Clarence and Pamela Cummings filed a petition for a Chapter 7 bankruptcy in a federal bankruptcy court. After the debtors filed two amended versions of the required schedules, the trustee asked for additional time to investigate. The court granted the request. The debtors then filed a third amended schedule. In it, they disclosed for the first time the existence of First Beacon Management Company, a corporation that they planned to use as part of their postbankruptcy “fresh start.” The trustee then claimed that the Cummingses’ failure to disclose their interest in First Beacon as debtor property was a “false oath relating to a material fact made knowingly and fraudulently” in violation of the Bankruptcy Code. The court agreed and denied the debtors a discharge. The Bankruptcy Appellate Panel (BAP) affirmed the court’s decision. The Cummingses appealed. ISSUE Did Clarence and Pamela Cummings commit fraud by not disclosing their interest in First Beacon until they filed their third amended schedule? DECISION Yes. The U.S. Court of Appeals for the Ninth Circuit affirmed the ruling of the Bankruptcy Appellate Panel. “The sequence of debtors’ filings substantiates the presence of fraud.” REASON The bankruptcy court rejected the Cummingses’ testimony as “not credible” and “beyond not credible,” and the BAP found “ample evidence” to support these findings. On appeal, the debtors claimed that the bankruptcy court had failed to consider “voluminous independent and undisputed documentary evidence” that “completely obliterated any suggestion of fraudulent intent.” The appellate court found, however, that this evidence did not support the debtors’ claim. Instead, it clearly showed their ultimate purpose—”to insulate First Beacon Management Co., . . . the new corporate anchor of their post-petition fresh start, from the stigma of bankruptcy.” That they eventually disclosed their interest in First Beacon did not eliminate their fraud. They chose twice to amend their schedules without revealing the corporation and finally admitted to its existence only after the bankruptcy court gave the trustee additional time to investigate. CRITICAL THINKING: Why would a debtor risk the denial of a discharge to conceal assets? Discuss.
> When a corporation wishes to issue certain securities, it must provide sufficient information for an unsophisticated investor to evaluate the financial risk involved. Specifically, the law imposes liability for making a false statement or omission that i
> Burke has been a rancher all her life, raising cattle and crops. Her ranch is valued at $500,000, almost all of which is exempt under state law. Burke has eight creditors and a total indebtedness of $70,000. Two of her largest creditors are Oman ($30,000
> Name Brand, Inc., is a small business. Twelve members of a single family own all of its stock. Ordinarily, corporate income is taxed at the corporate and shareholder levels. How can Name Brand avoid this double taxation of income?
> Greener Delivery Company and Hiway Trucking, Inc., form a business trust. Insta Equipment Company and Jiffy Supply Corporation form a joint stock company. Kwik Mart, Inc., and Luscious Produce, Inc., form an incorporated cooperative. What do these forms
> Gabriel, Harry, and Ida are members of Jeweled Watches, LLC. What are their options with respect to the management of their firm?
> Darnell and Eliana are partners in D&E Designs, an architectural firm. When Darnell dies, his widow claims that as Darnell’s heir, she is entitled to take his place as Eliana’s partner or to receive a share of the firm’s assets. Is she right? Why or why
> Koko, a person with a disability, applies for a job at Lively Sales Corporation for which she is well qualified, but she is rejected. Lively continues to seek applicants and eventually fills the position with a person who does not have a disability. Coul
> Ruth is a supervisor for a Subs & Suds restaurant. Tim is a Subs & Suds employee. The owner announces that some employees will be discharged. Ruth tells Tim that if he has sex with her, he can keep his job. Is this sexual harassment? Why or why not?
> Onyx applies for work with Precision Design Company, which tells her that it requires union membership as a condition of employment. She applies for work with Quality Engineering, Inc., which does not require union membership as a condition of employment
> Erin, an employee of Fine Print Shop, is injured on the job. For Erin to obtain workers’ compensation, does her injury have to have been caused by Fine Print’s negligence? Does it matter whether the action causing the injury was intentional? Explain.
> Ogden is a vice president of Plumbing Service, Inc. (PSI). On May 1, Ogden loans PSI $10,000. On June 1, the firm repays the loan. On July 1, PSI files for bankruptcy. Quentin is appointed trustee. Can Quentin recover the $10,000 paid to Ogden on June 1?
