Question 1

Karlovsky and Sons Inc., a retail corporation reports financial losses for three years in a row. Two larger corporations, Gatsby Retail Inc. and Chelsea Sales Corp compete to acquire Karlovsky and Sons. Initially, Chelsea Corp. places a higher bid than Gatsby Retail Inc. but eventually backs out of the merger. In the end, a Boston-based MNC named J.Y. Corp. acquires Karlovsky and Sons and permits the latter to expand as a wholesaler. Which of the following is the surviving corporation in this scenario?

Accepted Answer

A)  Gatsby Retail Inc. 
B)  Chelsea Corp. 
C)  J.Y. Corp. 
D)  Karlovsky and Sons

Question 2

An agreement that requires selling shareholders to sell their shares to the other shareholders or to the corporation at the price specified in the agreement is referred to as ________.

Accepted Answer

A)  preemptive sale 
B)  right of first refusal 
C)  buy-and-sell agreement 
D)  shareholder voting agreement

Question 3

Dividends are distribution of profits of the corporation to shareholders.

Accepted Answer

A) True 
 B)False

Question 4

Derrick has 2,000 shares of the Unistone Corporation which is planning to vote for two new directors. Through a special voting provision in the corporation's articles of incorporation, Derrick was able to vote for both his preferred candidates with 2,000 shares, giving him a virtual voting count of 4,000 shares. What voting rule in the articles of incorporation allows Derrick to achieve this?

Accepted Answer

A)  supramajority voting 
B)  noncumulative voting 
C)  cumulative voting 
D)  preemptive voting

Question 5

________ is a doctrine that says if a shareholder dominates a corporation and uses it for improper purposes, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations.

Accepted Answer

The answer of ________ is a doctrine that says if...

Question 6

In case the corporation's assets are liquidated, the preferred stockholders are paid before common stockholders.

Accepted Answer

A) True 
 B)False

Question 7

The Sarbanes-Oxley Act requires CEO and CFO certification for annual and quarterly reports.

Accepted Answer

A) True 
 B)False

Question 8

A ________ is a long-term unsecured debt instrument that is based on a corporation's general credit standing.

Accepted Answer

The answer of A ________ is a long-term unsecured debt...

Question 9

Shareholders of a closely held corporation play a minor role in its management.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is true of an S corporation?

Accepted Answer

A)  The corporation can have no more than 100 shareholders. 
B)  Only foreign corporations can be an S corporation. 
C)  They are taxed at the corporate level. 
D)  The corporation must be a member of an affiliated group of corporations.

Question 11

Bylaws of a corporation must be filed with a government official.

Accepted Answer

A) True 
 B)False

Question 12

When is the annual shareholders' meeting held?

Accepted Answer

A)  according to the dates fixed in the bylaws 
B)  at the whim of the board of directors 
C)  only if and when there is a crisis 
D)  only at the time of electing a new board of members

Question 13

A(n)________ is a person or a corporation that is empowered to accept service of process on behalf of a corporation and is identified in the articles of incorporation.

Accepted Answer

The answer of A(n)________ is a person or a corporation...

Question 14

A duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders is known as ________.

Accepted Answer

A)  duty of care 
B)  duty of loyalty 
C)  duty of obedience 
D)  self-dealing

Question 15

Which of the following shares have the right to vote?

Accepted Answer

A)  unissued shares 
B)  treasury shares 
C)  outstanding shares 
D)  liquidated shares

Question 16

The determination of whether a corporate director or officer has met his or her duty of care is measured in hindsight.

Accepted Answer

A) True 
 B)False

Question 17

A corporation in the United States that has been incorporated in another country is referred to as a(n)________ corporation.

Accepted Answer

A)  foreign 
B)  domestic 
C)  onshore 
D)  alien

Question 18

Which of the following criteria must be met for a company to be treated as an S corporation?

Accepted Answer

A)  Shareholders must be other corporations or partnerships. 
B)  Nonresident aliens cannot be shareholders. 
C)  The corporation must have more than 100 shareholders. 
D)  The corporation must have more than one class of stock.

Question 19

Authorized shares that have been sold by the corporation are called issued shares.

Accepted Answer

A) True 
 B)False

Question 20

A long-term debt security that is secured by some form of collateral is referred to as a ________.

Accepted Answer

A)  treasury share 
B)  bond 
C)  note 
D)  debenture

Exam 16: Corporations and the Sarbanes-Oxley Act

An agreement that requires selling shareholders to sell their shares to the other shareholders or to the corporation at the price specified in the agreement is referred to as ________.

Dividends are distribution of profits of the corporation to shareholders.

________ is a doctrine that says if a shareholder dominates a corporation and uses it for improper purposes, a court of equity can disregard the corporate entity and hold the shareholder personally liable for the corporation's debts and obligations.

In case the corporation's assets are liquidated, the preferred stockholders are paid before common stockholders.

The Sarbanes-Oxley Act requires CEO and CFO certification for annual and quarterly reports.

A ________ is a long-term unsecured debt instrument that is based on a corporation's general credit standing.

Shareholders of a closely held corporation play a minor role in its management.

Which of the following is true of an S corporation?

Bylaws of a corporation must be filed with a government official.

When is the annual shareholders' meeting held?

A(n)________ is a person or a corporation that is empowered to accept service of process on behalf of a corporation and is identified in the articles of incorporation.

A duty that directors and officers have not to act adversely to the interests of the corporation and to subordinate their personal interests to those of the corporation and its shareholders is known as ________.

Which of the following shares have the right to vote?

The determination of whether a corporate director or officer has met his or her duty of care is measured in hindsight.

A corporation in the United States that has been incorporated in another country is referred to as a(n) ________ corporation.

Which of the following criteria must be met for a company to be treated as an S corporation?

Authorized shares that have been sold by the corporation are called issued shares.

A long-term debt security that is secured by some form of collateral is referred to as a ________.