CPAR

CPA Review School of the Philippines

FINAL PRE-BOARD EXAMINATION September 2021
Regulatory Framework for Business Transactions

Instructions: Choose the BEST answer for each of the following items. Mark only one answer for each item on
the Special Answer Sheet provided. Strictly no erasure allowed.

1. A, B, C and D organized a general partnership with A and B as industrial partners and C and D as capitalist
partners. C contributed Php 200,000 and D contributed Php 100,000 to the common fund. By a unanimous
vote of the partners, A and B were appointed as managing partners without any specification of their respective
powers and duties. Later, W applied for the position of secretary and Y applied for the position of accountant
of the partnership. The hiring of W was decided upon by A and B but was opposed by C and D. The hiring of
W was decided by A and D but was opposed by B and C. Who can be hired by the partnership?
a. Both W and Y b. Neither W nor Y c. Only W d. Only Y

2. A, upon request, loaned his passenger jeepney to B to enable B to bring his sick wife from Legaspi City to
the PGH in Manila for treatment. On the way back to Legaspi, after leaving his wife at the hospital, people
stopped the passenger jeepney. B stopped for them and allowed them to ride on board accepting payment
from them just as in the case of ordinary passenger jeepney plying their route. As B was crossing Guinobatan,
there was an onrush of lahar from Mount Mayon. The jeep that was loaned to him was destroyed. Which of
the following is not correct?
a. The contract between A and B is called commodatum
b. B is obliged to pay A for the use of the passenger jeepney
c. B is liable for the loss of the jeepney
d. A can recover from B the value of the jeepney and payment for the use of the jeepney

3. Spouses A and B borrowed money from a local merchant. To guarantee the payment, they left the Torrens
title of their land with the merchant for him to hold until they pay the loan. There is a contract of
a. Pledge b. Mortgage c. Antichresis d. Simple loan

4. The following are examples of real contracts, except

a. Commodatum b. Mutuum c. Donation d. Pledge

5. A, B and C are general partners in a merchandising firm. They contributed amounts to the capital and also
agreed on equal distribution of whatever net profit is realized per fiscal period. After three years of operation,
however, C conveys her whole interest in the partnership to D, without the knowledge and consent of A and
B. Which of the following is not correct?
a. The partnership is dissolved.
b. D cannot interfere or participate in the management or administration of the partnership business or affairs
c. D shall receive the net profits to which C would have otherwise been entitled
d. The conveyance by C of his whole interest in the partnership did not make D a partner

6. Which of the following obligations is not valid?

a. If the debtor promises to pay as soon as she has the means to pay
b. If the debtor will give his car if the creditor will pass the CPA Exam and if the creditor will fail, the creditor
will have sexual intercourse with the debtor for one week.
c. If the debtor will give his cow or will kill the friend of the creditor
d. If the debtor will be the mistress of the creditor or if the debtor wants will give Php 1M to the creditor

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7. If a pregnant woman passenger of a bus were to suffer an abortion following a vehicular accident due to the
gross negligence of the bus driver, she and her husband can claim as damages from the bus company for the
death of their unborn child, except
a. Actual damages in the form of imdemnity for the loss of life of the unborn child
b. Moral damages for mental anguish that attended the loss of the unborn child
c. Exemplary damages since there is gross negligence
d. Actual damages for the bodily injury she suffered from the loss of the fetus which is considered part of
her internal organs.

8. A 16-year old high school student stabs his classmate who is his rival for a girl while they were going out of
the classroom after their last class, under the law on quasi delict. Which of the following is not correct?
I – The school, its administrators and teachers shall have substituted parental authority and responsibility
over the minor child while under their supervision, instruction or custody.
II – The persons identified by law to be liable may raise the defense that they exercised the proper diligence
required under the circumstances, that is they observed the diligence of a good father of a family to prevent
the damage.
a. Both I and II b. Neither I nor II c. Only I d. Only II

9. A made a negotiable promissory note payable to the order of B, a minor. Later, B indorsed the note to C, then
C to D and D to E. Which of the following is correct?
a. If E is aware that B is a minor, E cannot collect from A but can collect from D or E
b. If E is a holder in due course, E can collect from A, and if A dishonors by non-payment, E can collect
from B, C or D
c. The indorsement by B to C did not make C a holder
d. Regardless of whether E is a holder in due course or holder for value, E can collect from A

