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Corporate Law Case Studies
Question 1: Designco Pty ltd designs, manufactures and distributes craft kits for children. Children use the kits to construct balsa wood models of animals, which can be painted. The directors of the company are Ian and May. Ian and May are also the only shareholders. Both Ian and May work in the business. Ian is in charge of design and marketing and May looks after manufacturing and finance.
Among other assets, Designco owns the original design drawings done by Ian. The commercial value of the drawings is about $15,000. Unfortunately, the business has not been going well lately. Ian is worried that, if Designco fails, the drawings will end up in the hands of the liquidator. He and May pass a directors’ resolution donating the drawings to the Art Gallery. Have the directors contravened any director duties of the Corporations Act and the corresponding fiduciary duty?
Question 2 : Andrew and Belinda are the only shareholders and directors of Sailors Pty Ltd which sells boating equipment. The company owns a warehouse and attached shop and a large block of land on the waterfront which it uses for storage. Andrew is also Chairman and majority shareholder of Buildplus Pty Ltd which is a property developer. Buildplus needs to borrow $1.5 million to fund its latest land purchase but it has no assets to use as security for the loan. Andrew arranges for Sailors to guarantee Buildplus’s loan by getting the company to execute a mortgage over its waterfront land. Andrew signed the mortgage documents as a director of Sailors and forged Belinda’s signature as the other signatory. Cassie who is the manager of the bank knew that Sailors was not in the business of land development. However she was away at the time the documents and the transaction were organized and signed. The bank employee in charge in place of Cassie was unaware of Sailors corporate history and did not ask any questions. Builplus is now in default on the loan and the bank is seeking to enforce its rights against Sailors. Advise Sailors whether it is bound by the mortgage.
Prepare cash budget, cash balance and minimum cash balance-Using the information above, prepare a cash budget as of December 31, 2009.
During 2010, Markel had actual outlay of $48,000 for repairs under warranty. Markel employs the expense warranty accrual method-What amount should the company report for estimated liability under warranties at the end of 2010?
High & Dry’s standard price for direct materials is $3.60 per unit-The actual purchase price per unit was
Brian purchased 500 shares of the substantially identical stock for $3,000. What is the tax effect fir Brian as well as what will be the basis of each of four batches of new stock?
In its first year of operations, Harden Co. earned $39,000 in revenues and received $33,000 cash from these customers-Calculate the first year’s net income under both the cash basis and the accrual basis of accounting.
For each of the following items, indicate whether it would be classified and reported under the operating activities (OA), investing activities (IA), or financing activities (FA) section of a statement of cash flows:
Can the state revenue agency collect the outstanding payroll tax from greater under the Federal joint and several liability rules for tax obligation of consolidated return affiliates?
The quantity demanded falls to 300 units per week. Use the formula for arc elasticity to compute elasticity along this portion of the curve.
Suppose that the terms of trade between a buyer and a seller are free on board (FOB) destination. What document provides evidence that a liability exists and might be unrecorded?
Bonita places a coupon in each box of its product. Customers may send in five coupons and $3-A total of 400,000 boxes of product were sold in 2010. It was estimated that 6% of the coupons would be redeemed.
Chris White was a forestry technician who had been searching for several years for a business opportunity to combine with his forestry career
Yuli Copters is known to be aggressive in ignoring intellectual property claims. Imagine they just go ahead with the project as stated above. (In other words, they decide not to pay for the license.)
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