Preview

Ch 28 Question CPA Law

Satisfactory Essays
Open Document
Open Document
284 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Ch 28 Question CPA Law
Chapter 28 Question 5

Joseph Bitter and two brothers, Joseph Smith and Steve Smith, became good friends. As a result of their friendship, they decided to go into the tavern business together. The parties bought an existing tavern and took title in the name of their corporation; Gomer’s Inc. Soon the brothers began feuding with bitter and because of their combined two-thirds interest, assumed virtual control of the business. In response bitter claimed that he and the brothers (the promoters) not the corporation held title to the real state. He claimed that Gomer’s Inc., could not own the building because the corporation was not yet in existence when the contract was made. Do the promoters, rather than the corporation, own the building?

Yes, promoters are liable on contracts they make on behalf of corporations that are not yet formed. This is based on agency law that says that an agent who makes a contract for a nonexistent principal is personally liable for it. Therefore, Joseph Bitter and the smith brothers are responsible for the liability that created the purchase of the tavern.

After reading the case, it mentioned that Bitter’s argument has no merit since they all owed a fiduciary duty to the corporation that they were intending to form to which they were acting as stockholders. Bitter was the attorney for the corporation therefore he had an additional obligation. The record also showed that all negotiations for purchase of real state were made on behalf of Gomer’s Inc. Lastly the case mentions that Bitter cannot profit personally from this transaction and he cannot assert personal ownership of the real state against the other stockholders to whom he had to show good faith

You May Also Find These Documents Helpful

  • Satisfactory Essays

    The gateway matter began with Howsam’s claim that the Dean Witter, Inc. misrepresented attributes of interests she bought in four limited partnerships between 1986 and 1994. Howsam’s claim is subject to arbitration and she has decided to use the National Association of Securities Dealers arbitration process which states that no dispute over six years old may be arbitrated. The plaintiff filed with the Tenth Circuit Court of Appeals to appeal the District Court decision that Howsam has the right to arbitrate and determine the applicable statute of limitations.…

    • 408 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    According to the fact of this case, Parent Co. (Parent) wholly owns Poor Son Co. (Poor Son) as a legal subsidiary, and both of them all nonpublic companies. However, in January 2007 Poor Son filed a voluntary bankruptcy under Chapter 11 of the U.S. bankruptcy code because of its inability of meet obligations as they became due. Then, Parent claimed the loss of control of Poor Son and deconsolidated Poor Son from its financial statement. Through the bidding process in May 2009, Poor Son and OtherCo, the winning sponsor, filed a joint plan of reorganization to the bankruptcy court, but the plan was rescinded by OtherCo later due to significant market value shrink of Poor Son. After that, the bankruptcy court reopened the bidding process and recommended Parent’s plan of reorganization in August 2010. Finally, Parent received final confirmation of Poor Son’s plan.…

    • 615 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    tax exam final 2

    • 12956 Words
    • 118 Pages

    David and Lilly Fernandez have determined their tax liability on their joint tax return to be $1,740. They have made prepayments of $1,100 and also have a child tax credit of $1,000.…

    • 12956 Words
    • 118 Pages
    Powerful Essays
  • Powerful Essays

    According to the factual allegations, Plaintiffs’ grievances arose out of a 2013 reorganization of the “Covis enterprise”. Plaintiffs argue that, before the reorganization, they held valuable profits interests in Covis Holdings LP (“CLP”). But, as part of the reorganization hey exchanged those interests for less valuable profits interests in Covis US Holdings, LLC (“C-US”), in reliance on Defendants’ actions.…

    • 650 Words
    • 3 Pages
    Powerful Essays
  • Powerful Essays

    Cpa Handbook

    • 6630 Words
    • 27 Pages

    UNIFORM CPA EXAMINATION HANDBOOK CALIFORNIA BOARD OF ACCOUNTANCY EXAMINATION UNIT 2000 Evergreen Street, Suite 250 Sacramento, CA 95815 Telephone: (916) 561-1703 Facsimile: (916) 263-3677 Web: www.cba.ca.gov CONTACT INFORMATION California Board of Accountancy 2000 Evergreen Street, Suite 250 Sacramento, CA 95815-3832 Main Telephone: (916) 263-3680 Fax: (916) 236-3675 Web site: www.cba.ca.gov CBA Outreach E-mail: outreach@cba.ca.gov Certifications Telephone: (916) 561-1701 Enforcement (Filing a Complaint, Enforcement Actions)…

