LA 245 Midterm 2 Review
LA 245 Midterm 2 Review LA 245
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This 15 page Study Guide was uploaded by Frankie Fucci on Monday March 21, 2016. The Study Guide belongs to LA 245 at Boston University taught by David Randall in Spring 2016. Since its upload, it has received 17 views. For similar materials see Introduction to Law in Law at Boston University.
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Date Created: 03/21/16
Agency Law Practice Quiz: GOT WRONG: While at work one evening, Joe was confronted by Tim. Tim had come into the store and accused Joe of trying to steal his girlfriend. Joe told Tim he was crazy but Tim persisted in yelling at Joe. Joe, now angered, stepped around the cash register and hit Tim in the jaw. Tim was seriously injured and sued Joe and his employer for his damages. a. Both Joe and his employer are probably liable to Tim. b. Joe's employer, but not Joe, is probably liable to Tim. c. Joe, but not his employer, is probably liable to Tim. d. Neither Joe nor his employer are probably liable to Tim. ANSWER: C REF: Text, p. 416 Jenny works on the sales floor and rings up sales transactions on the cash register at Harry’s Hardware. Which of these statements is incorrect? a. Jenny has express authority to conduct retail sales transactions. b. Jenny has implied authority to accept returns of purchased items. c. Jenny has apparent authority to sign payroll checks for other employees d. Jenny has actual, or express, authority to conduct retail sales transactions ANSWER: C REF: Text, pp. 408409 As a general rule, the doctrine of respondeat superior: a. applies to the torts of servants and independent contractors. b. applies to the torts of servants but not independent contractors c. applies to the torts of independent contractors but not servants d. applies to the torts of neither servants nor independent contractors B ANSWER: REF: Text, pp. 413414 GOT RIGHT: 1. Hank and Henrietta Berman divorced when their children Alice and Maggie were 12 and 10, respectively. The court granted custody of the children to Henrietta. The divorce was contentious, requiring numerous and lengthy court proceedings to settle controversies over custody and finances. The court appointed Jane Hertz, a lawyer, to arbitrate the disputes between Hank and Henrietta and also to represent Alice and Maggie as guardian ad litem. (A guardian ad litem represents minor children who have a stake in the outcome of a lawsuit, determining the scope of their interests, who they might be affected by the lawsuit, and advocating to the court on their behalf.) If Hertz could not successfully resolve the Bermans’ disputes through arbitration then the court would impose a resolution. As proceedings wore on Hertz, in her capacity as guardian ad litem, took positions critical of Henrietta Berman’s conduct involving the children and cooperation with Hertz. Henrietta complained to the court that Hertz was biased against her, was not acting in her daughters’ best interests, and was secretly meeting with Hank Berman to discuss financial and custody issues. The court must decide whether Hertz may serve both as guardian ad litem and arbitrator. How should it rule? a. That Hertz may not serve in both capacities because her duty as arbitrator to find facts and consider arguments from all parties conflict with her duty as Alice’s and Maggie’s guardian ad litem to represent and advocate for their interests b. That Hertz may serve in both capacities because as a lawyer she is trained to conduct herself in such a way that her duties as guardian ad litem do not conflict with her duties as arbitrator c. That Hertz may serve in both capacities because she is an agent acting for the court as principal, and since the court appointed her to serve in both capacities then the court waived any conflict of interest d. That Hertz may serve in both capacities because doing so involves no conflict of interest 1. Hank and Henrietta Berman divorced when their children Alice and Maggie were 12 and 10, respectively. The court granted custody of the children to Henrietta. The divorce was contentious, requiring numerous and lengthy court proceedings to settle controversies over custody and finances. The court appointed Jane Hertz, a lawyer, to arbitrate the disputes between Hank and Henrietta and also to represent Alice and Maggie as guardian ad litem. (A guardian ad litem represents minor children who have a stake in the outcome of a lawsuit, determining the scope of their interests, who they might be affected by the lawsuit, and advocating to the court on their behalf.) If Hertz could not successfully resolve the Bermans’ disputes through arbitration then the court would impose a resolution. As proceedings wore on Hertz, in her capacity as guardian ad litem, took positions critical of Henrietta Berman’s conduct involving the children and cooperation with Hertz. Henrietta complained to the court that Hertz was biased against her, was not acting in her daughters’ best interests, and was secretly meeting with Hank Berman to discuss financial and custody issues. The court must decide whether