Free CPA REG (Taxation & Regulation) Business Law Practice Questions
Business law on the CPA REG exam covers contract formation and enforcement, the Uniform Commercial Code (UCC), agency relationships, business entity formation (partnerships, LLCs, corporations), debtor-creditor relationships, and federal securities regulation.
Sample Questions
Question 1
Easy
Under contract law, what is the mailbox rule and when does it apply?
Solution
D is correct.
The mailbox rule (also called the dispatch rule) provides that an acceptance is effective when dispatched by the offeree through a reasonable or authorized medium of communication, rather than when received by the offeror. This means a contract is formed at the moment of dispatch. The rule applies unless the offeror specifies that acceptance is effective only upon receipt or the offeree sends a rejection before dispatching the acceptance.
The mailbox rule (also called the dispatch rule) provides that an acceptance is effective when dispatched by the offeree through a reasonable or authorized medium of communication, rather than when received by the offeror. This means a contract is formed at the moment of dispatch. The rule applies unless the offeror specifies that acceptance is effective only upon receipt or the offeree sends a rejection before dispatching the acceptance.
Question 2
Medium
Which of the following debts is dischargeable in a Chapter 7 bankruptcy proceeding?
Solution
Ordinary unsecured consumer debt, such as a credit card balance for routine living expenses, is the classic example of a dischargeable obligation in Chapter 7. The other three are statutorily nondischargeable: recent income taxes (those for which the return was due within three years pre-petition), domestic support obligations (alimony and child support), and debts arising from willful and malicious injury to a person or property all survive a Chapter 7 discharge under Section 523.
Question 3
Hard
Debtor is filing for Chapter 7 bankruptcy. Which of the following actions by a creditor is permitted notwithstanding the automatic stay imposed under Section 362?
Solution
The automatic stay halts virtually all creditor collection activity (lawsuits, repossession, dunning calls, lien enforcement) the moment the petition is filed. However, Section 362(b) lists express exceptions, and CRIMINAL proceedings against the debtor are exempt. The bankruptcy system stops debt collection but does not shield a debtor from prosecution for crimes. Other notable exceptions: domestic support actions, certain tax assessments, and police/regulatory actions. Continuing a civil collection suit, repossessing collateral, and making collection phone calls are all classic stay violations subject to sanctions.