:

Accepted Answer

A)  is created by agreement of partners. 
B)  is based on what is usual business for partnerships of the same general type. 
C)  is the sole determinant of a partner's actual authority. 
D)  is established only in writing. 
A)  is created by agreement of partners. 
B)  is based on what is usual business for partnerships of the same general type. 
C)  is the sole determinant of a partner's actual authority. 
D)  is established only in writing.

Question 10

A partner in a partnership firm should make all attempts to take decisions that are in the best interest of the firm.This is related to the concept of _____.

Accepted Answer

A)  duty to serve 
B)  duty to act within actual authority 
C)  duty of care 
D)  duty to account 
A)  duty to serve 
B)  duty to act within actual authority 
C)  duty of care 
D)  duty to account

Question 11

A trading partnership:

Accepted Answer

A)  borrows money to avoid cash flow problems. 
B)  engages in providing services. 
C)  has no substantial inventory. 
D)  buys but does not sell merchandise. 
A)  borrows money to avoid cash flow problems. 
B)  engages in providing services. 
C)  has no substantial inventory. 
D)  buys but does not sell merchandise.

Question 12

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.

Question 13

In a partnership,some classes of partners may have greater voting rights than others.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is applied in determining the liability of a partnership and of the other partners for the torts of a partner and other partnership employees?

Accepted Answer

A)  Respondeat superior 
B)  De facto 
C)  Habeas corpus 
D)  Juris privati 
A)  Respondeat superior 
B)  De facto 
C)  Habeas corpus 
D)  Juris privati

Question 15

The _____ requires partners to undertake their share of responsibility for running the day-to-day operations of the partnership business.

Accepted Answer

A)  duty to act within actual authority 
B)  duty to serve 
C)  duty of care 
D)  duty to account 
A)  duty to act within actual authority 
B)  duty to serve 
C)  duty of care 
D)  duty to account

Question 16

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.

Question 17

In a partnership agreement,partners are not criminally liable when a partner commits a crime in the course and scope of transacting partnership business,even if they knew of the partner's criminal tendencies and placed him or her in a position in which he or she could commit a crime.

Accepted Answer

A) True 
 B)False

Question 18

A partnership will be bound by the legal admissions or representations of its partners.

Accepted Answer

A) True 
 B)False

Question 19

Hannah is a managing partner of Andrusian Worldwide LLP,an accounting and consulting partnership.Acting within her implied authority,Hannah makes a contract for Andrusian to perform an audit for National Motors Company.The audit fee is $325,000.The performance of the audit takes more hours than Hannah expected,because Hannah has failed to determine the number of locations in which National Motors does business prior to setting the audit fee.As a result,Andrusian loses $50,000 on the audit.Has Hannah breached a fiduciary duty?

Accepted Answer

Yes.Hannah's failure to determine the nu

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 38: Operation of Partnerships and Related Forms

Which of the following is true about partnership agreements?

Partners have a right to be indemnified for expenditures they make for the partnership from their personal funds.

Kate is a partner in a limited liability partnership (LLP)which provides accounting services.Acting within her authority,Allie,who is one of Kate's subordinates,negligently provides accounting services to a client.The client sues the LLP and its partners.Which of the following is incorrect?

LLP partners are personally liable for the actions of the business.

Which of the following is NOT true about the management powers of partners?

The standards and principles of agency law's respondeat superior are applied in determining the liability of the partnership and of the other partners for the torts of a partner and other partnership employees.

Express authority:

A partner in a partnership firm should make all attempts to take decisions that are in the best interest of the firm.This is related to the concept of _____.

A trading partnership:

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:

In a partnership,some classes of partners may have greater voting rights than others.

Which of the following is applied in determining the liability of a partnership and of the other partners for the torts of a partner and other partnership employees?

The _____ requires partners to undertake their share of responsibility for running the day-to-day operations of the partnership business.

Which of the following is true about a nontrading partnership?

In a partnership agreement,partners are not criminally liable when a partner commits a crime in the course and scope of transacting partnership business,even if they knew of the partner's criminal tendencies and placed him or her in a position in which he or she could commit a crime.

A partnership will be bound by the legal admissions or representations of its partners.

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

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 Robinson-Patman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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