Hertz may serve both as guardian ad litem and arbitrator. How should it rule? a. That Hertz may not serve in both capacities because her duty as arbitrator to find facts and consider arguments from all parties conflict with her duty as Alice’s and Maggie’s guardian ad litem to represent and advocate for their interests b. That Hertz may serve in both capacities because as a lawyer she is trained to conduct herself in such a way that her duties as guardian ad litem do not conflict with her duties as arbitrator c. That Hertz may serve in both capacities because she is an agent acting for the court as principal, and since the court appointed her to serve in both capacities then the court waived any conflict of interest d. That Hertz may serve in both capacities because doing so involves no conflict of interest 4. The equal dignities rule would not apply to a. an agent retained to negotiate and execute with top management of a corporation a three year employment contract that, under contract law, must be in writing to be enforceable because it is longer than one year b. an agent retained to sell a house for a person going to prison for five years c. an agent retained to negotiate and execute for an Internet retailer a tenyear warehouse lease that, under contract law, must be in writing to be enforceable because it is longer than one year d. an agent retained to sell stock if and when the stock price exceeds $42/share; the stock is currently priced at $14/share and is owned by a principal who wishes to keep his identity secret Babcock Realty, an apartmentmanagement company, rented an apartment to Donna Crane in a building owned by SJN Investments, Inc. Babcock Realty is not related to SJN Investments. It manages the building under a twoyear management contract with SJN, similar to Babcock’s other management engagements with area landlords. Two months after moving in Crane complained to Babcock Realty that she had no hot water in her apartment. Babcock hired Driscoll Plumbers to repair the water heater. Despite Driscoll Plumber’s best efforts it could not repair the water heater because the heating element was burnt out, the tank was badly rusted, and Driscoll believed the tank could soon fail. Driscoll promptly told all of this to Babcock, said the water heater needed replacement, and asked whether Babcock wanted Driscoll to purchase and install a new one. Babcock did not respond to Driscoll and did not notify SJN Investments of what it learned from Driscoll. After one more week without hot water a building inspector, at Crane’s request, certified in writing to Babcock and SJN Investments that the lack of hot water violated the state health code. Neither Babcock nor SJN responded to the health inspector’s notice. A few days later the hot water heater burst, scalding Crane with hot water and causing second degree burns, and also damaging property in his apartment. Crane moved out and sued Babcock Realty, SJN Investments, and Driscoll Plumbing for breaching her lease and for negligence. Which of these statements is incorrect? a. If a court finds that Babcock was negligent in failing to correct Crane’s hot water problem, then SJN Investments should be liable to Crane on the theory of respondeat superior. b. Driscoll should not be liable to Crane because it was not a party to her lease and the facts do not show that it acted negligently. c. If a court finds that Babcock was negligent in failing to correct Crane’s hot water problem, then SJN Investments could be liable to Crane on the negligence claim if the court finds that SJN was negligent in hiring or supervising Babcock. d. Because it managed the building for SJN pursuant to a written management agreement, Babcock likely had actual, or express, authority to hire Driscoll to deal with Crane’s hot water problem. 6. Which of the following is not required of an agency relationship? a. Consideration. b. Fiduciary duties. c. Consent of the parties to act as agent or principal. d. Control of the principal over the agent's conduct. 7. As a general rule, the doctrine of respondeat superior: a. applies to the torts of servants and independent contractors. b. applies to the torts of servants but not independent contractors c. applies to the torts of independent contractors but not servants d. applies to the torts of neither servants nor independent contractors 8. Zach worked for Four Corner's Pizza as a driver. His duties consisted of making deliveries along a designated route a few miles from the pizza shop. One day while delivering pizzas Zach visited his girlfriend, Ocarina, who lived fifty miles out of his delivery route. While driving to Ocarina’s Zach injured a pedestrian, Chuck. The accident was caused because of Zach's negligent operation of the delivery truck. Chuck is now suing both Zach and Four Corner's for personal injuries. Under the circumstances: a. Four Corner's is liable under the doctrine of respondeat superior. b. Four Corner's is not liable because Zach is an agent. c. Four Corner’s is liable because it failed to adequately supervise Zach, an independent contractor. d. Four Corner's is not liable because Zach abandoned Four Corner’s employment and was on a frolic when the accident occurred. 