10. A made a negotiable promissory note payable to the order of B. Later, B made a blank indorsement to C and
C delivered the note to D, who likewise delivered the note to E. E made a special indorsement to F and F
made a qualified indorsement to G. Which of the following is correct?
a. The indorsement made by E is not necessary because the instrument was converted to bearer, hence the
indorsement made by G can be stricken out
b.C and D are not liable because they negotiated the instrument by delivery
c. If the instrument is dishonored by A, the present holder E cannot go after C and D
d.B’s indorsement can be stricken out because B’s blank indorsement converted the instrument to bearer

11. Inadvertently, the SEC approved the Articles of Incorporation and issued a Certificate of Incorporation to
Wholesome Corporation. Thereafter it was discovered that the incorporators have not completed the required
period of residency in the Philippines. As a result, which of the following is not correct?
a. The corporation shall be considered as a de-facto corporation
b. The right to exercise corporate powers can be inquired into collaterally in any private suit to which the
corporation maybe a party
c. The corporation has no legal personality and the incorporators maybe held personally liable for damages
d. The Solicitor General has the right to question or contest the validity of its corporate existence through
a quo-warranto proceedings

12. Which of the following statements is not correct?

a. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though
he was not aware thereof
b. The agent shall finish the business already begun on the death of the principal, should delay entail any
danger
c. The agent shall be bound to advance the necessary funds, except when the principal is insolvent
d. In the execution of the agency, the agent shall act in accordance with the instruction of the principal

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13. The following are the effects of unlawful partnership, except
a. The contract is void ab initio and the partnership never existed in the eyes of the law
b. The profits shall be confiscated in favor of the government
c. The instruments, or tools and proceeds of the crime shall be forfeited in favor of the government
d. The contributions of the partners shall be confiscated in favor of the government

14. S sold his piano to B for P200,000, payable in installment. A chattel mortgage was constituted on the piano.
B defaulted in two installment payments. S demanded payment of the unpaid obligation amounting to
P120,000 and a writ of attachment was issued and the piano was sold for P100,000. Can A still recover the
deficiency?
a. Yes, even without stipulation
b. Yes, only if stipulated that in case of foreclosure the buyer will pay any deficiency
c. No, even if stipulated
d. No, unless there is stipulation

15. In a partnership, the liability of the partners shall be joint and solidary
I. Obligations in favor of partnership suppliers by virtue of sales contract
II. Obligations in favor of a partnership client for return of deposits misappropriated by one of the partners
III. Obligations in favor of a pedestrian hit by the delivery van driven by one of the partners in the course of
partnership business
a. I and III b. II and III c. I and II d. I, II and III

16. A lost his cell phone while inside a restroom. It was found by B who diligently searched for the owner but to
no avail. Later, the cell phone was purchased by C, a buyer in good faith. Subsequently A traced his cell phone
while being used by C. In this case
a. C acquires ownership over the cell phone
b. A can recover the cell phone from C upon reimbursement of the purchase price
c. C should return the cell phone to A if B will return the purchase price
d. B’s title is void; hence C did not acquire a valid title over the cell phone

17. A sold to B a laptop computer covered by an invoice marked “on trial or satisfaction, 15 days”. On the 10 th
day, B pledged the laptop computer at “Casa Agencia”. Unfortunately, everything in the pawnshop got lost
due to robbery. In this case,
a. B has no obligation to pay the price since ownership has not yet passed to him
b. A cannot demand for payment of the price since he retains ownership
c. Obligation to pay the price is demandable due to acceptance of the delivery
d. No one is liable because the loss was due to a fortuitous event

18. A mortgaged his land to B to guarantee the debt of C. Despite repeated demands, C failed to pay B prompting
the latter to foreclose the mortgage. However, the proceeds was not sufficient to settle the obligation of C to
B. Can B go after A for the deficiency?
a. Yes, A is a guarantor
b. Yes, the mortgage is binding upon A
c. No, only the land was offered as security
d. No, the mortgage was not registered with the Registry of Deeds

