Ella Is a Partner in a Law Firm Operating as a General

question 61

Multiple Choice

Ella is a partner in a law firm operating as a general partnership. One of the firm's clients deposited $1 000 000 in the firm account to be used by Ella to complete a real estate purchase. Ella negligently bungled the transaction with the result that the client lost the $1 000 000. Which of the following is TRUE?

• A) The partnership is not liable for Ella's negligence because Ella breached her fiduciary duty to act in the best interests of the partnership.
• B) The partnership is not liable for Ella's negligence because negligence may be a criminal act as well as a tort.
• C) The partnership is not liable for Ella's negligence because they did not authorize Ella to commit negligence.
• D) The partnership would not be liable for Ella's negligence if it was a limited partnership.
• E) The partnership is liable for Ella's negligence.

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Definitions:

Overhead Costs

All costs on the income statement except for direct labor, direct materials, and direct expenses, covering expenses like rent, utilities, and insurance.

Volume of Units

The total number of individual units produced or sold by a business in a specified period.

General & Administrative Expenses

Operating expenses that are not directly tied to the production of goods or services, including salaries of non-sales personnel, rent, and office supplies.

WIP Inventory

Work-in-process inventory, which represents the costs of unfinished goods in manufacturing processes.