9. Ron is the business agent for Duende, a rock and roll band. He is also the agent for another popular rock group, Narrowsmith. Ron negotiates a deal with a Kansas City promoter to have Narrowsmith play in Arrowhead Stadium after a Chiefs football game. The promoter was willing to pay $250,000 for both groups to play after the game, the money to be split equally between them. Ron talked her into booking only Narrowsmith for a price of $175,000. His contract terms with each group meant that Ron made more money under this arrangement than he would have made if both groups had played at the concert. To be fair to Duende Ron has the promoter agree to pay Duende $75,000 to appear in another concert four months later. Has Ron violated his fiduciary duty to Duende? a. Yes, because Ron put his own interests ahead of his Duende’s interests. b. Yes because Ron cannot act as an agent for both groups under any circumstances. c. No, because Ron took reasonable steps to be fair to Duende by obtaining another booking for the band. d. No. This scenario arises frequently with agents who represent multiple musical acts, and they would never be able to book any of their clients if this could be construed as a breach of duty 10. Mrs. O'Leary hired Jenna to sell her house in Michigan. She executed a power of attorney in favor of Jenna authorizing her to do "anything and everything associated with the sale of real estate, acting as a prudent person." On May 30, Jenna finalized a deal with Brandon for the purchase of the house. Brandon and Jenna signed the real estate contract that day. Jenna learned the next day that Mrs. O'Leary had died on May 29. a. The contract is void since the agency terminated May 29. b. The contract is valid since the agency terminated when Jenna was notified of Mrs. O'Leary's death on May 30. c. The contract is voidable at the option of Mrs. O'Leary's estate. d. The contract is voidable at the option of Brandon. Employment Practice Quiz: GOT WONRG: Wrongful discharge claims can generally be based upon any of the following except: a. public policy. b. criminal law. c. contract. d. tort. ANSWER: B REF: Text, pp. 428433 GOT RIGHT: The Family and Medical Leave Act applies to: a. companies with 15 or more full time workers. b. companies with 50 or more employees. c. companies with 100 or more employees. d. any company engaged in interstate commerce. Good News, a Christian Bookstore, refused to hire Mark because he was not a "bornagain Christian." (A bornagain Christian is one who becomes a fundamentalist, or orthodox, believer in Christianity, typically as an adult or older teenager.) If Mark brings a Title VII action against Good News, its best defense would be: a. it did not discriminate against a member of a protected class. b. the First Amendment protects Good News' discriminatory hiring practices c. being a "bornagain Christian" is a bona fide occupational requirement. d. they could not reasonably accommodate Mark's religious preferences Which of the following may be legitimate nondiscriminatory criteria for selection of an employee? a. age. b. race. c. color. d. educational level. When may an employer require an employee to submit to a lie detector test? a. When the employer has hired the employee to work for less than 90 days b. When the employer is conducting the test as part of an ongoing investigation into crimes that have occurred in the workplace. c. When the employer has reason to believe the employee is using illegal drugs on the job. d. When the employer is questioning all employees using a lie detector. Refer to the Victoria’s Secret narrative. Which of the following is not relevant to Ellen’s claim against the law firm? a. That she has worked for the law firm for seven years b. That a reasonable woman would find the work atmosphere to be offensive c. That, as required by the law firm’s employment manual, she reported the incidents to the head of the human resources department d. That the law firm never spoke with or reprimanded Mitchell Refer to the Victoria’s Secret narrative. On these facts, which theory provides Ellen with the best chance of success in a lawsuit against the firm? a. A sexual harassment claim on a quid pro quo theory b. A sexual harassment claim on a hostile work environment theory c. A claim of intentional infliction of emotional distress d. A claim of wrongful discharge Refer to the Victoria’s Secret narrative. Which of the following statements is true? a. Ellen’s case is weaker if the incidents she described happened over a period of five years, rather than five consecutive days b. Ellen should lose her lawsuit because she should not have had a Victoria’s Secret catalog at her desk where Mitchell could see it c. Ellen cannot win her lawsuit unless Mitchell withheld some privilege of employment from her because she failed to provide him pictures of her in a Victoria’s Secret outfit d. Ellen could not win a lawsuit against the law firm because, as a lawyer, Mitchell knows or should know the requirements of sexual harassment law, and therefore the firm is not responsible for his