 Highlights  of Test Bank  Test Bank contains more than 1,2 00 questions  Each Chapter of Test Bank includes —  True - False Questions and Multiple - Choice Questions, including Hypotheticals & Fact Patterns with series of questions, and Essay Questions  Answers to all questions  References to the specific sections of the text that discuss the law relating to the questions & answers  An Annotation System that reveals when a question is: new (N), revised from the last edition ( + ), or the same as in the last edition (=).  An Annotation System that tells you which AACSB Skill and AICPA Skill each question fulfills.  Unit Appendices with questions on features & “Focus on Ethics” sections  Test Bank is also available on ExamView® Pro , the acclaimed computerized testing system . W ith ExamView® Pro , instructors can —  Set up the Page Layout for tests  Add or Edit questions & answers and Select questions at random or by number  View summaries of the test or Test Bank chapters  Print tests in a variety of formats 1 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Law and Legal Reasoning N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows. N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Bank. = A question included in the previous edition of the Test Bank. TRUE/FALSE QUESTIONS 1. Laws and government regulations affect almost all business activities . ANSWER: T PAGES: Section 1 TYPE: N BUSPROG: Analytic AICPA: BB - Legal 2. The U.S. Constitution is the basis of all law in the United States. ANSWER: T PAGES: Section 2 TYPE: + BUSPROG: Analytic AICPA: BB - Legal 3. The U.S. Constitution reserves to the federal government all powers not granted to the states . ANSWER: F PAGES: Section 2 TYPE: N BUSPROG: Analytic AICPA: BB - Critical Thinking 4. The Uniform Commercial Code has been adopted in all fifty states . ANSWER: T PAGES: Section 2 TYPE: + BUSPROG: Reflective AICPA: BB - Critical Thinking 2 TEST BANK — UNIT ONE: THE FOUNDATIONS © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5. Federal agency regulations take precedence over conflicting state agency regulations. ANSWER: T PAGES: Section 2 TYPE: + BUSPROG: Analytic AICPA: BB - Legal 6. Common law is a term for the laws that are familiar to most of us. ANSWER: F PAGES: Section 3 TYPE: = BUSPROG: Analytic AICPA: BB - Critical Thinking 7. Decisions by higher court s are not binding on lower court s . ANSWER: F PAGES: Section 3 TYPE: + BUSPROG: Analytic AICPA: BB - Legal 8. Stare decisis is a doctrine obligating judges to help persons who have failed to protect their own rights. ANSWER: F PAGES: Section 3 TYPE: = BUSPROG: Analytic AICPA: BB - Legal 9. Courts are not obligated to follow precedents . ANSWER: F PAGES: Section 3 TYPE: N BUSPROG: Reflective AICPA: BB - Critical Thinking 10. In most legal controversies, there is one single correct result . ANSWER: F PAGES: Section 3 TYPE: N BUSPROG: Analytic AICPA: BB - Critical Thinking 11. Although cases may be similar, no two cases are ever identical in all respects . ANSWER: T PAGES: Section 3 TYPE: N BUSPROG: Analytic AICPA: BB - Critical Thinking CHAPTER 1: LAW AND LEGAL REASONING 3 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 . The courts, in interpreting statutory law, often rely on the common law as a guide to what the legislators intended. ANSWER: T PAGES: Section 3 TYPE: N BUSPROG: Analytic AICPA: BB - Critical Thinking 13 . Each judge had his or her personal beliefs and philosophy, which shape the legal reasoning process. ANSWER: T PAGES: Section 4 TYPE: N BUSPROG: Reflective AICPA: BB - Critical Thinking 14 . Clearly, a judge’s function is to make the laws . ANSWER: F PAGES: Section 4 TYPE: N BUSPROG: Analytic AICPA: BB - Critical Thinking 15 . A jury’s good sense and careful consideration of consequences is known as jurisprudence. ANSWER: F PAGES: Section 4 TYPE: = BUSPROG: Reflective AICPA: BB - Critical Thinking 16 . Procedural law consists of all laws that outline the methods of enforcing rights . ANSWER: T PAGES: Section 5 TYPE: N BUSPROG: Analytic AICPA: BB - Legal 17 . A citation identifies the publication in which a legal authority can be found . ANSWER: T PAGES: Section 6 TYPE: N BUSPROG: Analytic AICPA: BB - Research 18 . The decisions made by the courts establish the boundaries of the law as it applies to almost all business relationships. ANSWER: T PAGES: