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

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

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

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-LegalUnited States – BUSPROG: Reflective

TOPICS:   CHAPTER 14—INSIGHT INTO ETHICS: SHOULD FRANCHISORS HAVE TO GIVE PROSPECTIVE FRANCHISEES INFORMATION ABOUT POTENTIAL EARNINGS?

KEYWORDS:   Bloom’s: Application

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-LegalUnited States – BUSPROG: Reflective

TOPICS:   CHAPTER 14—INSIGHT INTO ETHICS: SHOULD FRANCHISORS HAVE TO GIVE PROSPECTIVE FRANCHISEES INFORMATION ABOUT POTENTIAL EARNINGS?

KEYWORDS:   Bloom’s: Application

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-LegalUnited States – BUSPROG: Reflective

TOPICS:   CHAPTER 15—ONLINE DEVELOPMENTS: THE NEW ERA OF CROWDFUNDING

KEYWORDS:   Bloom’s: Application

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-LegalUnited States – BUSPROG: Reflective

TOPICS:   CHAPTER 15—ONLINE DEVELOPMENTS: THE NEW ERA OF CROWDFUNDING

KEYWORDS:   Bloom’s: Application

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-LegalUnited States – BUSPROG: Reflective

TOPICS:   CHAPTER 15—INSIGHT INTO ETHICS: SOFTWARE TO HELP OFFICERS SPOT POTENTIAL EMBEZZLERS

KEYWORDS:   Bloom’s: Application

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-LegalUnited States – BUSPROG: Reflective

TOPICS:   CHAPTER 15—INSIGHT INTO ETHICS: SOFTWARE TO HELP OFFICERS SPOT POTENTIAL EMBEZZLERS

KEYWORDS:   Bloom’s: Application

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

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