CIMA Business Law and Taxation

Question 1

In contract law, which element is described as 'something of value exchanged between parties to a contract'?

Accepted Answer

Consideration

Answer

Offer

Answer

Acceptance

Answer

Intention to create legal relations

Question 2

What is the primary purpose of the Sarbanes-Oxley Act (SOX) in the US?

Accepted Answer

Improving corporate governance and financial reporting accuracy following major accounting scandals

Answer

Regulating international trade practices

Answer

Setting environmental standards for public companies

Answer

Regulating banking and financial services

Question 3

What does 'limited liability' mean for shareholders of a corporation?

Accepted Answer

Shareholders' losses are limited to the amount they invested in the company

Answer

Shareholders are personally liable for all corporate debts

Answer

Shareholders have no rights in the event of corporate insolvency

Answer

Directors are personally liable for company debts but not shareholders

Question 4

In US taxation, what is 'depreciation recapture'?

Accepted Answer

The inclusion in taxable income of gains attributable to previously claimed depreciation deductions when an asset is sold

Answer

The deduction of depreciation from taxable income

Answer

The recovery of an asset's cost over its useful life

Answer

A penalty for over-claiming depreciation deductions

Question 5

Which legal structure provides owners with limited liability while avoiding the double taxation typical of C-corporations in the US?

Accepted Answer

S-Corporation (or LLC)

Answer

Sole proprietorship

Answer

Partnership

Answer

C-Corporation

Question 6

What is a 'fiduciary duty' in the context of business law?

Accepted Answer

A legal obligation to act in the best interests of another party

Answer

A contractual obligation to make regular payments

Answer

A duty to report financial information to regulators

Answer

An obligation to pay taxes on time