19. Which of the following statements is false?

a. Treasury shares revert to the unissued shares of the corporation and being in the treasury they don’t have
the status of outstanding shares
b. Shares issued without par value shall be deemed fully paid and non assessable and the holder of such
shares shall not be liable to the corporation or its creditors in respect thereto
c. Redeemable shares may be redeemed regardless of the existence of unrestricted retained earnings provided
such redemption would not cause insolvency or inability of the corporation to meet its debts as they
mature
d. When par value shares are issued above par, the premium or excess is not to be considered as part of the
legal capital
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20. A, B and C organized ABC and Co, limited, a limited partnership with A as a general partner, B as a limited
partner, and C as an industrial partner, contributing P200,000, P200,000 and industry respectively. The
partnership failed and after disposing all its assets to pay partnership debts, there still remains a note payable
in the sum of P30,000. Against whom can the creditor demand payment?
A B C A B C
a. P30,000 P0 P0 c. P10,000 P10,000 P10,000
b. P15,000 P0 P15,000 d. P15,000 P15,000 P0

21. Which of the following statements is not correct?

a. A stockholder is entitled to cast such number of votes as the number of shares outstanding entitled to vote
in his name times the total number of directors to be elected
b. Outstanding shares although with voting rights but have not been fully paid cannot be voted
c. A stockholder may cumulate his vote for one candidate or may distribute them among as many candidates
but he cannot cast more than the shares outstanding in his name times the number of directors to be
elected
d. Members of the board of directors are voted by stockholders by means of cumulative voting

22. A, B, C and D are partners contributing P20,000, P30,000, P50,000 and industry, respectively. The partnership
failed so the partners decided to dissolve the partnership. At the same time of liquidation, the unpaid obligation
amounted to P100,000 distributed as follows:
To partnership creditor, Y - Php 50,000
To partners A 30,000
B 20,000
If the remaining cash amounting to P10,000 was given to Y as partial payment. Which of the following is
correct?
a. Y can collect P10,000 from the separate property of D
b. As an industrial partner, D is not liable to Y
c. A, B and C are liable to Y in proportion to their capital contribution
d. A, B and C are liable to Y at P13,333 each

23. Using the above information, if Y succeeds in collecting the deficiency from the partners concerned, which
of the following is not correct?
a. Only C will be liable to the other partners
b. A and B will not make additional contribution
c. D is entitled to get reimbursement from A, B and C
d. C will pay P35,000 to his partners

24. A, B, C and D are partners in Y & Co., a limited partnership contributing P10,000, P20,000, P30,000 and
P40,000, respectively. A, C and D are the general partners while B is the limited partner. The partnership
failed and the partners decided to dissolve the partnership. At the time of liquidation, the unpaid obligation
amounted to P100,000 distributed as follows:
To partnership creditor Y - Php 50,000
To partners A 30,000
B 20,000
If the remaining cash amounting to P20,000 was given to Y as partial payment, which of the following is
correct?
a. Y can collect P7,500 each from the separate properties of the partners
b. Y can collect P30,000 from A, or C or D but not from B
c. B is not liable to Y because B is also a creditor of the partnership
d. Y can collect P10,000 each from A, C and D

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25. M delivers a negotiable promissory note payable to P or order. Later, P makes a special indorsement to A and
A delivers the note to B. Who is the holder?
a. B, because he is in possession of the note
b. A, because he is the indorsee
c. P, because he is the payee
d. No one can be considered as holder

26. If par value shares are now treasury shares, the following rules are applicable, except one. The exception is
a. They shall have no voting rights as long as they remain in the treasury
b. They are not entitled to dividends
c. They may again be disposed of for a reasonable price even below par
d. They are not part of subscribed stock and not considered as outstanding shares

27. A issued a check dated April 2, 2020, in favor of B in payment of A’s obligation to B amounting to P100,000.
B kept the check in his drawer and failed to encash it due to his busy schedule. On February 16, 2021, B
presented the check to the drawee bank for payment. The bank refused to pay the check for failure of B to
present the check within the reasonable time after its issue. In this case.
a. A’s obligation to B is extinguished because the impairment of the check is due to B’s fault
b. B can sue the bank because as drawee it is the party primarily liable
c. A’s obligation to B is not extinguished because the failure of B to present the check for payment within a
reasonable time did not cause any injury to A
d. When B accepted the check when A tendered payment, A’s obligation is extinguished

