BUL 5810 – CORPORATIONS TEST
2 QUESTIONS WITH REVISED
ANSWERS
The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay
more if corporate earnings reach certain specified levels. The holder of the bond may
exchange it for stock of the corporation. This bond would be a: - Answer-convertible
bond
Allen owns 200 of the 1,000 shares outstanding of General Myopics. GM plans to issue
1,000 new shares. If Allen has preemptive rights, he may buy: - Answer-200 shares at
the new stock price
Yukon Corporation purchases 1,000 shares of its own stock from Jones at a price of
$50 a share. These shares, which are now issued but not outstanding, are known as: -
Answer-Treasury Shares
The directors of Premier Glass Company authorize the issuance of 100 shares of
common stock for $25 per share to Justin for property the directors value at $2,500. The
valuation: - Answer-under the Revised Act, depends on the directors' determination of
the consideration's "adequacy"
If The Raintree Company has accumulated earnings each year but the directors have
not declared dividends for five years, the shareholders may: - Answer-ask for an
injunction requiring a dividend to be declared
If Alfred seeks to find out what the par value of his stock in Denim Corporation, Alfred
wants to know: - Answer-the minimum price at which Denim Corporation may sell the
stock at issuance
Denali, Inc. is seeking to pay out dividends to all of its shareholders and seeks advice
on the customary type of dividend to pay out to its shareholders. What advice would you
give Denali, Inc.? - Answer-Pay shareholders cash dividends
Patrick, a shareholder in Denali, Inc., thinks that the company is doing well, but wants to
know when and who decided when to declare dividends and how much, and he seeks
your advice. What advice would you give Patrick to answer his questions about
dividends? - Answer-Wait for the Board of Directors to declare dividends
Under the Revised Act, Lupita owns common stock in XeroSum Corporation. Lupita
believes that her common stock is preferred stock. Which of the following is correct with
regard to Lupita's common stock? - Answer-Lupita's common stock does not have any
special contract rights or preferences
The Porter Corporation has $100,000 in equity and $150,000 in liabilities. If the board of
directors seek to declare dividends, which of the following is true under the cash flow
, test? - Answer-The Board cannot declare dividends because doing so would make
Porter Corporation insolvent
In the case of Metropolitan Life Insurance Company v. RJR Nabisco, Inc., the court: -
Answer-examined the indentures themselves to determine the agreement of the parties
In Cox Enterprises, Inc. v. Pension Benefit Guaranty Corporation, the court found that
solvency should be measured on the date: - Answer-of a payment to a shareholder
In the case of Dodge v. Ford Motor Co., the court held: (3) - Answer-1. A business
corporation is organized and carried on primarily for the profit of the stockholders
2. The right of shareholders to receive a dividend may not be arbitrarily withheld by the
directors
3. The directors were not acting in the best interest of the corporation.
Which of the following is the basic governing document of a corporation? - Answer-
Articles of Incorporation
The incorporators would typically do which of the following?
a. Purchase outstanding shares.
b. Assemble the assets.
c. Sign the charter. - Answer-Assemble the assets
Whether a corporation is a de facto corporation may be challenged by: - Answer-the
state in which the business attempted to incorporate
Courts have responded by piercing the veil when the shareholders have:
a. not followed the formalities of corporate procedures.
b. not provided an adequate financial basis for the business.