> Davis contracts with Estee to buy a certain horse on her behalf. Estee asks Davis not to reveal her identity. Davis makes a deal with Farmland Stables, the owner of the horse, and makes a down payment. Estee does not pay the rest of the price. Farmland S
> Daniel and Katherine Balk asked Jirak Construction, LLC, to remodel their farmhouse in Lawler, Iowa. Jirak provided the Balks with an initial estimate of $45,975 for the cost. Over the course of the work, the Balks made significant changes to the plan. J
> Dimka Corporation wants to build a new mall on a specific tract of land. Dimka contracts with Nadine to act as its agent in buying the property. When Nadine learns of the difference between the price that Dimka is willing to pay and the price at which th
> Roni writes a check for $700 to Sela. Sela indorses the check in blank and transfers it to Titus, who alters the check to read $7,000 and presents it to Union Bank, the drawee, for payment. The bank cashes it. Roni discovers the alteration and sues the b
> After graduating from college, Tina works briefly as a salesperson and then files for bankruptcy. As part of her petition, Tina reveals that her only debts are student loans, taxes accruing within the last year, and a claim against her based on her misus
> Lyn writes a check for $900 to Mac, who indorses the check in blank and transfers it to Jan. She presents the check to Omega Bank, the drawee bank, for payment. Omega does not honor the check. Is Lyn liable to Jan? Could Lyn be subject to criminal prosec
> Lee is an officer of Magma Oil, Inc. Lee knows that a Magma geologist has just discovered a new deposit of oil. Can Lee take advantage of this information to buy and sell Magma stock? Why or why not?
> Wonder Corporation has an opportunity to buy stock in XL, Inc. The directors decide that instead of Wonder buying the stock, the directors will buy it. Yvon, a Wonder shareholder, learns of the purchase and wants to sue the directors on Wonder’s behalf.
> Finian and Gloria are partners in F&G Delivery Service. When business is slow, without Gloria’s knowledge, Finian leases the delivery vehicles as moving vans. Because the delivery vehicles would otherwise be sitting idle in a parking lot, can Finian keep
> Thirsty Bottling Company and U.S. Beverages, Inc. (USB), enter into a franchise agreement that states that the franchise may be terminated at any time “for cause.” Thirsty fails to meet USB’s specified sales quota. Does this constitute “cause” for termin
> Frank plans to open a sporting goods store and to hire Gogi and Hap. Frank will invest only his own funds. He expects that he will not make a profit for at least eighteen months and will make only a small profit in the three years after that. He hopes to
> A financing statement that does not have the debtor’s exact name should still be effective because creditors should always be protected when debtors default. Debate this
> With a loan of 1.4 million euros from Barclays Bank, PLC, Thomas Poynter bought a yacht. The loan agreement gave Barclays multiple options on default. One option required the lender to give ten days’ advance notice of a sale. A different option permitted
> To reduce fraud, checks that utilize mechanical or electronic signature systems should not be honored.
> Lynne Meyer, on her way to a business meeting and in a hurry, stopped by a Buy-Mart store for a new car charger for her smartphone. There was a long line at one of the checkout counters, but a cashier, Valerie Watts, opened another counter and began load
> Rather than being allowed to file Chapter 7 bankruptcy petitions, individuals and couples should always be forced to make an effort to pay off their debts through Chapter 13. Debate this
> What are some types of actions that an HRM professional can take to reduce the probability of harassment lawsuits against her or his company?
> Can you think of a way a company can obtain information via an applicant’s social media posts without running the risk of being accused of hiring discrimination?
> What are the pros and cons of paying overtime wages to workers who check e-mail and perform other work-related tasks electronically after hours?
> Imagine the United States without federal deposit insurance. What are some of the mechanisms that would arise to “punish” bank managers who acted irresponsibly?
> Does having a digital wallet in an iPhone, Android-based phone, or other smartphone entail more security risks than carrying a physical wallet? Explain.
> Some observers predict that numerous lawsuits will be filed against the FCC in the immediate future. Why would this be likely?
> Clearly, limited liability is an important aspect of doing business globally. Why might a nation limit the number of member-owners in a limited liability entity?
> Timothy Martinez, owner of Koenig & Vits, Inc. (K&V), guaranteed K&V’s debt to Community Bank & Trust. The guaranty stated that the bank was not required to seek payment of the debt from any other source before enforcing the guaranty. K&V defaulted. Thro
> Do local participation rules benefit countries in the long run? Explain.
