Chapter
12 Test Questions

Use the
following information for the next three questions:

Assume
Karen quit a job in New York that paid her $60,000 a year and that had
additional employee benefits of 35 percent of salary to accept a new position
in Los Angeles that allegedly would pay her $90,000 a year and have additional
employee benefits of 45 percent of salary. Karen left New York, spent $10,000
in relocation expenses, and started working in Los Angeles. Karen planned to
keep the job in Los Angeles for three years and then return to New York. After
only two months in the new job, it became clear to Karen that the new job was
nothing like it was purported to be. Her actual income was based on some hard
to determine compensation model that appears to pay her about $4,000 per month,
and the benefits seem to be more like 20 percent of pay. Karen is so sorry she
took the new job and she is very upset with the Los Angeles based company that
she believes grossly misrepresented the new job.

106. Assuming Karen can convince the court that she
was intentionally mislead, under the benefit of the bargain approach discussed
in Chapter 10, Karen’s damages would be:

a. $391,500.

b. $218,700.

c. $228,700.

d. $80,200.

e. None of the answers above is correct.

107. Assuming Karen can convince the court that she
was intentionally mislead, under the out-of-pocket approach discussed in
Chapter 10, Karen’s damages would be:

a. $243,000.

b. $172,800.

c. $77,200.

d. $80,200.

108. Karen calls you, a forensic accounting friend
from New York, to ask you advice on her situation. Your most helpful
information would be to:

a. Tell her that she has a really good case
against her current employer and she definitely should file a law suit right
away.

b. Give Karen some idea of what the possible
damages in such a case may be, but make it clear there are legal issues
involved in the situation about which an attorney should advise her.

c. Make it clear that you cannot talk to her
about the case until you are contacted by an attorney.

d. Tell her what a bad idea it was moving to
Los Angeles.

109. If Kevin is injured at work in a work-related
accident, all of the following would be logical components that would be added
to the total damages suffered by Kevin except
for

a. the wages Kevin would have earned during
the time he is off work because of his injury.

b. the company-paid fringe benefits that he
would have received during the time he was off work because of his injury.

c. the work related expenses that he would
have incurred during the time he was off work because of his injury.

d. all of the above are components that would
be added to the damages for Kevin during the time he was off work because of
his injury.

110. If Kevin is injured at work in a work-related
accident, all of the following would be logical components that would be added
to the total damages suffered by Kevin except
for

a. the wages Kevin would have earned during
the time he is off work because of his injury.

b. the company-paid fringe benefits that he
would have received during the time he was off work because of his injury.

c. the amount of FICA tax that would be
withheld from Kevin’s paycheck during the time he was off work because of his
injury.

d. all of the above are components that would
be added to the damages for Kevin during the time he was off work because of
his injury.

Use the
following data to answer the next five questions:

Josh
worked for the Johnson Boat Works company as a maintenance welder for 15 years.
At the beginning of each five years of employment, Josh signed a five-year work
agreement with the company. Twelve months ago shortly after Josh had signed a
new five-year agreement, Josh was fired by the new owner of the company. At the
time of his firing, Josh was making $25 an hour and his employer paid benefit
package, which included health care and other government mandated items, was
worth about 20% of his wages. Although Josh started looking for a new similar
job right away, it was eight months before he got a new job. The new job pays
$22 per hour, but it is a contract that pays no benefits other than his wages.
On advice from his family he recently filed a wrongful discharge case against
Johnson Boat Works.

111. Assume that the court finds that Josh was
fired” for cause” and that the Johnson Boat Works has no liability
for wrongful discharge. In this scenario the best estimate of damages for Josh
for the first twelve months after his firing is

a. $62,400.

b. $52,000.

c. $50,960.

d. There are no damages because the court
found that Johnson Boat Works has no liability for firing Josh.

112. Assume that the Johnson Boat Works is found
liable for the firing of Josh. Also assume a 40 hour week and a 52 week work
year. Josh worked for 13 weeks during the first twelve months at his new job.
What is the amount of damages suffered by Josh during the first year after he
was fired?

a. $62,400.

b. $52,000.

c. $50,960.

d. None of the answers above is correct.

113. Assume that the Johnson Boat Works is found
liable for the firing of Josh. Also assume a 40 hour week and a 52 week work
year. Josh worked for 13 weeks during the first twelve months at his new job.
Assume that he continued to work at his new job for all of years two and three
of the five year work agreement and that the last two years of the contract
Josh lost his contract job and had to work a minimum wage job at $15,000 a year
with employer paid benefits that amounted to 10% of his wages. What is the
amount of damages suffered by Josh during the entire five-year contract?

a. $176,040.

b. $50,960.

c. $62,400.

d. $84,240.

e. None of the answer above is correct.

