[ykim32]

NINJA Question –

Q. Reilly has agreed to purchase some stock of Jansen Corporation. Which of the following types of consideration or value is(are) sufficient to purchase this stock?

I. Services already performed by Reilly.

II. Services promised by Reilly to be performed at a later date.

III. Negotiable promissory note to pay cash.

Answer: D

A.I only.

B. I and II only.

C. I and III only.

D. I, II and III.

However, I believed that the answer would C because NiNJA material shows that ‘No promises to pay or perform service’ Promise to perform is not valid consideration’. In the other hands, Wiley Test bank that promises to perform service can be valid consideration. I’m so confused. Which one is right? Please help me.

– NINJA NOTE&Flash card

Valid consideration must be given for shares. Cash; property; or services performed.

“No promises to pay or perform services”

– Wiley Test Bank

Valid consideration or value for shares can be any benefit to corporation

including cash, property, services performed, intangible property, promissory notes, other securities, or services contracted to be performed in future.

[Tux]

Which exam is this for?

Is it FAR?

FAR - 86 - 2/27/14
AUD - 75 - 5/29/14
BEC - 80 - 8/31/14
REG - 89 - 2/27/15
Praise Jesus! I'm done!!

Study resources:
Becker
Wiley test bank

[M.O.D.]

There may be a difference in how the term consideration is used. In the legal sense, it supports the existence of a contract, as legally defensible in court. In this case promises may not be valid consideration.

But in accounting usage, it is what is given up in a trade or exchange, thus promises are consideration.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[ykim32]

Thank you! M.O.D.

That question is about Business Law in REG.

[Author]

Replies