> Sole proprietorships, as well as other businesses, routinely seek funding for online projects. How can the individuals involved avoid personal liability?
> Should a U.S.-based franchisor be allowed to impose different contract terms and quality control standards on franchisees in foreign nations than it does on domestic franchisees? Why or why not?
> Why do you think U.S. corporations are more aggressive than European com-panies in taking steps to prevent sexual harassment in the workplace?
> What problems might arise if data from an internal social media system are stored on third-party servers?
> How would U.S. society be affected if employers could not be held vicariously liable for their employees’ torts?
> If an employee accesses Facebook at work even though personal use of a workplace computer is against the employer’s stated policies, can the employee be criminally prosecuted? Why or why not?
> Filing for bankruptcy under Chapter 11 may involve a time-consuming process. How might this affect the likelihood that a firm will be able to negotiate a workout agreement with its creditors?
> How do online escrow services reduce Internet fraud?
> Why does the presence of a capitalist system affect a nation’s perspective on corporate governance?
> Thomas Tille owned M.A.T.T. Equipment Co. To operate the business, Tille borrowed funds from Union Bank. For each loan, Union filed a financing statement that included Tille’s signature and address, the bank’s address, and a description of the collateral
> Do corporations benefit from shareholders’ derivative suits? If so, how?
> The board of the Royal Arcanum Hospital Association of Kings County, Inc., passed a resolution to require that all corporate checks be signed by two of three officers—Frank Vassallo, Joseph Rugilio, and William Herrnkind. The three were also named as sig
> David and Sharon Welsh filed a Chapter 13 petition. The bankruptcy trustee objected to their proposed plan on the ground that it was not proposed in good faith. Specifically, the Welshes were making “minuscule” payments on unsecured claims while li
> On May 11, 2009, JPMorgan Chase Bank (Chase) filed a foreclosure action against Robert McLean. The complaint alleged that Chase was entitled to enforce the mortgage and promissory note on which McLean had defaulted. Nevertheless, the attached mortgage id
> To finance a development project in Delaware, Brandywine Partners, LLC, borrowed $15.9 million from HSBC Realty Credit Corp. (USA). As part of the deal, Brian O’Neill, principal for Brandywine, signed a guaranty that designated him the “primary obligor”
> Since its founding in Jackson, Michigan, in 1900, Sparton Corporation has designed, developed, and manufactured electronic and electromechanical devices. From prototype through shipment, Sparton has worked with diverse companies in the aerospace, medical
> Steven Light bought a $55,050 wedding ring for his wife, Sherri Light, on credit from Royal Jewelers, Inc., a store in Fargo, North Dakota. The receipt granted Royal a security interest in the ring. Later, Royal assigned its interest to GRB Financial Cor
> Nina Shahin deposited a check in the amount of $2,500 into her checking account at the Delaware Federal Credit Union (DelOne). DelOne placed a two-business-day “local hold” on the check pending verification. Concerned that the drawer’s signature did no
> The Michigan Basic Property Insurance Association (MBP) issued a check for $69,559.06 from its account with Fifth Third Bank to Joyce Washington, Countrywide Home Loans, and T&C Federal Credit Union as co-payees. Washington indorsed the check herself by
> PRA Aviation, LLC, borrowed $3 million from Center Capital Corp. to buy a Gates Learjet 55B. Center perfected a security interest in the plane. Later, PRA defaulted on the loan, and Center obtained possession of the jet. Based on a review of the market f
> Write a few sentences describing the circumstances in which a creditor would resort to each of the following remedies when trying to collect on debt. 1. Mechanic’s lien 2. Artisan’s lien 3. Writ of attachment
> On January 5, Brian drafts a check for $3,000 drawn on Southern Marine Bank and payable to his assistant, Shanta. Brian puts last year’s date on the check by mistake. On January 7, before Shanta has had a chance to go to the bank, Brian is killed in an a
