ANSWERS TO
AICPA QUESTIONS
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
,2 Answers to AICPA Questions
CHAPTER 10
INTELLECTUAL PROPERTY RIGHTS AND THE INTERNET
1. (a) Computer software is covered under the general copyright laws and is therefore usually
copyrightable as an expression of ideas. Answer (b) is incorrect because copyrights in
general do not need a copyright notice for works published after March 1, 1989. Answer
(c) is incorrect because a recent court ruled that programs in both source codes, which
are human readable, and in machine readable object code can be copyrighted. Answer
(d) is incorrect because copyrights taken out by corporations or businesses are valid for
100 years from creation of the copyrighted item or 75 years from its publication,
whichever is shorter.
2. (c) Computer databases are generally copyrightable as compilations. Answer (a) is not
chosen because copies for archival purposes are allowed. Answer (b) is not chosen
because in the case of corporations or businesses, the copyright is valid for the shorter
of 100 years after the creation of the work or 75 years from its date of publication.
Answer (d) is not chosen because computer programs are now generally recognized as
copyrightable.
3. (d) Under the fair use doctrine, copyrighted items can be used for teaching, including
distributing multiple copies for class use. Answer (a) is incorrect because although he
originally purchased this software for personal use, he may still use it for his class, in
which case, the fair use doctrine applies. Answer (b) is incorrect because databases
can be copyrighted as derivative works. Answer (c) is incorrect because the use of the
computer is not the issue but the fair use doctrine is.
4. (c) Both patent and copyright law are used under modern law to protect computer
technology rights. Answer (a) is incorrect because copyright law now also protects
software. Answer (b) is incorrect because modern law also protects software as
patentable. Answer (d) is incorrect because modern law generally protects intellectual
property rights in software under both patent law and copyright law.
CHAPTER 12
NATURE AND CLASSES OF CONTRACTS: CONTRACTING ON THE INTERNET
1. (a) The offeror made a promise for an act. When the act was performed, a unilateral
contract was created and the offeror is bound to pay. Answer (b) is incorrect because
unjust enrichment is generally considered only if there was no contract and the court
wishes to provide an “equitable solution.” Answer (c) is incorrect because there are no
public policy issues involved. Answer (d) is incorrect because a quasi-contract arises
only if there was no contract to begin with and the law implies one to prevent an unjust
enrichment. Since there was a unilateral contract, there can be no quasi-contract.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
,Answers to AICPA Questions 3
CHAPTER 13
FORMATION OF CONTRACTS: OFFER AND ACCEPTANCE
1. (c) If sent by a mode of communication expressly or impliedly authorized by the offeror
(e.g., mail or telegram), acceptance of an offer is normally effective on dispatch, even if
subsequently delayed or lost. Noll’s telegram was an effective acceptance of the offer
by Able. The rule applies to any situation in which acceptance is made in a manner
expressly or impliedly authorized. This can include telegraph or telephone as well as
mail in most circumstances. In this situation the acceptance was effective on dispatch,
before Able’s attempted revocation.
2. (b) Common law applies to this contract because it involves real estate. In this situation,
Fox’s reply on October 2 is a counteroffer and terminates Summers’ original offer made
on September 27. The acceptance of an offer must conform exactly to the terms of the
offer under common law. By agreeing to purchase the vacation home at a price
different from the original offer, Fox is rejecting Summers’ offer and is making a
counteroffer. Answer (a) is incorrect because the fact that Fox failed to return
Summers’ letter is irrelevant to the formation of a binding contract. Fox’s reply
constitutes a counteroffer as Fox did not intend to accept Summers’ original offer.
Answer (c) is incorrect because Summers’ offer was rejected by Fox’s counteroffer.
Answer (d) is incorrect because with rare exceptions, silence does not constitute
acceptance.
3. (c) Peters’ offer had been revoked. Since revocation notice can be received either directly
or indirectly, Mason, in effect, received the revocation notice when he was told the
mower had been sold to Bronson; and therefore, Mason’s acceptance was ineffective,
even though the specified time of the oral contract had not expired. Peters’ offer had
been revoked prior to Mason’s acceptance. There was no obligation on the part of
Peters to keep the offer open, since there was no consideration for him to do so.
CHAPTER 14
CAPACITY AND GENUINE ASSENT
1. (a) Where a mistake is made by only one party (a unilateral mistake), the rule is that the
mistaken party is bound by the contract unless the nonmistaken party knew of the
mistake or should have known of the mistake. In this question, the nonmistaken party
knew of the mistake; thus, the mistaken party is not bound by the contract. Whether the
mistake was a result of gross negligence is irrelevant.