behavior. Which of these is the least likely to be a valid defense to a employee’s claim under Title VII? (Assume the employer has enough employees to be subject to Title VII.) a. That the employer passed over the female plaintiff for promotion in favor of a male employee who had been with the company eight years longer with consistently positive employment evaluations b. That the employer passed over an Asian plaintiff for promotion in favor of a Caucasian employee who had been with the company the same length of time but had consistently received much better employment evaluations than the plaintiff c. That a Catholic elementary school passed over an atheist in favor of an observant Catholic to teach a religion course d. That the employer passed over a Muslim employee for a sales position in favor of a nonMuslim employee because the employer feared alienating its customers Jerry Wheeler applied for a position on a road maintenance crew with the Missouri Highway and Transportation Commission ("MHTC"). The MHTC rejected him for the job, saying he was not qualified. The MHTC subsequently hired a woman for the position Wheeler had sought, noting when it did so that it wanted to give women a chance to break into a field dominated by men. Wheeler sued MHTC under Title VII, claiming that it engaged in "reverse discrimination" when it hired the woman rather than him. After a trial on the merits the jury found that the MHTC had engaged in gender discrimination when it hired the female employee. The jury also found that Wheeler was not entitled to an award of damages, so he walked away with nothing from the lawsuit. Which of these provides the best basis for the jury’s decision not to award damages to Wheeler? a. Title VII does not recognize reverse discrimination claims. b. These facts show a case of unintentional Title VII discrimination in which the only possible legal remedy is to award the plaintiff the job he sought, not money damages. c. The MHTC hired the woman pursuant to an affirmativeaction plan required by Title VII. d. Even had it not favored the female employee, MHTC would not have hired Wheeler for the position he sought. Business Organization Practice Quiz: GOT WRONG: Darrell and his brother Darrell have an equal partnership. This year, after expenses, the partnership has a profit of $100,000. Darrell and his brother Darrell will each pay taxes on: a. whatever they receive from the partnership. b. $50,000. c. $100,000. d. $0 (the partnership is responsible for paying their taxes) ANSWER: B REF: Text, pp. 497500; Outline pp. 67 68 The form of business ownership that is the most easily transferable is the: a. general partnership. b. corporation. c. limited liability company. d. limited partnership. ANSWER: B REF: Text, p. 486, 506 Which of the following completes this sentence correctly? “An S corporation“ a. is the type of entity created when a limited liability company converts to a corporation b. can be either publiclyheld or privatelyheld c. provides greater flexibility regarding the number and type of its owners than a limited liability company d. can be a closelyheld corporation ANSWER: D REF: Text, pp. 488489 GOT RIGHT: Which of the following entities does not provide limited liability to its owners? a. Limited liability company. b. General partnership. c. Subchapter S corporation. d. C Corporation. ANSWER: B Rachel and Cyndi started a retail business called Zebra Toy Company. They operate the business as a partnership. Under partnership law: a. Rachel is personally liable for any business contracts entered into by Cyndi. b. Rachel is personally liable for any business debts, regardless of whether she or Cyndi created the obligation. c. Rachel is personally liable for any negligent act committed by Cyndi in the scope of the business activity. d. All the above are correct. ANSWER: D Murray was a partner in a large firm. He died unexpectedly. His son, Frank, wanted to take over for Murray in the partnership and was well qualified to do the work his father had done. Which statement best describes Frank's rights in the partnership if he inherits the interest? a. Frank has a right to take over for his father in the partnership. b. Frank is entitled to the economic value of Murray’s interest in the partnership, but has no right to become a full partner. c. Frank has no rights to his father's partnership interest. d. Frank has the right to exercise Murray’s management responsibilities in the partnership, but has no right to the economic value of Murray’s interest ANSWER: B Charles and Ellen, an unmarried couple, run an ice cream store. The business is not incorporated. Their business is a: a. sole proprietorship. b. partnership. c. joint venture. d. limited liability company. ANSWER: B John, his parents Jim and Jen, and his brothers Juan, Johann, and Jean own 100% the stock of 6 Js, Inc., which in turn owns the farm on which they all work. This corporation is probably: a. a subchapter S corporation. b. a C corporation. c. a closelyheld corporation. d. a professional corporation ANSWER: C Which of the following are passthrough entities? a. C corporation and limited liability company b. S