28. Which of the following statements is correct?

a. When a vacancy in the board arises, such vacancy maybe filled by the remaining directors provided they
still constitute a quorum
b. The officers of a non-stock corporation maybe elected directly by the members instead of by the board of
trustees
c. The number of trustees in a non-stock corporation maybe five (5) but not more than fifteen (15)
d. A director individually and acting as such can bind the corporation because he is an agent of the
corporation

29. A, husband and B, wife are legally separated. By order of the court, which decreed the legal separation, A is
obliged to give a monthly support of P50,000 to B payable in advance within the first five days of the month.
B owes A P50,000 by way of loan. On the other hand, A has not yet given B support of P50,000 for the
preceding month and another P50,000 of the present month. All the debts are already due. Based on the
foregoing, which of the following statements is incorrect?
a. If B demands her support for the preceding month, A may set up compensation as regards the loan that B
owes him
b. If B demands her support for the current month, A may claim compensation as regards the loan that B
owes him
c. If A demands payment of the loan, B may set up compensation as regards her support for the preceding
month that A owes her
d. If A demands payment of the loan, B may set up compensation as regards her support for the current
month that A owes her

30. On January 1, 2019, A bought a parcel of land from B who was insane. The deed of sale was duly
acknowledged before a notary public. Six months after the sale, A realized that he needed a larger area on
which to construct a commercial building. At about the same time, B who had been undergoing psychiatric
treatment was declared of sound mind by his neurologist. Should a court action be filed today, which is
correct?
a. A may successfully prosecute a court action to annul the contract on the ground of B’s insanity
b. B may successfully prosecute a court action to annul the contract on the ground of his insanity
c. Neither A nor B may successfully prosecute a court action to annul the contract
d. A may successfully prosecute a court action to annul the contract on the ground of mistake as to the area
of the parcel of land

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31. A delivered to B the following instrument:

In payment of a gambling debt, A made a promissory notes which reads: “I promise to pay to B P10,000 Sgd.
A.” B indorsed the note in blank before maturity and delivered it to C for value. When due, A refused to pay
and C sued B. Could C recover from B?
a. No, C could not sue B because B did not write the name of C as indorsee
b. No, the instrument is not negotiable and B is a mere assignor of credit
c. Yes, provided C gives notice of dishonor to B otherwise B is discharged from liability
d. Yes, the endorsement will be considered as an assignment, hence B will be liable as an assignor of the
instrument

32. Using the preceding number, but the note is in payment of merchandise purchased by A from B and A failed
to pay due to insolvency. Could C collect from B?
a. No, C could not sue B because B did not write the name of C as indorsee
b. No, the instrument is not negotiable and B is a mere assignor of credit
c. Yes, provided C gives notice of dishonor to B otherwise B is discharged from liability
d. Yes, the endorsement will be considered as an assignment, hence B will be liable as an assignor of credit

33. On April 1, 2021, A and B entered into a contract of partnership for the purpose of selling cows’ milk, with
the former as capitalist partner and the latter as industrial partner. It was agreed that A shall contribute 1,000
cows to the common fund on May 2, 2021. Upon the arrival of the designated date, A failed to deliver the
contribution he promised. As a result
a. B should make a demand upon A for the delivery of his contribution and its fruits to render A in default
b. The contract of partnership becomes void because A failed to give his contribution to the common fund
c. B can compel A to deliver his contribution and its fruits without the necessity of demand
d. The contract of partnership was never perfected because there was no delivery of contributions by the
partners

34. A holder is a holder in due course if he has taken the instrument complete and regular on its face and three of
the following conditions, except
a. That he became the holder of the instrument before it was dishonored and without notice that it had been
previously dishonored if such was the fact
b. That he took it in good faith and for value
c. That there is negotiation to him before it became overdue
d. That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in
the title of the person negotiating the same

35. As regards cash dividend, which of the following is correct?

a. Declared by the board by majority vote and ratified by the stockholders by majority vote
b. Declared by the board by majority vote and ratified by the stockholders by ⅔ vote of the outstanding capital
stock
c. Declared by the board by majority vote and need not be ratified by the stockholders
d. Declared by the board by ⅔ vote and need not be ratified by the stockholders

36. Which of the following statements is not correct?

a. An agreement to constitute a commodatum is binding and is perfected from the moment there is meeting
of minds
b. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by
the provisions concerning mutuum.
c. Precarium is a kind of commodatum where the bailor may demand the thing loaned at will
d. In case of extraordinary expenses, the debtor in mutuum will shoulder 50% if he is in actual use of the
thing borrowed.