    • 6630 Words
    • 27 Pages
    Powerful Essays
  • Good Essays

    Courts and the IRS interpret and apply the IRC and Treasury Regulations by Revenue Rulings, Revenue Procedures and Letter Rulings. Rulings made in practice can help a court apply individual situations and current laws when not specifically defined in the IRC. Revenue Procedures are the current procedures that are being followed and adhere to tax codes, laws, and…

    • 652 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Cpa Research Paper

    • 441 Words
    • 2 Pages

    CPAs are required to obtain a bachelor's degree in business administration, finance or accounting. CPAs are also required to complete 150 hours of education and have no less than two years public accounting experience. CPAs must pass a certification exam, and certification requirements vary by state. Additionally, CPAs must complete a specific number of continuing hours of education yearly.…

    • 441 Words
    • 2 Pages
    Good Essays
  • Good Essays

    CPA - GSL 2014

    • 880 Words
    • 4 Pages

    How would you define the industry to be analysed? Is the industry global? Is the organization mentioned Australian or overseas based? Can you make any inferences about the industry value chain from the article? What are the key product and services segments in the industry that are mentioned in the article? Are you able to identify the stage of the industry life-cycle from the facts in the article?…

    • 880 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Accounting Practice Question

    • 5497 Words
    • 22 Pages

    4. Which of the following is not true of a general ledger trial balance? A. If it balances, it proves that the total debits equal total credits. B. It facilitates the preparation of financial statements. C. If it balances, it proves that no errors have been made in recording transactions. D. It will not detect an error where the accounts debited and credited are reversed in recording a particular transaction.…

    • 5497 Words
    • 22 Pages
    Good Essays
  • Good Essays

    Case Study

    • 390 Words
    • 2 Pages

    The general rule is that promoters are personally liable for the acts made on behalf of a…

    • 390 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Name Chapter 4--Profitability Analysis Description Instructions Modify Add Question Here Question 1 Multiple Choice 0 points Modify Remove Question One important difference between return on assets (ROA) and return on common shareholder’s equity (ROCE) is Answer ROA does not differentiate based on how a company finances its assets, ROCE does. ROA does not distinguish between the different types of income items, such as income from continuing operations, discontinued operations, extraordinary items and changes in accounting principles, ROCE does. ROCE does not distinguish between the different types of income items, such as income from continuing operations, discontinued operations, extraordinary items…

    • 3846 Words
    • 16 Pages
    Good Essays
  • Good Essays

    The word "tax" did not become a household name until the late 1800 's when congress created the nation 's first income tax law. Prior to this law the government used tariff 's and imported goods to help support the economy. However, in order to bring in more revenue to help cover the costs of the civil war the government had to make necessary reforms and re-establish tax law. The Revenue Act of 1862 (July 1, 1862, Ch 119, 12 Stat. 432), signed into law by President Abraham Lincoln, is the stepping stone to the modern income tax statutes of today. It is based on "principles of graduated, or progressive, taxation and of withholding income at the source" (History of the Income Tax in the United States, 2000, ¶2). During this time the government collected over 300 million dollars, the highest in the nation 's history.…

    • 921 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Kohler Company

    • 764 Words
    • 4 Pages

    It is now April 2000 and Herbert Kohler Jr. must decide whether to settle with the plaintiffs or go to trail in 2 days. It was very possible that the court would determine fair market value to be much higher than price offered. Herbert also must consider that the IRS will use a court determined share price to determine the tax liability…

    • 764 Words
    • 4 Pages
    Good Essays
  • Better Essays

    CPA quiz Gov Acctg

    • 10235 Words
    • 41 Pages

    [3] Evaluation of financial reporting by a not-for-profit entity should include which of the following considerations?…

    • 10235 Words
    • 41 Pages
    Better Essays
  • Powerful Essays

    Shlensky V. Wrigley

    • 1709 Words
    • 7 Pages

    This case proves that the defendant and the stockholders he represented were the majority stockholders, the plaintiff is a minority stockholder and the majority stockholders can control the policy of the corporation. The court was not necessarily in favor of what the majority…

    • 1709 Words
    • 7 Pages
    Powerful Essays