114. Assume that the Johnson Boat Works is found
liable for the firing of Josh. Also assume a 40 hour week and a 52 week work
year. Josh worked for 13 weeks during the first twelve months after he was fired
and he worked at that job for all of the second year after he was fired. At the
beginning of the third year he found a new welding job that paid $30 per hour
with the same fringe benefit package as he had at the Johnson Boat Works
company. What is the amount of damages suffered by Josh during the entire
five-year contract?

a. $176,040.

b. $50,960.

c. $62,400.

d. $67,600.

e. None of the answer above is correct.

115. Assume that the Johnson Boat Works is found
liable for the firing of Josh. Based on the information you have about the
case, what approach should be used to measure the lost household services that
Josh suffered from his “wrongful discharge” by the company?

a. We would need to estimate what percentage
of household services was lost by Josh when he was fired.

b. We would need to find the U.S. Department
of Labor statistics on lost household services.

c. It is not clear what the amount would be
for Josh, but because he is a male the amount would be much less than the
amount if he was a female.

d. Typically there is no loss of household
services component associated with the calculation of damages in a wrongful
discharge case.

116. David was injured at work while operating a
metal lathe. As an expert representing the defendant (the company) in this
case, some of the questions you will need to address in computing damages in
this case are

a. what is the extent of David’s injuries and
how will it impact on his future ability to work?

b. what is David’s lost wages and
company-paid benefits?

c. How much FICA taxes does David have
withheld from his paycheck?

d. all of the above are correct.

e. Answers a and b are correct.

117. If an expert witness adjusts his damage
estimate for “probability of being alive”, the resulting damage
amount will be

a. less than the damage amount without the
adjustment for probability of being alive.

b. more than the damage amount without the
adjustment for probability of being alive.

c. it could be more or less than the damage
amount without the adjustment for probability of being alive.

d. impossible to know without more
information about the age of the parties involved in the case.

118. An expert for the defense in a permanent
injury case for a work related injury incorporated into the damage calculation
an adjustment for “expected worklife” using data from the U.S.
Department of Labor, Bureau of Labor statistics. As a result the plaintiff’s
expected remaining worklife was 10 years which meant that the plaintiff would
leave the workforce at the age of 62. The plaintiff’s attorney argued strongly
that the plaintiff expected to work until the age of 70 and both of her parents
were living and in good health and in their mid 80s. As the expert witness for
the defense, what arguments would you make to rebut the plaintiff’s attorney
arguments?

a. Probability of life statistics show that
some people will not survive nearly as long as others

b. accidents both on and off the job can
strike anyone and government statistical data takes that into account.

c. people may become disabled or get laid off
from their job.

d. unexpected changes in the health and
welfare of family members may cause a person to leave the work force before
they originally intended.

e. all of the answers above are correct.

119. In most situations, damage estimates for lost
future wages and benefi ts are discounted to their present value using an
appropriate discount rate. The reason for this is because

a. the court does not want damage estimates
to get too large.

b. Money received in the future is not worth
as much as money available now, because currently available funds can be used
or invested immediately.

c. it is required by law, but often it
results in unrealistic amounts for damages.

d. all of the answers above are correct.

120. Typically when making damage calculations
experts discount future wages and other cash flows back to their present value,
and experts incorporate expected future growth in wage and other benefits into
their damage model. The impact of these two events is that

a. the computed damages are lower than they
would have been absent these two adjustments to the damage model.

b. the computed damages are higher than they
would have been absent these two adjustments to the damage model.

c. there is no way to determine whether the
damages will be higher or lower with these two adjustments.

d. the computed damages can be higher or
lower depending on the rate of growth of the wages and other benefits and on
the discount rate used to discount the damages back to their present value.

121. Kevin is fired from his job and decides to
file a wrongful discharge suit against his employer. All of the items listed below might improve
Kevin’s chances of prevailing in the case except
for:

a.
contacting an employees’ rights
attorney.

b.
reading and becoming familiar with
all the provisions of his employment agreement.

c.
acting on some of the negative
instincts he has had as a result of the firing to show the employer he means
business.

d.
requesting to see his personnel file.

e.
none of the above.

122. Kevin is fired from his job and decides to
file a wrongful discharge suit against his employer. All of the items listed below might improve
Kevin’s chances of prevailing in the case except
for:

a.
requesting and negotiating a
severance package.

b.
not allowing the company to
intimidate him.

c.
reviewing any promises made to Kevin
by his employer and gathering any evidence that supports Kevin’s understanding
of the promises.

d.
keeping company property that Kevin
may have as a bargaining chip if needed.

e.
none of the above

7. Sam agrees to buy an
asset from Pam for $205,000, but six months later Pam says no sale. The asset
is now worth $325,000. What would the damages be under the bene?t-of bargain
rule? Show your calculation together
with your answer below. (1 point).