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37. A was having his house repaired by B, who needed construction materials, so A orally told the seller C, “Give
B the materials, I shall be responsible. I shall pay in 30 days. C delivered the materials. As a result,
a. The contract is unenforceable because A made an oral agreement to answer for the debt of B
b. The contract is enforceable because A did not make a special promise to answer for the default of
another person
c. The contract shall be enforceable if there is ratification by A
d. The contract shall be unenforceable if the value is at least P500.00

38. A and B are co-owners of a parcel of land from where they share the profits equally as co-heirs in inheritance.
Is there a partnership?
a. There is a prima facie presumption of partnership because of the equal sharing of profits
b. There is no partnership because co-ownership by itself does not establish a partnership despite the
sharing of profits
c. There is no partnership since in partnership, division of profits is not always necessary among partners
d. There is prima facie presumption of partnership they being co-owners and co-possessors

39. Strictly speaking, by its very nature, is not a special form of payment.
a. Application of payment c. Payment by cession
b. Dation in payment d. Tender of payment and consignation

40. The vendor is not responsible to the vendee for any hidden faults or defects in the thing sold, if
a. It is stipulated provided the vendee is not aware of the hidden faults or defects
b. It is stipulated provided the vendor is not aware of the hidden faults or defects
c. It is stipulated even if the vendor is aware of the hidden faults or defects
d. It is stipulated regardless of whether the vendor is aware or not aware of the hidden faults or defects

41. H, an Olympic judo champion, with violence and intimidation forced his wife W to sell W’s pieces of jewelry
to B. The sale is
a. Valid and binding
b. Voidable, because the consent of W is vitiated
c. Rescissible, if W suffered lesion of more than ¼ of the value of the property
d. Void, except when a separation of property was agreed upon in the marriage settlement or there has been
a judicial separation of property

42. Dividends on shares of stocks can only be declared out of unrestricted retained earnings of the corporation.
Answer 1 – True, dividends whether cash or stock can be validly declared only out of unrestricted retained
earnings.
Answer 2 – False, during the receivership, the assets and properties of the corporation are being gathered for
conversion into cash in preparation for distribution to creditors
a. Both answers are correct c. Only answer 1 is correct
b. Both answers are not correct d. Only answer 2 is correct

43. Statement 1- A director is removed from office by a vote of the stockholders holding or representing at least
2/3 of outstanding capital stock. The vacancy occasioned by such removal can be filled by the vote of at least
a majority of the remaining directors if still constituting a quorum
Statement 2- Treasury shares sold for less than par or issued value are considered “watered stock” and as
such are prohibited by law.
a. True, true b. True, false c. False, true d. False, false

44. The following are ways of enforcing payment of unpaid subscription. Which is the exception?
a. Sale at public auction of delinquent stock
b. Denying delinquent stock cash dividend
c. Filing a court action to recover unpaid subscription
d. Denying delinquent stock the right to vote and be voted upon

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45. May a stock certificate be issued before full payment?
Statement 1 – No, in case of stock with par value
Statement 2 – Yes, in case of stock without par value
a. True, true b. True, false c. False, true d. False, false

46. Which of the following corporate acts will not require the approval of the stockholders or of the members of
the private corporation?
a. To amend the by-laws
b. To increase the capital stock
c. To invest corporate funds in another corporation or business
d. To elect the officers of the corporation

47. When a real property is contributed to the partnership

a. A real contract is perfected
b. A written instrument is required
c. A public instrument complete with inventory is required
d. A partner can make important alteration if beneficial to the partnership