Section 7 TYPE: N BUSPROG: Analytic AICPA: BB - Critical Thinking 4 TEST BANK — UNIT ONE: THE FOUNDATIONS © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19 . The party against whom a lawsuit is brought is the plaintiff or petitioner . ANSWER: F PAGES: Section 7 TYPE: N BUSPROG: Analytic AICPA: BB - Critical Thinking 20 . When all the judges (or justices) agree on a decision, a majority opinion is written for the entire court. ANSWER: F PAGES: Section 7 TYPE: N BUSPROG: Reflective AICPA: BB - Critical Thinking MULTIPLE - CHOICE QUESTIONS 1 . Data Analytics, Inc., is a corporation engaged in the business of compiling, analyzing, and marketing data. To accomplish its purposes, Data Analytics obtains financing, and hires and fires employees. Laws and government regulations affect such business activities as a. hiring and firing decisions . b. the manufacturing and marketing of products . c. business financing . d. all of the choices . ANSWER: D PAGES: Section 1 TYPE: N BUSPROG: Reflective AICPA: BB - Critical Thinking 2. The U.S. Congress enacts a new federal statute that imposes liability on businesses hiring employees without verifying their citizenship status . This statute applies a. only to businesses not covered by state law. b. only to those states that consent to apply it . c. to all of the states. d. to none of the states. ANSWER: C PAGES: Section 2 TYPE: + BUSPROG: Reflective AICPA: BB - Legal CHAPTER 1: LAW AND LEGAL REASONING 5 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3. A provision in the California state constitution conflicts with a provision in the U.S. Constitution. If challenged a. neither provision will be enforced. b. the provisions will be balanced to reach a compromise. c. the state provision, not the U.S. Constitution, will be enforced. d. the U.S. Constitution, not the state provision, will be enforced. ANSWER: D PAGES: Section 2 TYPE: + BUSPROG: Reflective AICPA: BB - Legal 4 . The Pennsylvania legislature enacts a state law that violates the U.S. Constitution. This law can be enforced by a. no one. b. the federal government only. c. the state of Pennsylvania only. d. the United States Supreme Court only. ANSWER: A PAGES: Section 2 TYPE: N BUSPROG: Reflective AICPA: BB - Legal 5 . The Bay City Planning Department, the Coastal County Zoning Commission, the Delaware Environmental Quality Agency, and the U.S. Bureau of Land Management issue regulations. These rules constitute a. administrative law. b. case law. c. stare decisis . d. statutory law. ANSWER: A PAGES: Section 2 TYPE: N BUSPROG: Reflective AICPA: BB - Critical Thinking 6 TEST BANK — UNIT ONE: THE FOUNDATIONS © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 . Charles is a federal judge whose judicial decisions are part of case law, which does not include interpretations of a. regulations created by administrative agencies. b. constitutional provisions. c. statutes enacted by legislatures. d. sound bites in the media. ANSWER: D PAGES: Section 2 TYPE: N BUSPROG: Reflective AICPA: BB - Legal 7 . Much of American law is based on a. the English legal system. b. the French legal system. c. Greek civil law. d. ancient Chinese law. ANSWER: A PAGES: Section 3 TYPE: N BUSPROG: Reflective AICPA: BB - Legal 8 . Larry enters into a contract with Motivational Education Services to host a panel discussion at a sales conference. When the conference is postponed indefinitely, Larry asks a court to cancel the contract and return the parties to the positions that they held before its formation. This request involves a. specific performance. b. an injunction. c. rescission. d. an action that the court cannot order. ANSWER: C PAGES: Section 3 TYPE: N BUSPROG: Reflective AICPA: BB - Legal CHAPTER 1: LAW AND LEGAL REASONING 7 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9 . Bob’s Big Burgers n’ Shakes Restaurant brings a suit, seeking a remedy at law. A remedy at law is a. monetary damages. b. a decree of specific performance. c. a judicial proceeding for the resolution of a dispute. d. an injunction. ANSWER: A PAGES: Section 3 TYPE: N BUSPROG: Reflective AICPA: BB - Critical Thinking 10 . Maggie and Nate enter into a contract for the sale of a car, but Nate later refuses to deliver the car. Maggie asks a court to order Nate to perform as promised. Ordering a party to perform what was promised is