c. used the corporation to defraud. - Answer-ALL OF THESE ARE CORRECT
James, a promoter of Unobtainium Corporation, has a fiduciary duty to: - Answer-Both
the other promoters and the initial shareholders of Unobtainium Corporation
Use of "Evans & Hall, Ltd." as a corporate name would be: - Answer-permissible as long
as it is distinguishable from the nae of any other domestic corporation or any foreign
corporation authorized to do business within the state
Wyatt, the sole stockholder of International Travel Corporation, wrongfully used the
corporation to avoid a personal liability. A court's disregarding the corporate entity and
holding Wyatt personally liable is called: - Answer-piercing the corporate veil
Claire opened Claire's Beauty Parlor in her home. She solicited funds to begin the
2 QUESTIONS WITH REVISED
ANSWERS
The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay
more if corporate earnings reach certain specified levels. The holder of the bond may
exchange it for stock of the corporation. This bond would be a: - Answer-convertible
bond
Allen owns 200 of the 1,000 shares outstanding of General Myopics. GM plans to issue
1,000 new shares. If Allen has preemptive rights, he may buy: - Answer-200 shares at
the new stock price
Yukon Corporation purchases 1,000 shares of its own stock from Jones at a price of
$50 a share. These shares, which are now issued but not outstanding, are known as: -
Answer-Treasury Shares
The directors of Premier Glass Company authorize the issuance of 100 shares of
common stock for $25 per share to Justin for property the directors value at $2,500. The
valuation: - Answer-under the Revised Act, depends on the directors' determination of
the consideration's "adequacy"
If The Raintree Company has accumulated earnings each year but the directors have
not declared dividends for five years, the shareholders may: - Answer-ask for an
injunction requiring a dividend to be declared
If Alfred seeks to find out what the par value of his stock in Denim Corporation, Alfred
wants to know: - Answer-the minimum price at which Denim Corporation may sell the
stock at issuance
Denali, Inc. is seeking to pay out dividends to all of its shareholders and seeks advice
on the customary type of dividend to pay out to its shareholders. What advice would you
give Denali, Inc.? - Answer-Pay shareholders cash dividends
Patrick, a shareholder in Denali, Inc., thinks that the company is doing well, but wants to
know when and who decided when to declare dividends and how much, and he seeks
your advice. What advice would you give Patrick to answer his questions about
dividends? - Answer-Wait for the Board of Directors to declare dividends
Under the Revised Act, Lupita owns common stock in XeroSum Corporation. Lupita
believes that her common stock is preferred stock. Which of the following is correct with
regard to Lupita's common stock? - Answer-Lupita's common stock does not have any
special contract rights or preferences
The Porter Corporation has $100,000 in equity and $150,000 in liabilities. If the board of
directors seek to declare dividends, which of the following is true under the cash flow
, test? - Answer-The Board cannot declare dividends because doing so would make
Porter Corporation insolvent
In the case of Metropolitan Life Insurance Company v. RJR Nabisco, Inc., the court: -
Answer-examined the indentures themselves to determine the agreement of the parties
In Cox Enterprises, Inc. v. Pension Benefit Guaranty Corporation, the court found that
solvency should be measured on the date: - Answer-of a payment to a shareholder
In the case of Dodge v. Ford Motor Co., the court held: (3) - Answer-1. A business
corporation is organized and carried on primarily for the profit of the stockholders
2. The right of shareholders to receive a dividend may not be arbitrarily withheld by the
directors
3. The directors were not acting in the best interest of the corporation.
Which of the following is the basic governing document of a corporation? - Answer-
Articles of Incorporation
The incorporators would typically do which of the following?
a. Purchase outstanding shares.
b. Assemble the assets.
c. Sign the charter. - Answer-Assemble the assets
Whether a corporation is a de facto corporation may be challenged by: - Answer-the
state in which the business attempted to incorporate
Courts have responded by piercing the veil when the shareholders have:
a. not followed the formalities of corporate procedures.
b. not provided an adequate financial basis for the business.
c. used the corporation to defraud. - Answer-ALL OF THESE ARE CORRECT
James, a promoter of Unobtainium Corporation, has a fiduciary duty to: - Answer-Both
the other promoters and the initial shareholders of Unobtainium Corporation
Use of "Evans & Hall, Ltd." as a corporate name would be: - Answer-permissible as long
as it is distinguishable from the nae of any other domestic corporation or any foreign
corporation authorized to do business within the state
Wyatt, the sole stockholder of International Travel Corporation, wrongfully used the
corporation to avoid a personal liability. A court's disregarding the corporate entity and
holding Wyatt personally liable is called: - Answer-piercing the corporate veil
Claire opened Claire's Beauty Parlor in her home. She solicited funds to begin the