48. A is the listed owner of 10,000 shares with par value of P100/share in ABC Corporation. ABC sued A for
the payment of A’s indebtedness of P1M. A contends that such debt must be compensated by his shares of
stocks with the plaintiff corporation. The contention of A is
a. Valid due to legal compensation
b. Valid by virtue of judicial compensation
c. Untenable since he is not a creditor of the corporation
d. Automatically extinguished if the fair market value of the shares is P1M

49. Two marks for the same product (shampoo) are currently being examined by the Trademark Examiner of the
Bureau of Trademarks to determine if they are confusingly similar. One product bears the trademark “Glow
Shampoo” while the other product uses the trademark “Clear Glow Shampoo”. What test shall be applied to
determine if there is trademark infringement?
a. Dominancy Test b. Holistic Test c. Enabling Test d. Best Mode Test

50. Two marks for the same product (vinegar) are being examined by the Trademark Examiner to determine if
the are confusingly similar. The names of the manufacturers are apparently different as printed on the bottom
part of their labels. However, the label designs, colors, print styles and sizes are very similar and almost
identical. What test shall be applied to determine if there is a trademark infringement?
a. Dominancy Test b. Holistic Test c. Enabling Test d. Best Mode Test

51. A maintained the following deposits at BPI Bank:

I. Php 800,000 – savings deposit in the name of A and/or B
II. Php 200,000 – time deposit in the name of ABC Partnership
III. Php 300,000 – current account in the name of A
How much can A personally recover from PDIC if BPI Bank was liquidated by BSP?
a. Php 900,000 b. Php 700,000 c. Php 550,000 d. Php 300,000

52. Which is false about contract of chattel mortgage?

a. Registration of the chattel mortgage is made in the Chattel Mortgage Registry of the Register of Deeds
where the property is located
b. Aside from the Chattel Mortgage Registry of the Register of Deeds where the property is located ,
registration shall also be made where the mortgagor resides if he resides in a place other than where
the property is located
c. Where the parties executed a chattel mortgage on a building, they shall be bound to the chattel mortgage
contract
d. Failure to execute the Affidavit of Good Faith and to register the chattel mortgage shall invalidate the
mortgage.

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53. Which is true about real estate mortgage contract?
a. The one-year redemption period is interrupted by the filing of an action questioning the validity of the
foreclosure sale
b. The mortgagee can recover any deficiency in the foreclosure sale but any excess or surplus shall be
given to the mortgagor
c. A writ of possession shall be issued in favor the purchaser in an extrajudicial foreclosure sale even if
there is a registered lease contract between the mortgagor-lessor and the lessee
d. The purchaser at the extra-judicial foreclosure sale who took possession of the property without the
benefit of a writ of possession cannot be ejected by the mortgagor

54. Which installment sale is covered by Maceda Law also known as Realty Installment Buyer Protection Act?
a. Installment sale of condominium dwelling units
b. Installment sale of commercial buildings
c. Installment sale of industrial lots
d. Installment sale of agricultural lands to tenants under the Agrarian Reform Program

55. B purchased a residential lot of S for Php 1,000,000 on installment under the following terms: Php 200,000
downpayment on January 2, 2021; Php 100,000 every year thereafter until fully paid. Assumed that B
defaulted on the very first installment due on January 2, 2022. What is the grace period to pay without
additional interest and cash surrender value earned by B?
a. 60 days and Php 0, respectively
b. 60 days and Php 100,000, respectively
c. 30 days and Php 100,000, respectively
d. No grace period and no cash surrender value

56. Assume the same facts in preceding number, except that B defaulted on the installment due on January 2,
2028. What is the grace period to pay without additional interest and cash surrender value earned by B?
a. 180 days and Php 440,000
b. 210 days and Php 540,00
c. 240 days and Php 620,000
d. 150 days and Php 530,000

57. Which of the following is considered “covered transaction” under AMLA for a banking institution?
a. Php 250,000 or more in one banking day
b. Php 500,000 or more in one banking day
c. Over Php 500,000 in one banking day
d. Php 1,000,000 or more in one banking day

58. Which of the following is not a feature of authorized capital stock?

a. It applies only to par value stock
b. It represents the maximum stock that may be issued by the stock corporation
c. It may include subscribed capital stock
d. It may include retained earnings