> Since the 1990 revision of Article 4, a bank is no longer required to include the customer’s canceled checks when it sends monthly statements to the customer. A bank may simply itemize the checks (by number, date, and amount). It may provide photocopies
> Karel Svoboda, a credit officer for Rogue Bank, evaluated and approved his employer’s extensions of credit to clients. These responsibilities gave Svoboda access to nonpublic information about the clients’ earnings, performance, acquisitions, and busines
> Go to Appendix G at the end of this text and examine the excerpt of Case No. 5, City of Livonia Employees’ Retirement System and Local 295/Local 851 v. Boeing Co. Review and then brief the case, making sure that your brief answers the following questions
> Milena Weintraub and Larry Griffith were shareholders in Grand Casino, Inc., which operated a casino in South Dakota. Griffith owned 51 percent of the stock and Weintraub 49 percent. Weintraub managed the casino, which Griffith typically visited once a w
> Newbury Properties Group owns, manages, and develops real property. Jerry Stoker and the Stoker Group, Inc. (the Stokers), also develop real property. Newbury entered into agreements with the Stokers concerning a large tract of property in Georgia. The p
> At least six months before the Summer Olympic Games in Atlanta, Georgia, a group made up of Stafford Fontenot, Steve Turner, Mike Montelaro, Joe Sokol, and Doug Brinsmade agreed to sell Cajun food at the games and began making preparations. On May 19, th
> Sandra Lerner and Patricia Holmes were friends. One evening, while applying nail polish to Lerner, Holmes layered a raspberry color over black to produce a new color, which Lerner liked. Later, the two created other colors with names like “Bruise,” “Smog
> Walid Elkhatib, an Arab American, bought a Dunkin’ Donuts franchise in Illinois. Ten years later, Dunkin’ Donuts began offering breakfast sandwiches with bacon, ham, or sausage through its franchises. Elkhatib refused to sell these items at his store on
> Marsh has a prize horse named Arabian Knight. In need of working capital, Marsh borrows $5,000 from Mendez, who takes possession of Arabian Knight as security for the loan. No written agreement is signed. Discuss whether, in the absence of a written agre
> Roy Supply, Inc., and R. M. R. Drywall, Inc., had checking accounts at Wells Fargo Bank. Both accounts required all checks to carry two signatures—that of Edward Roy and that of Twila June Moore, both of whom were executive officers of both companies. Be
> Exact Photo Service purchased a new color printer at the beginning of 2018 for $38,000. The printer is expected to have a four-year useful life and a $3,500 salvage value. The expected print production is estimated at 1,500,000 pages. Actual print produc
> Required: Give some examples of long-term operational assets that each of the following companies is likely to own: (a) Caterpillar, (b) Amtrak, (c) Facebook, and (d) Bank of America Corp.
> Leach Inc. experienced the following events for the first two years of its operations: 2018: 1. Issued $10,000 of common stock for cash. 2. Provided $78,000 of services on account. 3. Provided $36,000 of services and received cash. 4. Collected $69,000 c
> During the first year of operation, 2018, Direct Service Co. recognized $290,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $46,000. For this first year in business, the owner believes uncollectible accounts ex
> Joey’s Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, it makes a significant amount of credit sales. During 2018, its first year of operations, Joey’s Bike Shop experienced
> The accounts receivable balance for Renue Spa at December 31, 2017, was $61,000. Also on that date, the balance in the Allowance for Doubtful Accounts was $3,750. During 2018, $2,100 of accounts receivable were written off as uncollectible. In addition,
> Grover Inc. uses the allowance method to account for uncollectible accounts expense. Grover Inc. experienced the following four accounting events in 2018: 1. Recognized $92,000 of revenue on account. 2. Collected $78,000 cash from accounts receivable. 3.
> Rosie Dry Cleaning was started on January 1, 2018. It experienced the following events during its first two years of operation: Events Affecting 2018 1. Provided $45,000 of cleaning services on account. 2. Collected $39,000 cash from accounts receivable.
