Which of the following statements is not true regarding the Futures Market Clearinghouse? a)Guarantees both sides of a futures contract b) It is owned and capitalized by the U.S. government c) It guarantees the quality of the goods delivered d) It eliminates counterparty credit risk e) It acts as a banker, transferring funds from the loser's account to the winner's account

OneClass: Which of the following statements is not true regarding the Futures Market Clearinghouse? a...

QUESTION 1 The knowledge of financial accounting can assist people with decisions such as whether to extend credit to a business. True False 0.2 points Saved QUESTION 2 Employees of a company would not have a reason to use the information provided by financial accounting. True False 0.2 points Saved

QUESTION 3 Financial accounting should be used for assessing the financial health of large organizations only. True False 0.2 points Saved

QUESTION 4 Financial accounting can be helpful for a job candidate who is assessing the financial future of a potential employer. True False 0.2 points Saved QUESTION 5 Lenders might use the information produced by financial accounting when making loan decisions. True False 0.2 points Saved

QUESTION 6 Credit analysts prefer not to use information provided by financial accounting, as it is not accurate. True False 0.2 points Saved

QUESTION 7 Financial accounting is helpful to investment advisors. True False 0.2 points Saved

QUESTION 8 Financial accounting is more useful than managerial accounting. True False 0.2 points Saved

QUESTION 9 The decision to buy or rent equipment is an example of a decision aided by managerial accounting. True False 0.2 points Saved

QUESTION 10 Which of the following statements is true of financial accounting? A. It is used by external parties to make investment decisions. B. It is used to make lease or purchase decisions. C. Managerial accounting is another name for financial accounting, D. It is primarily used to make internal decisions of a business. E. The effectiveness of advertising can be judged using financial accounting. 0.2 points Saved QUESTION 11 The charge for using money over time, often associated with long-term loans, is known as: A. interest. B. principal. C. distribution charge. D. cash dividend. E. preferred dividend. 0.2 points Saved QUESTION 12 Which of the following is a common feature of financial and managerial accounting? A. Both have same objectives B. Both are prepared according to U.S. GAAP C. Both are reported at year end in the annual report D. Both are analyzed by external users while making investment decisions E. Both are used by the management in making decisions 0.2 points Saved

QUESTION 13 Dividends are required to be paid to stockholders on an annual basis. True False 0.2 points Saved

QUESTION 14 An individual who owns one or more shares of stock in a corporation is an owner of that corporation. True False 0.2 points Saved

QUESTION 15 Corporations do not exist as separate legal entities apart from their owners. True False 0.2 points Save Answer

QUESTION 16 It is very difficult to buy or sell ownership shares of a corporation in a stock exchange. True False 0.2 points Saved

QUESTION 17 Stock markets match up investors who wish to buy shares with those who wish to sell them. True False 0.2 points Saved

QUESTION 18 Legal process by which owners of an organization apply to a state government to have it identified as an entity legally separate from its owners is called: A. stocking. B. filling. C. attributing. D. registration. E. incorporation. 0.2 points Saved

QUESTION 19 An advantage of ownership in a sole proprietorship over ownership in a corporation is: A. tax benefits. B. having a board of directors. C. the ability to raise capital through issuance of stock. D. separation of owner and business as legal entities. E. limited liability for debts. 0.2 points Saved

QUESTION 20 Who hires the management of a corporation? A. Stockholders B. Board of directors C. Creditors D. Government E. SEC 0.2 points Saved QUESTION 21 Inventory refers to the: A. excess amount paid for an asset over its fair value. B. intangible assets of a business. C. merchandise bought or manufactured for the purpose of selling. D. amount of net income reinvested by company for future operations. E. revenue generated from investment. 0.2 points Saved QUESTION 22 Investors use financial information to predict whether a: A. company will recruit more employees. B. company's stock price will increase C. company has invested in buildings. D. company will pay salaries. E. company's bond price will increase. 0.2 points Saved

QUESTION 23 Financial accounting can be compared to a portrait. True False 0.2 points Saved

QUESTION 24 Financial statements provide the form and structure for the conveyance of financial information that will create a likeness of the reporting organization. True False 0.2 points Saved

QUESTION 25 The information reported in financial statements must be exact for an investor to make any decision. True False 0.2 points Saved

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After graduating from college with a horticulture degree, LilyCalla began a small business providing plant consulting and designservices for hotels, office buildings and malls. One of her clientswas an attorney who suggested that she incorporate her business.She followed his advice and became the sole shareholder, directorand officer of Calla Lily, Inc. The main assets of the corporationwere Lilyâs consulting accounts. The business had little need foradditional capital.