2. (a) Answer (b) is incorrect because a disaffirmance need not be in writing. Answer (c) is
incorrect because a minor can disaffirm at any time during minority or for a reasonable
time thereafter regardless of payment. Answer (d) is incorrect because a minor need
only return whatever consideration he/she has, even if damaged or lost. Answer (a) is
correct because it is still a reasonable time after majority.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
, 4 Answers to AICPA Questions
CHAPTER 16
LEGALITY AND PUBLIC POLICY
1. (d) There are two types of licensing statutes. First, there are licensing statutes intended
primarily for revenue raising. Second, there are licensing statutes (regulatory) intended
primarily to protect the public against dishonest or incompetent professionals. An
individual without a license can collect his total compensation if the primary purpose of
the statute was to raise revenue. However, if the purpose was regulatory in nature
(intended to protect the public), the individual can collect nothing since the contract is
voidable. Thus, an unlicensed individual who enters into a contract to provide regulated
services will not be allowed to enforce the contract or recover even the value of the
services rendered.
2. (d) Answer (a), (b), and (c) are correct statements because covenants not to compete must
be reasonable in time and geographic scope. The answer is (d) because it is an
incorrect statement regarding the value of goodwill.
CHAPTER 17
WRITING, ELECTRONIC FORMS, AND INTERPRETATION OF CONTRACTS
1. (d) The contract terms need not appear in a single document so long as the several
documents refer to the same transaction. Only the signature of the party against whom
enforcement is sought is required. If the performance could occur within a one-year
period, the contract is not within the statute and need not be written. Only contracts of
$500 or more that involve the sale of goods fall under the Statute of Fraud and must be
in writing.
2. (c) The Statute of Frauds requires only that the written contract be signed by the party to be
charged, not by all parties to the contract. Answer (a) is incorrect because it is not
required that the contract be formalized in a single writing. Two or more documents can
be combined to create a sufficient writing to satisfy the Statute of Frauds as long as one
of the documents refers to the others. Answer (b) is incorrect because the Statute of
Frauds does not require consideration to be fair and adequate. Answer (d) is incorrect
because while the Statute of Frauds is applicable to the sale of goods only if the
purchase price is $500 or more, it is always applicable to the sale of real estate,
regardless of purchase price.
3. (c) The parole evidence rule will prevent the admission of evidence concerning the oral
agreements regarding who pays the utilities, since the rule excludes evidence of prior or
contemporaneous oral agreements, which would vary the written contract. However, the
parol evidence rule will not prevent the admission of the fraudulent statements by Kemp
during the original negotiations. Therefore, answers (a), (b), and (d) are incorrect.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
AICPA QUESTIONS
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
,2 Answers to AICPA Questions
CHAPTER 10
INTELLECTUAL PROPERTY RIGHTS AND THE INTERNET
1. (a) Computer software is covered under the general copyright laws and is therefore usually
copyrightable as an expression of ideas. Answer (b) is incorrect because copyrights in
general do not need a copyright notice for works published after March 1, 1989. Answer
(c) is incorrect because a recent court ruled that programs in both source codes, which
are human readable, and in machine readable object code can be copyrighted. Answer
(d) is incorrect because copyrights taken out by corporations or businesses are valid for
100 years from creation of the copyrighted item or 75 years from its publication,
whichever is shorter.
2. (c) Computer databases are generally copyrightable as compilations. Answer (a) is not
chosen because copies for archival purposes are allowed. Answer (b) is not chosen
because in the case of corporations or businesses, the copyright is valid for the shorter
of 100 years after the creation of the work or 75 years from its date of publication.
Answer (d) is not chosen because computer programs are now generally recognized as
copyrightable.
3. (d) Under the fair use doctrine, copyrighted items can be used for teaching, including
distributing multiple copies for class use. Answer (a) is incorrect because although he
originally purchased this software for personal use, he may still use it for his class, in
which case, the fair use doctrine applies. Answer (b) is incorrect because databases
can be copyrighted as derivative works. Answer (c) is incorrect because the use of the
computer is not the issue but the fair use doctrine is.
4. (c) Both patent and copyright law are used under modern law to protect computer
technology rights. Answer (a) is incorrect because copyright law now also protects
software. Answer (b) is incorrect because modern law also protects software as
patentable. Answer (d) is incorrect because modern law generally protects intellectual
property rights in software under both patent law and copyright law.
CHAPTER 12
NATURE AND CLASSES OF CONTRACTS: CONTRACTING ON THE INTERNET
1. (a) The offeror made a promise for an act. When the act was performed, a unilateral
contract was created and the offeror is bound to pay. Answer (b) is incorrect because
unjust enrichment is generally considered only if there was no contract and the court
wishes to provide an “equitable solution.” Answer (c) is incorrect because there are no
public policy issues involved. Answer (d) is incorrect because a quasi-contract arises
only if there was no contract to begin with and the law implies one to prevent an unjust
enrichment. Since there was a unilateral contract, there can be no quasi-contract.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
,Answers to AICPA Questions 3
CHAPTER 13
FORMATION OF CONTRACTS: OFFER AND ACCEPTANCE
1. (c) If sent by a mode of communication expressly or impliedly authorized by the offeror
(e.g., mail or telegram), acceptance of an offer is normally effective on dispatch, even if
subsequently delayed or lost. Noll’s telegram was an effective acceptance of the offer
by Able. The rule applies to any situation in which acceptance is made in a manner
expressly or impliedly authorized. This can include telegraph or telephone as well as
mail in most circumstances. In this situation the acceptance was effective on dispatch,
before Able’s attempted revocation.
