CA Business Law 4

Question 1

A corporation issues stock at $10 par value but sells it for $15. How is the $5 excess recorded?

Accepted Answer

As additional paid-in capital

Answer

The amount received above par value is recorded as additional paid-in capital (or capital surplus) on the balance sheet.

Question 2

Under contract law, which of the following is an example of an illusory promise?

Accepted Answer

'I will buy your car if I feel like it.'

Answer

An illusory promise is one that appears to bind a party but leaves them complete discretion to perform or not, making it unenforceable as consideration.

Question 3

Which remedy for breach of contract aims to place the non-breaching party in the position they would have been in had the contract been fully performed?

Accepted Answer

Expectation (benefit-of-the-bargain) damages

Answer

Expectation damages compensate the non-breaching party for the benefit they expected to receive, putting them in the position they would have occupied had the contract been performed.

Question 4

A director of a corporation personally benefits from a transaction with the corporation without board approval. This is most likely a violation of:

Accepted Answer

The duty of loyalty

Answer

The duty of loyalty requires directors to put the corporation's interests above their own and prohibits self-dealing without proper disclosure and approval.

Question 5

Which type of negotiable instrument is an unconditional written order by one party directing another to pay a fixed sum to a third party?

Accepted Answer

Draft (bill of exchange)

Answer

A draft is a written order (three-party instrument) where the drawer directs the drawee to pay the payee, making it the classic bill of exchange.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Business Law 4