Question 1

Urban Commerce, Inc., issues bonds, which are also known as

Accepted Answer

Bonds are known as fixed-income securities because they provide a fixed rate of interest or coupon rate to the bondholders. This is in contrast to equity securities, like preferred stock or common stock, which do not provide a fixed return and may fluctuate in value. Bonds are also not cumulative investments, which typically refer to preferred stock that pays dividends that accumulate if they are not paid out in a given period.

Question 2

Dollars & Sense, Inc., is incorporated in the state of New Jersey and is doing busi?ness in the state of New York. In New York, Dollars & Sense is properly referred to as

Accepted Answer

Since Dollars & Sense is incorporated in New Jersey but doing business in New York, it is considered a foreign corporation in New York. A domestic corporation is one that is incorporated in the state in which it is doing business, while an alien corporation is one that is incorporated in a foreign country. A public corporation is a corporation that is owned by the government or its agencies.

Question 3

The shares of Home Mortgage Corporation are publicly traded in securities mar?kets. Home Mortgage Corporation is

Accepted Answer

The answer of The shares of Home Mortgage Corporation are...

Question 4

Orel incorporates his business as Posts & Wire Corporation in Texas. He and his group of shareholders intend to make a profit from their sales of fencing materials. Posts & Wire is

Accepted Answer

Since Orel's group intends to make a profit from their sales of fencing materials, Posts & Wire Corporation is a for-profit entity, also referred to as a private corporation.

Question 5

Bay City Merchants Corporation has six shareholders, four of whom are members of the same family. All of Bay City's shareholders agree in writing to operate without shareholders' meetings. Under the Revised Model Business Corporation Act, this most likely warrants

Accepted Answer

The Revised Model Business Corporation Act allows corporations to operate without formal shareholders' meetings if all shareholders agree in writing. Therefore, Bay City's arrangement is likely lawful and does not warrant any penalties or sanctions.

Question 6

Memphis Music Makers Inc.'s stated purpose is to sell musical instruments. If chief executive officer Neal contracts with Open Season Firearms in Memphis Music's name to sell a shotgun, he has likely committed

Accepted Answer

Memphis Music Makers Inc.'s stated purpose is to sell musical instruments, meaning that selling a shotgun would be outside the scope of their authority or ultra vires.

Question 7

Equestrian Stables Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Equestrian Stables is most likely

Accepted Answer

A de jure corporation is one that has met all legal requirements for incorporation, including filing articles of incorporation with the state. Even though Equestrian Stables Corporation listed an incorrect address for its incorporator, it still followed the proper legal procedures for incorporation, so it is a de jure corporation. A corporation by estoppel would arise if someone relied on Equestrian Stables Corporation's incorrect address and suffered harm as a result. A de facto corporation would arise if there were some defect in the incorporation process, but not simply because of an incorrect address. Ultra vires refers to actions taken by a corporation that are beyond its legal authority or powers.

Question 8

Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like other holders of common stock, they have a residual position in the overall financial structure of Discount Retail, because they

Accepted Answer

Common stockholders have the lowest priority in the financial structure of a company and are the last to receive returns on their investment, after creditors and preferred stock holders have been paid. They do not have a guaranteed return nor do they have priority to the firm's assets in the event of insolvency. The state of the firm's incorporation is also not relevant to common stockholders.

Question 9

The abbreviation "P.A." in the name "Conrad & Drake, Accountants, P.A." means that this organization is

Accepted Answer

"P.A." stands for "professional association," indicating that Conrad & Drake, Accountants is organized as a professional entity, likely with a membership of certified public accountants or other financial professionals. The other options are not applicable to this type of organization.

Question 10

Tech Personnel, Inc., is a corporation. Tech Personnel's implied powers enable it to

Accepted Answer

Implied powers are those powers that are not expressly provided for in a corporation's articles of incorporation or bylaws. One of the implied powers of a corporation is to borrow and lend funds to further its business activities. Therefore, Tech Personnel, Inc. has the implied power to borrow and lend funds.

Question 11

Boutique Bodega Corporation would like to change its corporate status to that of an S corporation to avoid in?come taxes at the corporate level. To qualify, the shareholders must not be

Accepted Answer

The correct answer is D because partnerships are not eligible to be shareholders in an S corporation. The other options, corporations, estates, and individuals, are eligible to be shareholders in an S corporation.

