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Humber College Exam 4: Invigilated Theory Sample Questions:

1. A buyer is purchasing a farm and all the animals are included in the sale price. The buyer is worried the animals could become infected with disease prior to closing, so the salesperson inserts a clause in the agreement of purchase and sale to address that issue. Which of the following should NOT be included in the clause to protect the buyer?

A) State that the seller will continue the day-to-day farm operations until closing.
B) State that the buyer is assuming all animals on an "as is" basis.
C) A condition requiring a check-up of each animal by a predetermined veterinarian during due diligence.
D) The number of animals based on type, gender, and health; if the number is not the same at closing, the price will be adjusted.

2. Audited and unaudited statements provide the financial status of a business to potential buyers. What is the main difference between audited and unaudited financial statements?

A) Unaudited financial statements are prepared by Chartered Professional Accountants; audited financial statements are prepared by senior Chartered Professional Accountants.
B) Unaudited financial statements are prepared by accounting students; audited financial statements are completed by accountants who have received their professional designation.
C) Audited financial statements provide an accurate picture of the financial status of a business; unaudited financial statements may only contain partially reviewed information.
D) Audited financial statements comply with Generally Accepted Accounting Principles (GAAP); unaudited financial statements do not comply with GAAP.

3. A brokerage negotiates the sale of a business on behalf of a seller. Which of the following documents must the brokerage provide to the buyer?

A) A statement of the assets and liabilities of the brokerage
B) A list of fixtures included in the sale
C) A list of chattels excluded in the sale
D) A profit and loss statement for the real estate brokerage for the preceding 12 months

4. A seller provides you with architectural drawings of their building. Which statement is NOT correct?

A) Other types of source documents include surveys and tax records.
B) If changes are made to source documents, they are still valid if you have the original document.
C) A photocopy of a source document can be used to verify information.
D) Architectural drawings are source documents.

5. Which statement about an Environmental Site Assessment (ESA) is NOT correct?

A) No stipulations exist for the third and final phase of an ESA due to its vast and complex nature.
B) The Environmental Protection Act establishes the procedures and requirements for the first two phases of an ESA.
C) All new commercial properties must undergo an ESA before construction begins.
D) An ESA is not required if the buyer is purchasing the industrial property for their own use.

Solutions: