REG-7.pdf - Becker Professional Education Registered to...

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Unformatted text preview: Becker Professional Education Registered to: Question CPA-01299 Lee repairs high-speed looms for Sew Corp., a clothing manufacturer. Which of the following circumstances best indicates that Lee is an employee of Sew and not an independent contractor? a. b. c. d. Lee's work is not supervised by Sew personnel. Lee's tools are owned by Lee. Lee is paid weekly by Sew. Lee's work requires a high degree of technical skill. Explanation Choice "c" is correct. A clear example of an employee is one who works full time for the employer, uses the employer's tools, is compensated on a time basis, and is subject to supervision of the employer in the details of the work. A clear example of an independent contractor is one who has a calling of his own, who uses his own tools, is hired for a particular job, is paid a given amount for the job, and follows his own discretion. Thus, payment on a weekly basis is an indication that a person is an employee rather than an independent contractor. Choice "a" is incorrect. If Lee's work is not supervised by Sew's personnel, per the above, that would be an indication of independent contractor status. Choice "b" is incorrect. Per the above, Lee's ownership of his own tools would indicate that he is an independent contractor. Choice "d" is incorrect. Work that requires a high degree of skill might be considered a calling or might be difficult to supervise. In any case, it would be indicative of independent contractor status. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01303 Blue, a used car dealer, appointed Gage as an agent to sell Blue's cars. Gage was authorized by Blue to appoint subagents to assist in the sale of the cars. Vond was appointed as a sub-agent. To whom does Vond owe a fiduciary duty? a. b. c. d. Gage only. Blue only. Both Blue and Gage. Neither Blue nor Gage. Explanation Choice "c" is correct. A subagent is one who assists the agent in the performance of his or her duties. When a subagent is appointed by an agent with authority to appoint a subagent, the subagent owes a duty to both the agent and the principal. Thus, choices "a", "b", and "d" are incorrect. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01304 Which of the following is(are) available to a principal when an agent fraudulently breaches a fiduciary duty? Termination of the agency Constructive trust Yes Yes No No Yes No Yes No a. b. c. d. Explanation Choice "a" is correct. If an agent breaches her fiduciary duty, the principal can terminate the agency and receive the remedy of a constructive trust to ensure that the principal can recover secret profits obtained by the agent because of the wrongful conduct. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01307 Which of the following statements is(are) correct regarding the relationship between an agent and a nondisclosed principal? I. The principal is required to indemnify the agent for any contract entered into by the agent within the scope of the agency agreement. II. The agent has the same actual authority as if the principal had been disclosed. a. b. c. d. I only. II only. Both I and II. Neither I nor II. Explanation Choice "c" is correct. A principal owes her agent the duty of indemnification, which is a type of reimbursement for costs and liabilities incurred by the agent as a result of authorized acts on behalf of the principal. Actual authority is the authority that the agent reasonably believes she possesses because of the principal's communications to the agent. The agent has the same actual authority whether the principal is disclosed or undisclosed. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01309 Which of the following statements represent(s) a principal's duty to an agent who works on a commission basis? I. The principal is required to maintain pertinent records, account to the agent, and pay the agent according to the terms of their agreement. II. The principal is required to reimburse the agent for all authorized expenses incurred unless the agreement calls for the agent to pay expenses out of the commission. a. b. c. d. I only. II only. Both I and II. Neither I nor II. Explanation Choice "c" is correct. A principal is required to pay its commissioned agent as agreed and thus must maintain sufficient records in order to do so. Therefore, statement I is true. Statement II is also true. Generally, a principal must indemnify an agent for all expenses the agent reasonably incurs on the principal's behalf unless the parties have agreed otherwise. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01311 Trent was retained, in writing, to act as Post's agent for the sale of Post's memorabilia collection. Which of the following statements is correct? I. To be an agent, Trent must be at least 21 years of age. II. Post would be liable to Trent if the collection was destroyed before Trent found a purchaser. a. b. c. d. I only. II only. Both I and II. Neither I nor II. Explanation Choice "d" is correct. I is incorrect because while a principal must have capacity, an agent need not have capacity; a minor may serve as an agent. II is incorrect because destruction of the subject matter of the agency constitutes a change in circumstances that will terminate the agency by operation of law and release the parties from their relationship. