BUS 250 EXAM 3 QUESTIONS WITH VERIFIED
ANSWERS
Which of the following persons is an agent? - Answers - Diane, a shoe salesperson for
a retail store
Tim, a real estate broker for a large real estate company
Craig, a telephone marketing employee
Which of the following is not required of an agency relationship? - Answers -
Consideration
Mohammad was an employee in the new product development department of Estay Inc.
Mohammad was directly involved in the development of a new product that Estay
intended to launch in 6 months. Estay took great care to keep information concerning
the new product a secret. Ceries, Inc., a competitor of Estay, persuaded Mohammad to
leave Estay to direct Ceries' marketing department. Which statement is correct? -
Answers - Mohammad cannot share with Ceries the confidential information he knows
about Estay's new product because he has a duty not to disclose confidential
information he acquired during the agency.
John hired Tim to sell his house. Which statement is correct? - Answers - John is Tim's
principal
The doctrine of estoppel would most often apply in situations of - Answers - apparent
authority
An agent may not engage in inappropriate behavior that reflects badly on the principal.
This rule applies to conduct - Answers - during both working hours and off-duty time
Pamela hired Lena to sell her business, Lena - Answers - can buy the business only
with Pamela's permission
Janet was employed as a sales representative for Esday, Inc. An appreciative customer
gave her a diamond bracelet for all her hard work on a complicated contract. Can Janet
keep the bracelet? - Answers - Yes, but only if she discloses the gift to Esday and
Esday consents to her keeping the bracelet
Chance is traveling marketing representative for a publishing company. He is an
independent contractor. One afternoon while driving to a meeting, he negligently runs a
stop sign and causes an accident. Judy is injured. Judy can - Answers - hold Chance
but no the company liable.
, 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 May 29.
- Answers - The contract is void since the agency terminated May 29.
Jim agreed to show Donna's car to a potential buyer. Donna was not able to be home
since she had to attend a meeting. After showing the car, Jim left the keys in it and the
car was stolen. Which statement is correct? - Answers - Since Jim is a gratuitous agent,
he will be only liable for the loss of the car if his conduct constitutes gross negligence.
HBR Accounting hired Denise, a CPA, to prepare tax returns. Which statement is
correct? - Answers - Denise, as a CPA, is an agent with special skills. She is held to a
higher duty than ordinary negligence.
Circus Pizza contracted with Art to run its birthday parties. Art's responsibilities included
supervising children and organizing the games. Circus did not investigate Art's
background, which included a history of assaulting children. Art assaulted a 7-year-old
girl in the restaurant's kitchen during a birthday party. Circus Pizza: - Answers - may be
held liable on the basis of negligent hiring
When a principal is partially disclosed: - Answers - the agent and principal will be jointly
and severally liable on the contract
Seventy farmers in Morgan County joined together to gain the advantages of
purchasing seed and fertilizer in bulk and of obtaining better prices when distributing
and selling their crops. These farmers have formed a - Answers - cooperative
The Federal Trade Commission requires franchisors to - Answers - give prospective
franchisees an offering circular at least 14 business days prior to the signing of a
contract or payment of any money.
The importance of a Subchapter S corporation is - Answers - its treatment of
shareholders for income taxation purposes
The business form that is taxed as a partnership and gives all owners limited liability is -
Answers - a limited liability company
Which of the following transactions would be considered by the IRS to be a taxable sale
of assets? Changing the form of business from - Answers - a corporation to an LLC
James was a partner in a large firm. He died unexpectedly. His son, Frank, wanted to
take over for his father 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
ANSWERS
Which of the following persons is an agent? - Answers - Diane, a shoe salesperson for
a retail store
Tim, a real estate broker for a large real estate company
Craig, a telephone marketing employee
Which of the following is not required of an agency relationship? - Answers -
Consideration
Mohammad was an employee in the new product development department of Estay Inc.
Mohammad was directly involved in the development of a new product that Estay
intended to launch in 6 months. Estay took great care to keep information concerning
the new product a secret. Ceries, Inc., a competitor of Estay, persuaded Mohammad to
leave Estay to direct Ceries' marketing department. Which statement is correct? -
Answers - Mohammad cannot share with Ceries the confidential information he knows
about Estay's new product because he has a duty not to disclose confidential
information he acquired during the agency.
John hired Tim to sell his house. Which statement is correct? - Answers - John is Tim's
principal
The doctrine of estoppel would most often apply in situations of - Answers - apparent
authority
An agent may not engage in inappropriate behavior that reflects badly on the principal.
This rule applies to conduct - Answers - during both working hours and off-duty time
Pamela hired Lena to sell her business, Lena - Answers - can buy the business only
with Pamela's permission
Janet was employed as a sales representative for Esday, Inc. An appreciative customer
gave her a diamond bracelet for all her hard work on a complicated contract. Can Janet
keep the bracelet? - Answers - Yes, but only if she discloses the gift to Esday and
Esday consents to her keeping the bracelet
Chance is traveling marketing representative for a publishing company. He is an
independent contractor. One afternoon while driving to a meeting, he negligently runs a
stop sign and causes an accident. Judy is injured. Judy can - Answers - hold Chance
but no the company liable.
, 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 May 29.
- Answers - The contract is void since the agency terminated May 29.
Jim agreed to show Donna's car to a potential buyer. Donna was not able to be home
since she had to attend a meeting. After showing the car, Jim left the keys in it and the
car was stolen. Which statement is correct? - Answers - Since Jim is a gratuitous agent,
he will be only liable for the loss of the car if his conduct constitutes gross negligence.
HBR Accounting hired Denise, a CPA, to prepare tax returns. Which statement is
correct? - Answers - Denise, as a CPA, is an agent with special skills. She is held to a
higher duty than ordinary negligence.
Circus Pizza contracted with Art to run its birthday parties. Art's responsibilities included
supervising children and organizing the games. Circus did not investigate Art's
background, which included a history of assaulting children. Art assaulted a 7-year-old
girl in the restaurant's kitchen during a birthday party. Circus Pizza: - Answers - may be
held liable on the basis of negligent hiring
When a principal is partially disclosed: - Answers - the agent and principal will be jointly
and severally liable on the contract
Seventy farmers in Morgan County joined together to gain the advantages of
purchasing seed and fertilizer in bulk and of obtaining better prices when distributing
and selling their crops. These farmers have formed a - Answers - cooperative
The Federal Trade Commission requires franchisors to - Answers - give prospective
franchisees an offering circular at least 14 business days prior to the signing of a
contract or payment of any money.
The importance of a Subchapter S corporation is - Answers - its treatment of
shareholders for income taxation purposes
The business form that is taxed as a partnership and gives all owners limited liability is -
Answers - a limited liability company
Which of the following transactions would be considered by the IRS to be a taxable sale
of assets? Changing the form of business from - Answers - a corporation to an LLC
James was a partner in a large firm. He died unexpectedly. His son, Frank, wanted to
take over for his father 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
