CPA Regulation (REG) : CPA Regulation (REG)
Study concepts, example questions & explanations for CPA Regulation (REG)
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Example Questions
Example Question #2 : Bankruptcy Relief For Business & Individuals
Of the following assets, which would be included in a debtor’s bankruptcy estate in a liquidation proceeding?
Wages earned by the debtor after the petition was filed
Property from a divorce settlement received 365 days after the petition was filed
An inheritance received 270 days after the petition was filed
Proceeds from a life insurance policy received 90 days after the petition was filed
Proceeds from a life insurance policy received 90 days after the petition was filed
Proceeds from life insurance, inheritance or divorce settlement received within 180 days after the filing of the petition are included in the estate.
Example Question #3 : Bankruptcy Relief For Business & Individuals
Stephen Industries has a few claims pending against a client filing for Chapter 7 Bankruptcy. They are an unsecured claim of $1,300 that was not timely filed as well as a claim on $75,000 principal and accrued interest on a mortgage loan secured by real property. What dollar amount would Stephen receive from these claims?
$1,300
$75,000
$0
$76,300
$75,000
Stephen would likely only receive the claim for $75,000 as this claim is secured, whereas the unsecured claim was not timely filed. Only additional money left over would be paid.
Example Question #1 : Surety Agreements
Brown cosigned Royal's $50,000 note to State Bank. If Royal is later adjudicated mentally incompetent, what would be Brown's liability on the note?
Not liable to pay State because Royal’s incompetency discharges Royal as a surety.
Liable to pay state only if State first seeks payment from Royal.
Not liable to pay State unless Brown was a compensated surety.
Liable to pay State on the due date of the note.
Not liable to pay State because Royal’s incompetency discharges Royal as a surety.
Any contract made by a party legally deemed incompetent is voidable, and a voided contract would release the liability of all parties involved.
Example Question #2 : Surety Agreements
Which of the following rights does a surety have?
I. Right to compel the creditor to collect from the principal debtor
II. Right to compel the creditor to proceed against the principal debtor’s collateral
II only
Both I and II
I only
Neither I or II
Neither I or II
As a rule, a surety generally has no rights to compel the creditor to collect from the principal debtor. Such rights are only available to a guarantor of collectability, who is liable only if the creditor has exhausted all other legal remedies.
Example Question #3 : Surety Agreements
Which of the following events will release a noncompensated surety from liability?
Release of the principal debtor’s obligation by the creditor but with the reservation of the creditor’s rights against the surety.
Modification by the principal debtor and creditor of their contract that materially increases the surety’s risk of loss.
Filing of an involuntary petition in bankruptcy against the principal debtor.
Insanity of the principal debtor at the time the contract was entered into with the creditor.
Modification by the principal debtor and creditor of their contract that materially increases the surety’s risk of loss.
A non-compensated (or gratuitous) surety is bound to the contract if he or she makes a promise to act as a surety prior to consideration changing hands from the creditor to the debtor. A gratuitous surety is released from liability only in a change of the original contract.
Example Question #4 : Surety Agreements
Per the Federal Fair Debt Collection Practices Act, which of the following would a collection service using improper debt collection practices be subject to?
Reduction of debt
Abolishment of the debt
Criminal prosecution for violating the debt
Civil lawsuit for damages for violating the act
Civil lawsuit for damages for violating the act
The FDCPA gives parties injured by unfair collection practices the right to sue for damages. It does not provide for any of the other answers given.
Example Question #5 : Surety Agreements
Of the following defenses, which would a surety be able to assert successfully to limit the surety’s liability to a creditor?
The incapacity of the surety
The incapacity of the principal debtor
A discharge in bankruptcy of the principal debtor
A personal defense the principal debtor has against the creditor
The incapacity of the surety
A surety may raise his or her own contract defenses to limit his or her liability, thus the surety’s own incapacity is a defense to the surety promise.
Example Question #6 : Surety Agreements
Of the following rights and liabilities, which does a surety have?
Liability on any debt decided by the creditor
Right to compel the creditor to collect from a principal debtor
Right to compel the creditor to proceed against the principal debtor’s collateral
Liability on debt agreed to backstop
Liability on debt agreed to backstop
A surety does not have the rights listed, as the surety acts to back up the debts of another party. Thus, the surety would have the liability on debt they agreed to backstop.
Example Question #1 : Business Law General
Which of the following pairs of elements must a client prove to hold an accountant liable for common law fraud?
Freedom from contributory negligence and loss.
Scienter and justifiable reliance.
Material misrepresentation and breach of contract.
Intent to deceive and perjury.
Scienter and justifiable reliance.
Common law fraud requires five elements all to be met: 1) misrepresentation of a material fact by the defrauding party; 2) scienter (intent to deceive); 3) intent to induce reliance; 4) reasonable reliance, and 5) actual damages to another party.
Example Question #2 : Business Law General
Which of the following circumstances generally will cause a discharge of contractual duties by operation of law?
Novation
Anticipatory retaliation
Impossibility of performance
Accord and satisfaction
Impossibility of performance
“Operation of law” refers to legal consequences of events based on legal principles, rather than from an individual’s action or a court order. In the event that performance becomes impossible (e.g., a person contracted to provide services dies or becomes incapacitated), this necessarily discharges the duties of performance.
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