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01312 Thorp was a purchasing agent for Ogden, a sole proprietor, and had the express authority to place purchase orders with Ogden's suppliers. Thorp placed an order with Datz, Inc. on Ogden's behalf after Ogden was declared incompetent in a judicial proceeding. Thorp was aware of Ogden's incapacity. Which of the following statements is correct concerning Ogden's liability to Datz? a. b. c. d. Ogden will be liable because Datz was not informed of Ogden's incapacity. Ogden will be liable because Thorp acted with express authority. Ogden will not be liable because Thorp's agency ended when Ogden was declared incompetent. Ogden will not be liable because Ogden was a nondisclosed principal. Explanation Choice "c" is correct. An agency is terminated by operation of law upon the incapacity of the principal; no notice is needed. Choice "a" is incorrect. An agency is terminated by operation of law upon the incapacity of the principal; notice to the third party with whom the agent deals is not necessary. Choice "b" is incorrect. An agent's authority is terminated by operation of law upon the incapacity of the principal regardless of whether the authority was express, implied, or apparent. Choice "d" is incorrect. Ogden will not be liable because of the incapacity; Ogden's status as a disclosed vs. undisclosed principal is irrelevant. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01313 When a valid contract is entered into by an agent on the principal's behalf, in a non-disclosed principal situation, which of the following statements concerning the principal's liability is correct? a. b. c. d. The principal may be held liable once disclosed The principal must ratify the contract to be held liable Yes Yes No No Yes No Yes No Explanation Choice "b" is correct. Once disclosed, an undisclosed principal can be held liable on a contract made on the principal's behalf by an agent if the agent had authority. There is no need to ratify; indeed an undisclosed principal can never ratify because a principal can ratify only when a person represents that he is an agent acting with authority on the principal's behalf when, in fact, the person lacks authority. When a principal is undisclosed, there is no representation of agency and so a prerequisite for ratification is missing. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01314 Young Corp. hired Wilson as a sales representative for six months at a salary of $5,000 per month plus 6% of sales. Which of the following statements is correct? a. b. c. d. Young does not have the power to dismiss Wilson during the six-month period without cause. Wilson is obligated to act solely in Young's interest in matters concerning Young's business. The agreement between Young and Wilson is not enforceable unless it is in writing and signed by Wilson. The agreement between Young and Wilson formed an agency coupled with an interest. Explanation Choice "b" is correct. An agent owes the principal a duty of loyalty, which includes the duty to act solely in the principal's interest in matters relating to the agency. Choice "a" is incorrect. A principal has the power to terminate an agency relationship at any time, although the principal might be liable for damages if the termination is in breach of contract. Choice "c" is incorrect. A contract for services need not be in writing unless it cannot be performed within one year. The service contract here is for six months. Choice "d" is incorrect. An agency coupled with an interest arises only when the agent is given an interest in the subject matter of the agency. A sales commission is not a sufficient interest. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01315 Which of the following actions requires an agent for a corporation to have a written agency agreement? a. b. c. d. Purchasing office supplies for the principal's business. Purchasing an interest in undeveloped land for the principal. Hiring an independent general contractor to renovate the principal's office building. Retaining an attorney to collect a business debt owed the principal. Explanation Choice "b" is correct. Generally, agency power may be granted orally, even if the agent enters into contracts that must be in writing to be enforceable. However, most states require an agency agreement to be in writing if the agent is to purchase or convey interests in land. Choice "a" is incorrect. Generally, agency power may be granted orally. The power to buy office supplies need not be granted in writing. Choice "c" is incorrect. Generally, agency power may be granted orally. The power to hire persons to perform services need not be granted in writing. (Note that repairing a building involves a service and not an interest in land.) Choice "d" is incorrect. Generally, agency power may be granted orally, even if the agent is to enter into contracts that must be in writing to be enforceable. The power to hire persons to perform services need not be granted in writing. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01316 Bolt Corp. dismissed Ace as its general sales agent and notified all of Ace's known customers by letter. Young Corp., a retail outlet located outside of Ace's previously assigned sales territory, had never dealt with Ace. Young knew of Ace as a result of various business contacts. After his dismissal, Ace sold Young goods, to be delivered by Bolt, and received from Young a cash deposit for 20% of the purchase price. It was not unusual for an agent in Ace's previous position to receive cash deposits. In an action by Young against Bolt on the sales contract, Young will: a. b. c. d. Lose, because Ace lacked any implied authority to make the contract. Lose, because Ace lacked any express authority to make the contract. Win, because Bolt's notice was inadequate to terminate Ace's apparent authority. Win, because a principal is an insurer of an agent's acts. Explanation Choice "c" is correct. Although Bolt gave known customer's notice of Ace's dismissal, some courts might also require a notice placed in a newspaper to terminate Ace's apparent authority as to people, like Young, who had heard of Ace. Choice "a" is incorrect. Although Ace lacked implied authority, a court might find that he had apparent authority since Bolt had held Ace out as its agent previously. Choice "b" is incorrect. Although Ace lacked express authority, a court might find that he had apparent authority since Bolt had held Ace out as its agent previously. Choice "d" is incorrect. A principal is not an insurer of an agent's acts. A principal is liable only when the agent acts with authority. