AICPA CPA-Business Exam - Topic 2 Question 93 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 93
Topic #: 2

Unless there is an agreement to the contrary, the voting power of members in a limited liability company is determined by:

AEach member's salary.

BEach member's share of profits.

CWhen the member was admitted to the company.

DEach member's capital contribution.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. 7.0 percent cost of funds from retained earnings.

The cost of retained earnings is equal to the rate of return required by the firm's common shareholders (or, in effect, the return 'lost' by them when the firm chooses to fund with retained earnings). While oftentimes this rate is somewhat subjective, we are given the facts to exactly answer the question in this case. The stock is currently selling for $100/share, and the dividend is given at $7/share.

$7 / $100 = 7%

Choices 'b', 'c', and 'd' are incorrect, per the above Explanation:/calculation.

by Elinore at Jul 13, 2024, 02:02 PM

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Judy

7 months ago

Nope, it's not about salaries, that's for sure.

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Amber

8 months ago

Really? I didn't know that!

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Yuonne

8 months ago

Wait, I thought it was about profit shares?

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Brinda

8 months ago

Totally agree, that's how it works!

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Goldie

8 months ago

It's based on each member's capital contribution.

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Davida

9 months ago

I believe it’s definitely about capital contributions, but I could be mixing it up with something else we studied.

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Annabelle

9 months ago

I’m a bit confused; I thought it could also depend on when members joined, but that doesn’t seem to fit the question.

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Carolynn

9 months ago

I remember a practice question that mentioned voting rights being tied to profit shares, but that seems less likely here.

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Kaycee

9 months ago

I think the voting power is based on each member's capital contribution, but I'm not completely sure.

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Wenona

9 months ago

I feel confident about this one. The voting power in an LLC is typically proportional to each member's ownership stake, which is usually determined by their capital contribution. So I'll select option D.

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Arlette

9 months ago

I'm a little confused by this question. I know there are different ways LLCs can structure voting power, but I'm not sure which is the default. I'll have to guess and hope I get lucky.

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Alana

9 months ago

Hmm, I'm not entirely sure about this one. I know voting power in LLCs is usually tied to ownership, but I can't remember if it's based on capital contributions, profit shares, or something else. I'll have to think this through.

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Vicente

9 months ago

This seems like a straightforward question about the default voting power rules for LLCs. I'll carefully read through the options and select the one that best matches the information provided.

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Jin

9 months ago

Okay, I've got this. The question says "unless there is an agreement to the contrary," so the default rule must be one of these options. I'm pretty sure it's based on each member's capital contribution, so I'll go with D.

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Jacqueline

9 months ago

Ensuring compliance with the enterprise architecture seems like a critical part of governance to me. I'll probably go with that option unless I see something else that seems even more fundamental.

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Ty

10 months ago

I'm pretty confident I know the answer to this one. The SSL bridge protocol for the vServer and the SSL protocol for the services should do the trick.

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Idella

1 year ago

Hmm, I wonder if they have a secret underground LLC voting power club. That would be the most interesting business club ever.

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Jarod

1 year ago

D) Each member's capital contribution.

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Lynelle

1 year ago

B) Each member's share of profits.

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Verda

1 year ago

D) Each member's capital contribution.

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Beatriz

1 year ago

A) Each member's salary.

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Lyndia

1 year ago

B) Each member's share of profits.

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Kayleigh

1 year ago

A) Each member's salary.

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Cordie

1 year ago

I bet the folks who wrote this question are real voting power enthusiasts. That's a niche interest if I've ever seen one!

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Sharika

1 year ago

D) makes sense to me. Tying voting power to capital contribution is a fair way to structure an LLC.

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Timothy

1 year ago

I agree, it seems like a logical way to determine voting power.

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Evangelina

1 year ago

D) Each member's capital contribution.

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Willow

1 year ago

B) Each member's share of profits.

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Nilsa

1 year ago

A) Each member's salary.

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Genevieve

1 year ago

I remember learning about this in my business law class. D) is definitely the right choice here.

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Ligia

1 year ago

Yes, that's correct. It's important for members to understand how their capital contribution affects their voting rights.

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Glenn

1 year ago

I agree, D) Each member's capital contribution is the key factor in determining voting power.

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Penney

1 year ago

I'm not sure, but I think it might also depend on when the member was admitted to the company.

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Elouise

1 year ago

I agree with Kyoko, it makes sense that the more capital you contribute, the more voting power you have.

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Fletcher

1 year ago

I was torn between B) and D), but I think D) is the correct answer. Voting power is usually tied to investment, not profits.

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Cathern

1 year ago

Definitely, it's important for members to have a say based on their financial commitment to the company.

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Jerilyn

1 year ago

That makes sense, it wouldn't be fair if voting power was based on profits instead of investment.

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Linwood

1 year ago

I agree, voting power is usually based on how much capital each member has invested.

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Fidelia

1 year ago

I think D) Each member's capital contribution is the correct answer.

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Kyoko

1 year ago

I think the voting power is determined by each member's capital contribution.

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Kiley

1 year ago

D) Each member's capital contribution seems like the most logical option. It's a common practice in LLCs.

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