2. (b) Common law applies to this contract because it involves real estate. In this situation,
Fox’s reply on October 2 is a counteroffer and terminates Summers’ original offer made
on September 27. The acceptance of an offer must conform exactly to the terms of the
offer under common law. By agreeing to purchase the vacation home at a price
different from the original offer, Fox is rejecting Summers’ offer and is making a
counteroffer. Answer (a) is incorrect because the fact that Fox failed to return
Summers’ letter is irrelevant to the formation of a binding contract. Fox’s reply
constitutes a counteroffer as Fox did not intend to accept Summers’ original offer.
Answer (c) is incorrect because Summers’ offer was rejected by Fox’s counteroffer.
Answer (d) is incorrect because with rare exceptions, silence does not constitute
acceptance.
3. (c) Peters’ offer had been revoked. Since revocation notice can be received either directly
or indirectly, Mason, in effect, received the revocation notice when he was told the
mower had been sold to Bronson; and therefore, Mason’s acceptance was ineffective,
even though the specified time of the oral contract had not expired. Peters’ offer had
been revoked prior to Mason’s acceptance. There was no obligation on the part of
Peters to keep the offer open, since there was no consideration for him to do so.
CHAPTER 14
CAPACITY AND GENUINE ASSENT
1. (a) Where a mistake is made by only one party (a unilateral mistake), the rule is that the
mistaken party is bound by the contract unless the nonmistaken party knew of the
mistake or should have known of the mistake. In this question, the nonmistaken party
knew of the mistake; thus, the mistaken party is not bound by the contract. Whether the
mistake was a result of gross negligence is irrelevant.
2. (a) Answer (b) is incorrect because a disaffirmance need not be in writing. Answer (c) is
incorrect because a minor can disaffirm at any time during minority or for a reasonable
time thereafter regardless of payment. Answer (d) is incorrect because a minor need
only return whatever consideration he/she has, even if damaged or lost. Answer (a) is
correct because it is still a reasonable time after majority.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
, 4 Answers to AICPA Questions
CHAPTER 16
LEGALITY AND PUBLIC POLICY
1. (d) There are two types of licensing statutes. First, there are licensing statutes intended
primarily for revenue raising. Second, there are licensing statutes (regulatory) intended
primarily to protect the public against dishonest or incompetent professionals. An
individual without a license can collect his total compensation if the primary purpose of
the statute was to raise revenue. However, if the purpose was regulatory in nature
(intended to protect the public), the individual can collect nothing since the contract is
voidable. Thus, an unlicensed individual who enters into a contract to provide regulated
services will not be allowed to enforce the contract or recover even the value of the
services rendered.
2. (d) Answer (a), (b), and (c) are correct statements because covenants not to compete must
be reasonable in time and geographic scope. The answer is (d) because it is an
incorrect statement regarding the value of goodwill.
CHAPTER 17
WRITING, ELECTRONIC FORMS, AND INTERPRETATION OF CONTRACTS
1. (d) The contract terms need not appear in a single document so long as the several
documents refer to the same transaction. Only the signature of the party against whom
enforcement is sought is required. If the performance could occur within a one-year
period, the contract is not within the statute and need not be written. Only contracts of
$500 or more that involve the sale of goods fall under the Statute of Fraud and must be
in writing.
2. (c) The Statute of Frauds requires only that the written contract be signed by the party to be
charged, not by all parties to the contract. Answer (a) is incorrect because it is not
required that the contract be formalized in a single writing. Two or more documents can
be combined to create a sufficient writing to satisfy the Statute of Frauds as long as one
of the documents refers to the others. Answer (b) is incorrect because the Statute of
Frauds does not require consideration to be fair and adequate. Answer (d) is incorrect
because while the Statute of Frauds is applicable to the sale of goods only if the
purchase price is $500 or more, it is always applicable to the sale of real estate,
regardless of purchase price.
3. (c) The parole evidence rule will prevent the admission of evidence concerning the oral
agreements regarding who pays the utilities, since the rule excludes evidence of prior or
contemporaneous oral agreements, which would vary the written contract. However, the
parol evidence rule will not prevent the admission of the fraudulent statements by Kemp
during the original negotiations. Therefore, answers (a), (b), and (d) are incorrect.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
