BUL 5810 – CORPORATIONS TEST
QUESTIONS WITH CERTIFIED
ANSWERS
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
business from Jack, who believed that the business was incorporated. Claire had, in
fact, never filed the papers. One day, Claire fell asleep while giving a customer a
permanent and the solution caused her customer severe burns. The customer sued the
Beauty Parlor for $500,000, an amount enormously in excess of the business assets.
Under the Revised Act, what would be the result? - Answer-Jack would not be
personally liable, but Claire would
The president of Hi-Glow Cosmetics sends his top chemist to Hi-Glow's competitor's
labs to steal its formula for shiny lipstick. The chemist gets caught and is sent to jail.
Can Hi-Glow be found to be criminally liable? - Answer-Yes, since the president
authorized the crime
Deer Haven, Inc. is a corporation incorporated in Arkansas and has its principal office in
San Antonio, Texas. Which of the following is true of Deer Haven, Inc.'s citizenship
status? - Answer-Deer Haven, Inc. is a citizen of Arkansas and Texas, for the purpose
of determining diversity of citizenship
Carlos is a promoter of Debonair Enterprises, Inc. To whom, if any, does Carlos owe a
fiduciary duty? - Answer-Carlos owes a fiduciary duty to any other promoters of
Debonair Enterprises.
Robert approaches you and seeks to form a corporation. He asks you which document
should he create to govern the corporation. What do you tell him? - Answer-Create
Articles of Incorporation
Shareholders of Tridential, Inc. are worried that the court will "pierce" its corporate veil
and hold the shareholders liable. Which of the following factors will a court consider in
deciding whether to pierce Tridential, Inc.'s corporate veil?
a. Tridential, Inc. did not follow the formalities of corporate procedures.
b. Tridential, Inc. did not provide an adequate financial basis for the business.
c. Tridential, Inc. did used the corporation to defraud others. - Answer-ALL OF THESE
ARE CORRECT
Michael is truck driver employed by Simmons Construction Corporation. While operating
, the truck during business hours, Michael negligently crashes into Peter. Is Simmons
Construction Corporation liable? - Answer-Yes, Simmons Construction Corporation is
liable under the doctrine of respondeat superior
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.
Barbara, a self-made millionaire, wants to start a corporation exclusively for charitable
and educational purposes. What type of corporation should Barbara form? - Answer-
Non-profit corporation
In the case of Harold Lang Jewelers, Inc. v. Johnson, the court found that: - Answer-
Lang's business was regular, continuous and substantial such that it was transacting
business in North Carolina
In the case of Coopers & Lybrand v. Fox, the court held: - Answer-a promoter is
personally liable for the contracts he makes
The case of Harris v. Looney dealt with the issue of: - Answer-personal liability for a
debt by a person purporting to act as or on behalf of a corporation, knowing no
corporation existed.
Which of the following is correct with regard to common stock? - Answer-Common stock
does not have any special contract rights or preferences
, usually called debentures, have only the obligation of the corporation
behind them. - Answer-Unsecured bonds
Par value: - Answer-is the minimum price at which the corporation may sell the stock at
issuance
The board of directors cannot declare dividends when the corporation: - Answer-is
insolvent
A corporation's proportional distribution of additional shares of the corporation's capital
stock to its shareholders is a: - Answer-stock or share dividend
What are the principal sources for corporate financing? - Answer-Debt
Equity Investment Securities
QUESTIONS WITH CERTIFIED
ANSWERS
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
business from Jack, who believed that the business was incorporated. Claire had, in
fact, never filed the papers. One day, Claire fell asleep while giving a customer a
permanent and the solution caused her customer severe burns. The customer sued the
Beauty Parlor for $500,000, an amount enormously in excess of the business assets.
Under the Revised Act, what would be the result? - Answer-Jack would not be
personally liable, but Claire would
The president of Hi-Glow Cosmetics sends his top chemist to Hi-Glow's competitor's
labs to steal its formula for shiny lipstick. The chemist gets caught and is sent to jail.
Can Hi-Glow be found to be criminally liable? - Answer-Yes, since the president
authorized the crime
Deer Haven, Inc. is a corporation incorporated in Arkansas and has its principal office in
San Antonio, Texas. Which of the following is true of Deer Haven, Inc.'s citizenship
status? - Answer-Deer Haven, Inc. is a citizen of Arkansas and Texas, for the purpose
of determining diversity of citizenship
Carlos is a promoter of Debonair Enterprises, Inc. To whom, if any, does Carlos owe a
fiduciary duty? - Answer-Carlos owes a fiduciary duty to any other promoters of
Debonair Enterprises.
Robert approaches you and seeks to form a corporation. He asks you which document
should he create to govern the corporation. What do you tell him? - Answer-Create
Articles of Incorporation
Shareholders of Tridential, Inc. are worried that the court will "pierce" its corporate veil
and hold the shareholders liable. Which of the following factors will a court consider in
deciding whether to pierce Tridential, Inc.'s corporate veil?
a. Tridential, Inc. did not follow the formalities of corporate procedures.
b. Tridential, Inc. did not provide an adequate financial basis for the business.
c. Tridential, Inc. did used the corporation to defraud others. - Answer-ALL OF THESE
ARE CORRECT
Michael is truck driver employed by Simmons Construction Corporation. While operating
, the truck during business hours, Michael negligently crashes into Peter. Is Simmons
Construction Corporation liable? - Answer-Yes, Simmons Construction Corporation is
liable under the doctrine of respondeat superior
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.
Barbara, a self-made millionaire, wants to start a corporation exclusively for charitable
and educational purposes. What type of corporation should Barbara form? - Answer-
Non-profit corporation
In the case of Harold Lang Jewelers, Inc. v. Johnson, the court found that: - Answer-
Lang's business was regular, continuous and substantial such that it was transacting
business in North Carolina
In the case of Coopers & Lybrand v. Fox, the court held: - Answer-a promoter is
personally liable for the contracts he makes
The case of Harris v. Looney dealt with the issue of: - Answer-personal liability for a
debt by a person purporting to act as or on behalf of a corporation, knowing no
corporation existed.
Which of the following is correct with regard to common stock? - Answer-Common stock
does not have any special contract rights or preferences
, usually called debentures, have only the obligation of the corporation
behind them. - Answer-Unsecured bonds
Par value: - Answer-is the minimum price at which the corporation may sell the stock at
issuance
The board of directors cannot declare dividends when the corporation: - Answer-is
insolvent
A corporation's proportional distribution of additional shares of the corporation's capital
stock to its shareholders is a: - Answer-stock or share dividend
What are the principal sources for corporate financing? - Answer-Debt
Equity Investment Securities