Lily realized early on that she could make more money if shealso grew the plants that she recommended to her clients. Sheenlisted the help of one of her former botany professors, SusanBlackeye, and together they began a small greenhouse operation.Lily and Susan formed a separate corporation for the greenhousebusiness, L&S Greenhouses, Inc. They needed additional capitalfor the greenhouse business, so Lily contacted some of her formerclassmates. Five of her friends each paid $1000 and Calla Lily,Inc. and Susan each contributed $1000, and their services asincorporators and consultants. Calla Lily, Inc. owned 51% of theshares in L&S, Susan owned 39% and each of the friends owned2%. Lily and Susan were the sole directors and Lily was thePresident and CEO. L&S borrowed $15,000 from the Last LocalBank (LLB) giving it sufficient funds to rent a small plot of land,install two large greenhouses, and purchase necessaryequipment.

L&S Greenhouses, Inc. was unable to keep up with the demandfor plants for Lilyâs consulting jobs, so L&S contracted withanother small greenhouse to start plants for it. That greenhousewas owned by Jacob Sladder. Jacob entered into a contract withL&S to provide a certain number of each of about twenty typesof plants. Payment would be made as the plants were delivered toL&S. Assuming Jacob successfully grew all of the plants in thecontract, he would be paid $13000. This was a big account for Jacoband he terminated several of his smaller customers in order to meethis obligations to L&S. Before the L&S contract, Jacob had$10,000 annual income from those customers.

Meanwhile, Lily, acting as CEO of Calla Lily, Inc. and CEO ofL&S, caused L&S to enter into a contract with it, wherebyL&S would sell its plants to Calla Lily, Inc. at a price farbelow fair market value. Susan was in charge of the greenhouseoperation. Because she was a scientist and had no interest in thebusiness side of things, Lily acted on behalf of L&S in itsbusiness dealings. Susan was completely unaware of the pricearrangement between Calla Lily, Inc., and L&S regarding theplants.

Another reason Susan may have been unaware of the deal is thatshe was using a section of the greenhouse to grow marijuana and shewas regularly testing her plants for quality control purposes.Susan was certain that her state was going to pass a marijuana lawin the next couple of months and she thought L&S should beready to fill the need that was going to be created by the law assoon as it came into effect. She fully researched the markets inColorado and Washington in order to best position L&S for entryinto the new pot market.

It was not too long, however, before the fortunes of thesecompanies changed dramatically. The new governor and majority inthe state legislature not only killed the marijuana bill, theypassed a substitute measure funding a major anti-drug initiativeand hiring additional drug enforcement agents. According to aprominent state senator, the program was designed to âroot outthose who plant that wicked weedâ and reverse the increasing socialacceptance of the drug. It wasnât long before L&Sâs greenhouseswere raided by the state narcotics squad. The state confiscated thepot plants and the greenhouse equipment that was used in the potcultivation. This was basically all of the greenhouseequipment.

The local newspaper ran the story about L&S on the frontpage. Jacob Sladder realized he might have a financial interest inthese events. He tried to contact L&S without success. Hefinally found Lily and asked whether L&S was going to honor theremaining 8 months of his contract. She said she did not knowwhether L&S was going to be able to stay in business. WhenL&S failed to make a payment to Jacob, he sued L&S, CallaLily, Inc., Susan and Lily,Lilyâs former classmates were also veryupset. As shareholders of L&S, they sued Susan for her decisionto grow pot. Susan defended herself, claiming that she did it witha good faith belief that it would greatly benefit the business ofL&S as soon as the new law passed. In fact, Susan argued,L&S should indemnify her for any fines or penalties that mightbe imposed on her personally as a result of her running this aspectof the business.

Evaluate the claims presented by these facts. Discuss all issuesfully.

1. Can Jacob seek payment from anyone besides L&S? If so, onwhat basis? If not, why not?

--- I can see that L&S is responsible, but if L&S cannotpay can the corporate veil be pierce to go after Calla Lily Inc.?Since it is a shareholder of L&S and dominates L&S. ThenCalla Lily forced L&S and Calla Lily into a contract to sellthe plants below fair market value causing financial hardship.

2.Do the L&S shareholders have a claim against Susan and/orthe corporation regarding the marijuana?

----I know the business judgement rule can apply, but since theact was illegal doesnt void everything?

3. Does Susan have a valid defense? Why or why not?

4. Is Susan entitled to indemnification from L&S for anylosses she suffers as a result of the drug arrest?

--- This is what I have so far, is growing the pot a crinimalact? Susan is not entitled to indemnification. Susan meets therequirements for indemnification based on the first tworequirement, acting in good faith and reasonably believing it wasin the best interest of the corporation. She met the tworequirements, but with a criminal fine a third requirement isestablished. This third requirement under the Business Law text ââ¦that the director had no reasonable cause to believe her conductwas unlawful.â

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