Question 12

Deepwater Dredging & Excavation holds itself out to others as being a corporation but makes no attempt to incorporate. Estuary Marina signs a contract with Deepwater that is not performed. Estuary Marina files a suit against the firm. The court will likely hold that Deepwater is

Accepted Answer

Deepwater Dredging & Excavation has held itself out to others as being a corporation, even though it has not formally incorporated. This can create the legal concept of "corporation by estoppel," which means that the company can be treated as if it were a corporation for certain legal purposes, such as being able to enter into contracts. Therefore, Estuary Marina can sue Deepwater as if it were a corporation.

Question 13

Bread & Brews, Inc., files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is the name of

Accepted Answer

The articles of incorporation typically do not include the names of the corporation's shareholders. The articles usually include the name of the corporation, the incorporators, and the initial registered agent.

Question 14

Miracle Mobile Devices, Inc., is a private, for-profit corporation that (1) was formed for the purpose of manufactur?ing and distributing a newly pat?ented tablet, (2) is owned by five share?holders, (3) is subject to double taxation, and (4) has made no public offering of its shares. Miracle is

Accepted Answer

Miracle Mobile Devices, Inc., meets the characteristics of a close corporation, which is a for-profit corporation that is owned by a limited number of shareholders and operates under simpler rules than a publicly traded corporation. Close corporations are not required to make public offerings of their shares, and they are often subject to double taxation.

Question 15

Like the bylaws of other corporations, the bylaws of Equipment Leasing, Inc.,

Accepted Answer

The bylaws of Equipment Leasing, Inc. were adopted at its first organizational meeting, which is a common practice for corporations when establishing their bylaws. The bylaws typically outline the rules and regulations for the corporation's internal governance and management, such as the powers and duties of the board of directors and officers, shareholder voting procedures, and meeting requirements. The other answer choices do not accurately describe the typical content or purpose of corporate bylaws.

Question 16

Neci and Olwen want to form and do business as a corporation-Pastries & Pies Inc. A corporation is a legal entity created and recognized by

Accepted Answer

A corporation is created and recognized by state law, specifically by filing articles of incorporation with the state Secretary of State's office.

Question 17

Rhys owns Solar Fuel Corporation. Rhys uses Solar Fuel's funds to pay his personal expenses, creates Thermal Power Corporation to engage in the same business as Solar Fuel, transfers Solar Fuel's assets to Thermal Power, and petitions Solar Fuel into bankruptcy. This most likely warrants

Accepted Answer

This scenario describes an abuse of the corporate form, as Rhys is essentially treating Solar Fuel as his alter ego rather than a separate legal entity. The act of transferring assets from Solar Fuel to Thermal Power can be seen as a fraudulent conveyance, and the bankruptcy petition filed by Rhys may be an attempt to avoid creditors. Therefore, a court may need to pierce the corporate veil and hold Rhys personally liable for Solar Fuel's debts and obligations.

Question 18

Hudson and Ilka want to market a new line of kayaks and related gear under the brand name Journeys as a corporation-Journeys Inc. To avoid income taxes at the corporate level, they should form

Accepted Answer

An S corporation is a type of corporation that is advantageous for small businesses because it allows the profits and losses to be passed through to the shareholders' personal tax returns, thus avoiding income taxes at the corporate level. This is the best choice for Hudson and Ilka to avoid income taxes. A C corporation is not a good choice because it is subject to double taxation, with profits being taxed at both the corporate and individual levels. Close and private corporations do not have specific tax implications, and therefore would not be the best choice for tax avoidance purposes.

Question 19

Qiara is a holder of preferred stock in Rio Grande Irrigation & Development, Inc. Qiara has priority over holders of Rio common stock as to

Accepted Answer

Preferred stockholders have priority over common stockholders when it comes to receiving dividends. They are entitled to receive fixed dividends before any dividend can be paid to the common stockholders.

Question 20

Demario and Evander want to form and do business as a corporation-Farm-2-Fork Restaurant Inc. A corporation is

Accepted Answer

A corporation is an artificial person, or legal entity, created under state law. It has many of the same legal rights and privileges as a natural person, including the ability to enter into contracts, own property, and sue or be sued.

Quiz 39: Corporate Formation and Financing