a. specific performance. b. damages. c. rescission. d. beyond the court’s authority. ANSWER: A PAGES: Section 3 TYPE: N BUSPROG: Reflective AICPA: BB - Decision Modeling 11 . Jane enters into a contract with Jill to provide 100 roses for a dinner party. Jill fails to deliver the roses. Jane initiates a suit against Jill, asking the court to order Jill to refund Jane’s payment. Jane is a. the plaintiff. b. the defendant. c. the binding authority. d. the persuasive authority. ANSWER: A PAGES: Section 3 TYPE: N BUSPROG: Analytic AICPA: BB - Legal 8 TEST BANK — UNIT ONE: THE FOUNDATIONS © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12 . Sara believes that she has a strong case against Tom for the breach of an employment contract. Despite this belief, Sara cannot file a suit against Tom after the expiration of the time allowed for the filing under a. a statute of limitations . b. the doctrine of laches . c. an equitable maxim . d. the remedy at law . ANSWER: A PAGES: Section 3 TYPE: N BUSPROG: Reflective AICPA: BB - Legal 13. In the case of Retail Sales Corp. v. Trucking Delivery Co. , the court may rule contrary to a precedent if the court decides that the precedent a. is incorrect or inapplicable. b. is not in line with the judge’s personal values. c. would lead to unintended consequences. d. would not bring about the result the judge prefers. ANSWER: A PAGES: Section 3 TYPE: N BUSPROG: Reflective AICPA: BB - Legal 14 . Karen is a judge hearing the case of Local Dispatch Co. v. National Transport Corp. Applying the relevant rule of law to the facts of the case requires Karen to find cases on point — previ ously decided cases that, in relation to the case under con sidera tion, are a. as different as possible. b. as similar as possible. c. at odds. d. exactly identical. ANSWER: B PAGES: Section 3 TYPE: N BUSPROG: Analytic AICPA: BB - Legal CHAPTER 1: LAW AND LEGAL REASONING 9 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15 . Juan is a judge. How Juan and the judges in other courts interpret a particular statute determines a. how that statute will be applied. b. how the law needs to be changed. c. how the common law should be codified. d. nothing. ANSWER: A PAGES: Section 3 TYPE: = BUSPROG: Analytic AICPA: BB - Legal 16 . To Sam , the written law of a particular society at a particular time is most signifi cant. Sam is a a. legal positivist. b. person who adheres to the historical school of legal thought . c. legal realist. d. person who adheres to the natural law tradition. ANSWER: A PAGES: Section 4 TYPE: + BUSPROG: Analytic AICPA: BB - Critical Thinking 17 . Dave and Ellen enter into a contract via e - mail. When a dispute arises over the performance of the deal, Dave files a suit against Ellen. The emerging body of law that governs transactions conducted via the Internet is referred to by the term a. cyberlaw. b. civil law. c. equitable maxims. d. IRAC. ANSWER: A PAGES: Section 5 TYPE: N BUSPROG: Reflective AICPA: BB - Critical Thinking 10 TEST BANK — UNIT ONE: THE FOUNDATIONS © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18 . Beth is a victim of Carl’s violation of a criminal law. Criminal law is con cerned with a. the prosecution of private individuals by other private individuals. b. the prosecution of public officials by private individuals. c. the relief available when a person’s rights are violated. d. wrongs committed against the public as a whole. ANSWER: D PAGES: Section 5 TYPE: N BUSPROG: Reflective AICPA: BB - Research 19 . The Nebraska Supreme Court issues an opinion that can be found at 285 Neb. 88, 825 N.W.2d 429. “285” is a. the number of the volume in the official reports of the court’s decisions . b. the number of the volume in Thomson Reuter’s unofficial publication of the court’s decisions . c. a page number in the appropriate volume . d. the number of the case in the sequence decided by the state’s highest court . ANSWER: A PAGES: Section 6 TYPE: N BUSPROG: Reflective AICPA: BB - Research 20 . Operational Processes, Inc., appeals a decision against it, in favor of Precision Manufacturing Corporation, from a lower court to a higher court. Operational Processes is a. the appellant. b. the appellee. c. the defendant. d. the respondent. ANSWER: A PAGES: Section 7 TYPE: + BUSPROG: Reflective AICPA: BB - Legal ESSAY QUESTIONS 1. In a lawsuit between Cloud