corporation and limited liability company c. S corporation and C corporation d. General partnership and C corporation ANSWER: B Which of these statements is false? a. A sole proprietorship is a business that is owned by one person and not registered with the state as a corporation, limited liability company, or other business entity b. Partners in a general partnership generally can avoid joint and several liability for the partnership’s obligations by entering into a written partnership agreement in accordance with the Revised Uniform General Partnership Act. c. The owner of a sole proprietorship reports all profits from the business on her individual tax return. d. Any individual partner in a general partnership can usually bind the whole business to a contract or other business deal ANSWER: B Refer to the Red Square Partners narrative. Annually for the past three years the partnership has leased one new car for each partner for business and personal use. At the end of each oneyear lease the partnership turns in the cars and enters a new oneyear lease. Typically the partners have approved a maximum amount to pay for each lease (e.g.. $350/month) and a list of acceptable car makes and models and given Joe the authority to negotiate the best deal within the authorized parameters with Mort’s Mercedes, Inc.. Mort’s knew that Joe was leasing the cars on behalf of the partnership for the partners’ use because each year he said something like “my partners have given me a budget” or “we’ve agreed to lease something sportier this year.”. When the time came to renew the leases for the current year Joe did not obtain the other partners’ approvals on either lease payments or car models. He went to Mort’s, said “here I am againthis year we’re going upscale,” and entered into leases for four new SClass Mercedes sedans at $700/month each. During the negotiations Mort’s said “this is a big step up from what you’ve leased before” to which Joe responded “we’ve had a great year and decided to treat ourselves.” When the dealer delivered the leased cars to their office Fred, Karl, and Vlad refused to accept them, and refused to allow Red Square Partners to use partnership funds to pay for the leases. Mort’s Mercedes sued Red Square Partners for breach of contract. Who should win? a. Red Square Partners. Joe did not have express authority to lease the Mercedes. b. Mort’s Mercedes. Because of the prior dealings between Joe and Mort’s, Joe had apparent authority to lease the Mercedes. c. Mort’s Mercedes. Joe had the implied authority to lease the Mercedes. d. Mort’s Mercedes. An individual partner always has the power to bind the partnership to contracts. ANSWER: B REF: Text, pp. 497498, 409, 419 Larry, Moe, and Curly own, respectively, Larry’s Landscaping General Partnership (Larry’s brother Barry is the other general partner), Moe’s Masonry, Inc., (a corporation), and Curly’s Cookware LLC (a limited liability company). Each business has annual operating income of $5,000,000 before taking into account federal income tax paid, if any. Each business distributes to its owners its entire annual operating income, less any tax paid. Larry’s Landscaping GP and Curly’s Cookware LLC are both passthrough entities; Moe’s Masonry, Inc. and Curly’s Cookware LLC both provide limited liability to their owners. Assume the applicable entity income tax rate is 34%, and the applicable individual income tax rate is 39% Case 1 Case 2 Operating income $5,000,00 $5,000,0 0 00 Entity federal income (1,700,00 -0- tax 0) Distributed to owner(s) 3,300,000 5,000,00 0 Owner(s) federal 1,287,000 1,950,00 income tax 0 To owner(s) after tax 2,013,000 3,050,00 0 Which of these statements is correct? a. Case 2 describes the tax treatment of Moe’s Masonry, Inc.and Curly’s Cookware LLC b. Case 2 describes the tax treatment of Larry’s Landscaping General Partnership and Moe’s Masonry, Inc. c. Case 2 describes the tax treatment of Larry’s Landscaping General Partnership and Curly’s Cookware LLC d. Case 1 describes the tax treatment of Larry’s Landscaping General Partnership. ANSWER: C Business Organization Jeopardy: Mutual agency: doctrine that defines relationship between general partners in a partnership Creating an Subchapter (S) corp: requires complying with rules/regulations of Internal Revenue Code Limited partnerships, LLCs and corporation: created pursuant to state statutory law Voluntary creditors: banks, vendors, suppliers, employees Corporations and LLCs provide limited liability to all owners Partnership by estoppel: doctrine that allowed courts to treat a non-partner as if he were an actual partner in a business, and thus make him liable for business obligations Corporations Practice Quiz: GOT WRONG: If a court determines a director's corporate decision amounted to self dealing: a. the business judgment rule will not apply. b. the transaction being challenged will be automatically voided. c. the director is automatically personally liable to the corporation. d. All the above are correct. ANSWER: A Which of the following is not a purpose of the business judgment rule? a. To make it easier for shareholders harmed by corporate