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01317 Easy Corp. is a real estate developer and regularly engages real estate brokers to act on its behalf in acquiring parcels of land. The brokers are authorized to enter into such contracts, but are instructed to do so in their own names without disclosing Easy's identity or relationship to the transaction. If a broker enters into a contract with a seller on Easy's behalf: a. b. c. d. The broker will have the same actual authority as if Easy's identity had been disclosed. Easy will be bound by the contract because of the broker's apparent authority. Easy will not be liable for any negligent acts committed by the broker while acting on Easy's behalf. The broker will not be personally bound by the contract because the broker has express authority to act. Explanation Choice "a" is correct. Actual authority arises from the communications between the principal and the agent. Whether the agent discloses the principal to the third party with whom the agent contracts has no effect on the communications between the principal and the agent. Choice "b" is incorrect. Apparent authority arises from the communications between the principal and the third party with whom the agent deals. If the principal is undisclosed, as under the facts here, the third party has no idea that there is a principal, and so there are no communications between the third party and the principal from which apparent authority can arise. Choice "c" is incorrect. A principal generally is not liable for an agent's torts, but can be liable when the torts are authorized. The fact that the principal is undisclosed has no effect on this rule. Choice "d" is incorrect. When a principal is undisclosed, the third party with whom the agent deals may hold either the agent or the principal liable on contracts that the agent enters into on the principal's behalf. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01318 An agent will usually be liable under a contract made with a third party when the agent is acting on behalf of a (an): a. b. c. d. Disclosed principal Undisclosed principal Yes Yes No No Yes No Yes No Explanation Choice "c" is correct. An agent generally is not liable on contracts that the agent enters into on the principal's behalf if the principal is disclosed, but the agent is personally liable on contracts entered into for the principal when the principal is undisclosed. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01319 Noll gives Carr a written power of attorney. Which of the following statements is correct regarding this power of attorney? a. b. c. d. It must be signed by both Noll and Carr. It must be for a definite period of time. It may continue in existence after Noll's death. It may limit Carr's authority to specific transactions. Explanation Choice "d" is correct. A power of attorney is a form of agency, and like all agencies it may be limited in scope of authority. Choice "a" is incorrect. As a general rule, no writing is required to form an agency relationship, and even where a writing is required, it need only be signed by the principal (the one sought to be bound). Choice "b" is incorrect. A power of attorney, like other agencies, need not explicitly state a duration. Choice "c" is incorrect. A power of attorney, like all agencies, is terminated by the death of either the principal or the agent. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01331 Generally, a disclosed principal will be liable to third parties for its agent's unauthorized misrepresentations if the agent is an: a. b. c. d. Employee Independent Contractor Yes Yes No No Yes No Yes No Explanation Choice "b" is correct. An employer is liable for torts of employees committed within the scope of employment. Employers are generally not liable for the torts of independent contractors. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01333 Which of the following rights will a third party be entitled to after validly contracting with an agent representing an undisclosed principal? a. b. c. d. Disclosure of the principal by the agent. Ratification of the contract by the principal. Performance of the contract by the agent. Election to void the contract after disclosure of the principal. Explanation Choice "c" is correct. If the principal is undisclosed, the third party with whom the agent dealt can hold the agent liable on the contract. Choice "a" is incorrect. A third party has no general right to discover the identity of an undisclosed principal. Choice "b" is incorrect. A third party never has the right to force a principal to ratify a contract; only a principal has a right to choose to ratify an unauthorized contract. However, an undisclosed principal never has the right to ratify because ratification is available only if the agent entered into the contract purportedly on behalf of the principal, and if the principal is not disclosed, this cannot occur. Choice "d" is incorrect. As a general rule a third party who has contracted with an agent for an undisclosed principal has no right to rescind the contract on discovering the principal. Such a right exists only if the nondisclosure was fraudulent. 2011 Edition. Distributed by DeVry/Becker Educational Development Corp. Copyright ?2010 DeVry/Becker Educational Development Corp. All rights reserved. Becker Professional Education Registered to: Question CPA-01335 North Inc. hired Sutter as a purchasing agent. North gave Sutter written authorization to purchase, without limit, electronic appliances. Later, Sutter was told not to purchase more than 300 of each appliance. Sutter contracte...
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