Computing Corporation and Digital Enterprises , Inc., the court applies the doctrine of stare decisis . What is this doctrine? What does this doctrine have to do with the American legal system ? CHAPTER 1: LAW AND LEGAL REASONING 11 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ANSWER: In a common law legal system, past judicial decisions are binding in current disputes with similar facts. This feature of the com mon law, which is the basis of the American legal system, is unique be cause, unlike the law in other legal systems, it is judge - made law. Within the common law system, when possible, judges attempt to be con sistent and to base their decisions on the principles suggested by earlier cases. The body of principles and doctrines that form the common law emerged over time as judges applied the principles announced in earlier cases to subsequent legal controversies. The practice of deciding cases with refer ence to former decisions, or precedents — the cornerstone of the American legal system — is called the doctrine of stare decisis . Under this doctrine, judges are obligated to follow the precedents established within their ju risdictions. This helps courts to be more efficient and makes the law more stable and predictable. PAGES: Section 3 TYPE: = BUSPROG: Reflective AICPA: BB - Critical Thinking 2. For a business law class, Sierra reads and briefs several court opinions using the IRAC method of legal reasoning. What do the letters I, R, A, and C abbreviate? What are the steps in the IRAC method? ANSWER: The letters I, R, A, and C are the first letters of “Issue,” “Rule,” “ Application ,” and “ Conclusion .” The IRAC method of legal reasoning requires Sierra or any other student or reader to first summarize the important facts of a legal case and state the salient issue or issues. The second step is to de termine and set out the rule of law that applies to the facts to resolve the issue. The third step is to apply that rule to those facts. The application of the rule requires an answer to the question posed by the issue. This answer may involve one or more different types of legal reasoning, but those reasons should be thought out and expressed clearly. Finally, the conclusion derived from the application of the rule to the facts is stated. This is sometimes referred to as the result or the outcome in a case — who won ; who lost ; what the award, if any, consists of ; or what the parties are, or are not, required to do next. PAGES: Section 3 TYPE: = BUSPROG: Reflective AICPA: BB - Legal 1 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Appendix A for Unit One Questions on the Features N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows. N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Bank. = A question included in the previous edition of the Test Bank. CHAPTER 4 — INSIGHT INTO THE GLOBAL ENVIRONMENT: BRIBERY AND THE FOREIGN CORRUPT PRACTICES ACT 1 . Mexican employees of Farmacos Ltd., a subsidiary of Global Pharmaceuticals , Inc., a U.S. firm, offer cash and gifts to regional Mexican government officials to obtain their approval of favorable contracts. Steps that company managers might take to end the practice and to influence other employees not to engage in similar conduct include a. termination of the employees who offered the bribes . b. mandatory antibribery training for all employees . c. audit of company expenses to expose illegal and unethical payments . d. all of the choices . ANSWER: D PAGE S : Section 5 TYPE: N BUSPROG: Ethics AICPA: BB - Critical Thinking 2 TEST BANK — UNIT ONE: THE FOUNDATIONS © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. UNIT ONE — FOCUS ON LEGAL ETHICS: ETHICS AND THE LEGAL ENVIRONMENT OF BUSINESS 2 . Energy Resources Company develops its marketing strategies in terms of what its management perceives as its ethical obligations, which represent its a. legal liability. b. profitability. c. standards of right and wrong. d. unilateral corporate duties. ANSWER: C PAGE S : Focus on Ethics TYPE: = BUSPROG: Ethics AICPA: BB - Critical Thinking 3 . Commercial Wholesale, Inc., conducts its operations unethically, which, when revealed, will likely affect its a. good will only. b. profits only. c. reputation only. d. good will, profits, and reputation. ANSWER: D PAGE S : Focus on Ethics TYPE: = BUSPROG: Ethics AICPA: BB - Risk Analysis