decisions to hold those who made the decision accountable for the harm b. To keep judges out of corporate decision making. c. To allow directors to do their job without constantly being concerned about personal liability. d. To encourage people to become corporate directors by limiting their potential liability. ANSWER: A Laurie is incorporating Miner’s Daughter, Inc., a usedclothing business. Miner’s Daughter’s' home state will be Connecticut. It will own or rent office and retail space and conduct business in Massachusetts, Rhode Island, and Vermont. Laurie: a. must incorporate the business in Connecticut, the home state. b. must incorporate the business in each of Connecticut, Massachusetts, Rhode Island and Vermont. c. must incorporate in Delaware. d. can incorporate the business in any state. ANSWER: D Sajona, Inc. purchased 10,000 shares of its own stock from private investors. The stock Sajona, Inc. purchased is called: a. authorized and unissued stock. b. authorized and issued stock. c. treasury stock. d. repurchased stock. ANSWER: C Alec was a director of Baldwin, Inc. and Glengarry, Inc. Baldwin is negotiating a major purchase from Glengarry. Alec must: a. advise the boards of both corporations of his conflict of interest. b. advise the boards of both corporations of his conflict and not vote on the transaction. c. resign from one of the boards. d. resign from both boards. ANSWER: B GOT RIGHT: Jenny is an officer of a corporation. She made a difficult business decision. When a shareholder challenged her decision the court ruled that Jenny had acted in good faith and the business judgment rule applied. This means that: a. The court will not hold Jenny personally liable for the decision, even if it results in money losses to the company. b. A court will review Jenny's decision to determine whether it made good business sense. c. Jenny is immune from a lawsuit. d. Jenny must resign from the board. ANSWER: A When forming a corporation, the promoter must file the corporate charter with: a. the Secretary of State of the state of domicile b. the Treasury or Revenue Department of the state of domicile c. the Department of Commerce of the United States d. the Secretary of State of the United States ANSWER: A Which of these statements is true? a. A promoter can free itself of all liability for preincorporation contracts by assigning all rights and delegating all duties under such contracts to the corporation b. A promoter is personally liable for all contracts he signs before the corporation is formed c. The incorporation process is governed by the Internal Revenue Code and regulations issued under its authority by the United States Treasury Department d. A corporation that intends to become publiclytraded must incorporate in Delaware ANSWER: B Coyote Inc. Wile E. Coyote, Inc.’s balance sheet shows assets totaling $742,000 and liability and equity as follows: Liability Short Term Liability Acme Roadrunner Decoys and Dolls $150,00 0 Acme Hardware and Trapping 66,000 Supplies Acme First Aid Supplies 100,000 316,000 Long Term Liability Lone Cactus Loan Company Note 100,000 Debenture held by Adventure Denture 150,000 Co. 250,000 Total Liability $666,00 0 Equity 10% Preferred Stock 1,000 shares @ 75,000 7.50/share Common stock 100,000 shares 1,000 Total Equity $76,000 Total Liability and Equity $742,00 0 Refer to the Coyote, Inc. narrative. Assume that Wile E. Coyote, Inc.’s common stock is held by members of the extended Coyote family, who purchased it for $1.00/share and have never received any dividends from Coyote. Assume further that Coyote has paid in full all dividends to its preferred stockholders Which of these statements is incorrect? a. The Acme companies will receive full payment of Coyote’s shortterm liabilities. b. Lone Cactus Loan and Adventure Denture will receive full payment of Coyote’s longterm liabilities c. Preferred stockholders will receive full payment of their investment in Coyote’s preferred shares. d. Common stockholders will receive a profit on their investment in Coyote, Inc. ANSWER: D This is a difficult question. It looks like it should appear on a finance exam, not a law exam. Answering it correctly requires understanding of the meaning of the statement on p. 812 of the Text that “common stock is last in line for any corporate payouts, including dividends and liquidation payments.” It is easy to memorize that statement and repeat it on an exam; this question requires understanding how to apply it in practice. (a) Coyote, Inc.’s assets of $742,000 are more than enough to cover its $316,000 shortterm liability to Acme (b) Coyote, Inc.’s assets of $742,000 are also more than enough to cover its $250,000 longterm liability to Lone Cactus and Adventure Denture (c) Ditto the preferred shareholders (d) After paying all other claims on corporate assets, Wile E. Coyote, Inc. has $1,000 to distribute to holders of 100,000 common shares, or $0.01 per share. If the shareholders purchased the shares for $1.00 and never received dividends from the corporation, their investment in the corporation has not been profitable.
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