S05 R-7 Class Questions Previedw - Regulation 7 Class...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Regulation 7 Class Questions 1 1. 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. I only. b. II only. c. Both I and II. d. Neither I nor II. CPA-01311 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. 2. 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? The principal The principal may must ratify be held liable the contract to once disclosed be held liable a. Yes Yes b. Yes No c. No Yes d. No No CPA-01313 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.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Regulation 7 Class Questions 2 3. 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): Disclosed Undisclosed principal principal a. Yes Yes b. Yes No c. No Yes d. No No CPA-01318 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. 4. 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 contracted with Orr Corp. to purchase 500 tape recorders. Orr had been shown Sutter's written authorization. Which of the following statements is correct? a. Sutter will be liable to Orr because Sutter's actual authority was exceeded. b. Sutter will not be liable to reimburse North if North is liable to Orr. c. North will be liable to Orr because of Sutter's apparent authority. d.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/25/2011 for the course ACCOUNTING AC555ON taught by Professor Abekele during the Spring '10 term at Keller Graduate School of Management.

Page1 / 8

S05 R-7 Class Questions Previedw - Regulation 7 Class...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online