59. Which of the following is a feature of share of stock

a. It makes the stockholder a creditor of the corporation
b. It is an incorporeal right
c. It represents property of the corporation
d. It requires a certificate of stock to vest ownership

60. Which of the following is not a feature of a preferred stock?

a. It cannot vote, unless expressly granted in the articles of incorporation
b. It is only preferred as to dividends in the absence of stipulation
c. It is always a par value stock
d. It may be classified as redeemable stock

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61. Which of the following is not part of legal capital in a stockholder’s equity
a. Paid-in capital stock
b. Retained earnings
c. Premium on capital stock
d. Donated capital

62. Which is not a characteristic of treasury share?

a. It is an issued share but is not classified as outstanding share
b. It has no voting right
c. It may be sold at less than par value
d. It may be distributed as a stock dividend

63. Which of the following defects would make the corporate a de facto corporation
a. The corporate name which resembles the name of a pre-existing corporation is likely to deceive the
public but the certificate of registration has already been issued by SEC
b. Failure to file the articles of incorporation with the SEC
c. Absence of certificate of incorporation or registration from SEC
d. Continuing business operations despite the discovery of the defect or defects after incorporation
without any action to correct them

64. Which is false about the board of directors of a stock corporation?

a. A director must not have been convicted by a final judgment of an offense punishable by more than six
(6) years of imprisonment, or committed a violation of the Corporation Code within five (5) years
prior to the date of election or appointment
b. A director may be removed from office by a vote of the majority of the outstanding capital stock with or
without cause; provided, that removal without cause may not be used to deprive minority stockholders,
who used cumulative voting to elect such director, or the right of representation
c. No director shall receive any compensation (other than reasonable per diems) as such, unless the same is
granted in the by-laws or but a vote of at least majority of the outstanding capital stock, provided, that
the total yearly compensation (excluding reasonable per diems and compensation as officers) shall not
exceed ten (10%) of the net income before tax of the corporation during the preceding year
d. Additional qualifications may be provided in the by-laws as long as they are reasonable and not contrary
to law

65. It refers to the restructuring of corporate capital where the outstanding shares are called in and replaced by a
larger number, accompanied by a corresponding reduction in the par or stated value?
a. Stock adjustment
b. Stock split up
c. Stock split down
d. Stock trading

66. Which corporate act require at least majority vote of the board of directors and at least 2/3 of the outstanding
capital stock
a. Approval of management contract
b. Amendment of by-laws
c. Issuance of stock dividends
d. Removal of a director

67. Which is not a characteristic of a proxy?

a. An oral proxy is not valid
b. It can be denied in the articles of incorporation and by-laws of a non-stock corporation
c. A continuing proxy within a period of five (5) years is not valid
d. It is not allowed in meetings of the board of directors

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68. X subscribed 1,000 shares, Php 100 par value of ABC Corporation. To date, he has paid Php 50,000 or half
of the subscription. Which is true
a. X can unilaterally sell the unpaid 500 shares to a third party which will bind the corporation
b. X can unilaterally sell the entire 1,000 shares to a third party which will bind the corporation
c. X is entitled to a certificate of stock on the 500 shares already paid
d. X is entitled to receive dividends and cast his vote equivalent to 1,000 shares

69. X is a stockholder of ABC Corporation. He and other stockholders were recently denied of their pre-emptive
right when the corporation increased its authorized capital stock and they were also prohibited to exercise the
right to vote in the election of the board of directors. Which action may be filed by X against ABC Corporation
a. Derivative suit for pre-emptive right and right to vote
b. Representative suit for pre-emptive right and right to vote
c. Representative suit for pre-emptive right and individual suit for right to vote
d. Individual suit for pre-emptive right and representative suit for right to vote

70. Which is not an attribute of a close corporation?

a. The officers or employees may be elected or appointed by the stockholders themselves rather than by the
board of directors as may be provided in the article of incorporation
b. The pre-emptive right of stockholders does not extent to treasury shares
c. The holders of each class of stock may elect the allocated number of directors coming from their own
class as provided in the articles of incorporation
d. Any amendment to the articles of incorporation must be approved by at least 2/3 of the outstanding capital
stock with or without voting rights

The End!

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