> The following account balances come from the records of Ourso Company: During the accounting period, Ourso recorded $14,000 of sales revenue on account. The company also wrote off a $150 account receivable. Required: a. Determine the amount of cash co
> The following information pertains to the inventory of Parvin Company: During 2018, Parvin sold 2,700 units of inventory at $90 per unit and incurred $41,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LI
> Use the Target Corporation’s Form 10-K to answer the following questions related to Target’s 2015 fiscal year (year ended January 30, 2016). Target’s Form 10-K is available on the company’s website or through the SEC’s EDGAR database. Appendix A provides
> The Shirt Shop had the following transactions for T-shirts for 2018, its first year of operations: During the year, The Shirt Shop sold 810 T-shirts for $20 each. Required: a. Compute the amount of ending inventory The Shirt Shop would report on the b
> Businesses using the allowance method for the recognition of uncollectible accounts expense commonly experience four accounting events: 1. Recognition of uncollectible accounts expense through a year-end adjusting entry. 2. Write-off of uncollectible acc
> The following information pertains to Mason Company for 2018: Beginning inventory…………………………………..90 units @ $40 Units purchased………………………………………..310 units @ $45 Ending inventory consisted of 30 units. Mason sold 370 units at $90 each. All purchases and s
> Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 100 units at $60 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 150-unit purchase at $68 per unit; the second
> Jones Co. started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first purchase cost $1,060 and the other, $1,380. Jones sold one of the items during the year. Required: Based on this info
> Required: For each of the following situations, indicate whether FIFO, LIFO, or weighted average applies: a. In a period of falling prices, net income would be highest. b. In a period of falling prices, the unit cost of goods would be the same for ending
> Luna Company accepted credit cards in payment for $6,000 of services performed during July 2018. The credit card company charged Luna a 4 percent service fee; it paid Luna as soon as it received the invoices. Required: Based on this information alone, w
> Ultra Day Spa provided $120,000 of services during 2018. All customers paid for the services with credit cards. Ultra submitted the credit card receipts to the credit card company immediately. The credit card company paid Ultra cash in the amount of fa
> The following post-closing trial balance was drawn from the accounts of Little Grocery Supplier (LGS) as of December 31, 2017: Cash……………………………………………..$9,000 Accounts Receivable………………………41,000 Allowance for Doubtful Accounts………2,500 Inventory………………………………
> On May 1, 2018, Benz’s Sandwich Shop loaned $10,000 to Mark Henry for one year at 6 percent interest. Required: Answer the following questions: a. What is Benz’s interest income for 2018? b. What is Benz’s total amount of receivables at December 31, 201
> Glenn’s Cleaning Services Company is experiencing cash flow problems and needs a loan. Glenn has a friend who is willing to lend him the money he needs provided she can be convinced that he will be able to repay the debt. Glenn has assu
> Rainey Enterprises loaned $20,000 to Small Co. on June 1, 2018, for one year at 6 percent interest. Required: Show the effects of the following transactions in a horizontal statements model like the one shown here. (1) The loan to Small Co. (2) The adju
> Roth Service Co. experienced the following transactions for 2018, its first year of operations: 1. Provided $110,000 of services on account. 2. Collected $89,000 cash from accounts receivable. 3. Paid $41,000 of salaries expense for the year. 4. Roth adj
> Holmes Cleaning Service began operation on January 1, 2018. The company experienced the following events for its first year of operations: Events Affecting 2018: 1. Provided $84,000 of cleaning services on account. 2. Collected $76,000 cash from accounts
> The Pet Store experienced the following events for the 2018 accounting period: 1. Acquired $60,000 cash from the issue of common stock. 2. Purchased $65,000 of inventory on account. 3. Received goods purchased in Event 2 FOB shipping point; freight cost
> Anna Chun was in charge of the returns department at The Luggage Company. She was responsible for evaluating returned merchandise. She sent merchandise that was reusable back to the warehouse, where it was restocked in inventory. Chun was also responsibl
> Selected financial information for Edwards Company for 2019 follows: Sales…………………………..…………..$800,000 Cost of goods sold…………..…………..500,000 Merchandise inventory Beginning of year………………………….37,500 End of yea
> The following data come from the financial records of Fargo Corporation for 2018: Sales………………………………………….$640,000 Interest expense………………………………6,000 Income tax expense………………………..12,000 Net income…………………………………….42,000 Required: How many times was interest
> Swartz Corporation wrote off a $1,600 uncollectible account receivable against the $48,000 balance in its allowance account. Required: Explain the effect of the write-off on Swartz’s current ratio.
> Identify which of the following items are added to or subtracted from the unadjusted bank balance to arrive at the true cash balance. Distinguish the additions from the subtractions by placing a + beside the items that are added to the unadjusted bank ba
> Identify which of the following items are added to or subtracted from the unadjusted book balance to arrive at the true cash balance. Distinguish the additions from the subtractions by placing a + beside the items that are added to the unadjusted book ba
