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PAMANTASAN NG LUNGSOD NG VALENZUELA

BUSINESS LAW REVIEW Prof. Juan Lodi F. Pua MIDTERM QUIZ

Name:_____________________________ Section/Schedule:____________________ Date:_________

1. Which of the following does not bring about corporate dissolution?


a. Failure to formally commence within 2 years from issuance of certificate of incorporation
b. By legislative dissolution
c. By insolvency of the incorporators
d. By expiration of corporate term
2. Which of the following corporate acts requires the approval of the majority of the
outstanding capital stock 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
3. The right given to the corporation itself to operate its corporate business. With all the
powers and attributes conferred upon it
a. Primary franchise
b. Secondary franchise
c. Pre-emptive right
d. Appraisal right
4. The following persons can be incorporators of a corporation, except
a. A resident alien
b. A married woman without consent of the husband even if the payment of her shares
comes from her paraphernal property
c. A subscriber on the shares of the corporation who pays less than 25% of his
subscription
d. A corporation organized under the laws of the Philippines
5. The following are corporate act in which a stockholder of a corporation shall have the right
to dissent and demand payment of the fair value of his share of stock, except one
a. In case an amendment to the Articles of Incorporation which has the effect of changing
or restricting the rights of any stockholder
b. In case of merger or consolidation
c. In case of sale, lease, mortgage or other disposal of all or substantially all of the
corporate asset
d. In case of incurring, creating or increasing bonded debts
6. 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 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

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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
7. One of the following is a ground for the suspension or revocation of the Certificate of
Incorporators by the SEC
a. If the corporation has commenced its business transactions and afterwards ceased
operations continuously for a period of at least 5 years
b. If the corporation fails to commence and start to operate and the failure is due to causes
beyond its control
c. If the corporation does not formally commence its business transactions within 2 years
from the date of incorporation
d. If the corporation has commenced its operation and subsequently become continuously
inoperative for 2 years
8. Statement 1 - A director is removed from office by a vote of the stockholders holding at
least 2/3 of the outstanding capital stock. The vacancy occasioned by such removal can be
filled by the vote of the majority of the remaining directors if still constituting a quorum
Statement 2 - It is illegal to issue watered stock. However, stocks issued without any
consideration at all justified if such issues are bonus share.
a. True, true
b. False, false
c. True, false
d. False, true
9. Mukasa Kho, Farrah Tingleyt, Tong Hitmore, Nick Collins and Sue Rocha formed Super
Corporation and submitted their Articles of Incorporation to the SEC. Inadvertently, through
an oversight; the SEC approved the Articles and issued a certificate of incorporation.
Thereafter, it was discovered that the have not completed their 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 and shall be allowed to
function as a corporation under the color of law
b. The right to exercise corporate powers, shall not be inquired into collaterally in any
private suit to which the corporation maybe a party
c. The Solicitor General has the right to question or contest the validity of its corporate
existence through a quo-warranto proceedings
d. In a suit filed by May Tolosa, against the corporation for breach of contract, she can
have alleged that the corporation has no legal personality and therefore all incorporators
shall be held personally liable for damages
10. The duty to make disclosure, where otherwise there would be a great and unfair inequality
of bargaining position by the use of inside position as regards relation of directors to
stockholders
a. Special circumstances rule
b. Trust fund theory

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c. Doctrine of the corporate opportunity
d. Incorporation theory
11. 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 quorom
Statement 2 - Treasury shares sold for less than par or issued value are considered
"watered stock" an as such are prohibited by law
a. True, true
b. True, false
c. False, true
d. False, false
12. One of the following is a ground for the suspension or revocation of the certificate of
incorporation by the SEC
a. If the corporation has commenced its business transaction and afterwards ceased
operations continuously for a period of at least 5 years
b. If the corporation fails to commence and start to operate and the failure to operate is
due to causes beyond control
c. If the corporation does not formally commence its business operation or transactions
within two years from date of incorporation
d. If the corporation has commenced its operations and subsequently become
continuously inoperative for two years
13. 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
14. After ten years, five out of the nine incorporators who organized the corporation and signed
the articles of incorporation died. The corporation is
a. Dissolved as there will only be four left which is below the minimum of five incorporators
required by law
b. Dissolved as the Corporation Code requires that the incorporators be alive during the
operation of the business
c. Not dissolved as it still has forty years left in its term
d. Not dissolved as it enjoys the right of succession
15. Cash dividend as distinguished from stock dividend
a. Corporate capital is increased
b. Concurrence of the stockholders is required
c. Involves disbursement to the stockholders of accumulated earnings
d. Being part of corporate property may be reached by corporate creditors
16. May a stock certificate be issued before full payment?
Statement 1 - No, in case of stock with par value

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Statement 2 - Yes, in case of stock without par value
a. True, true
b. True, false
c. False, true
d. False, false
17. Which of the following does not bring about corporate dissolution?
a. Failure to formally commence within 2 years from issuance of certificate of incorporation
b. By legislative dissolution
c. By insolvency of the incorporators
d. By expiration of corporate term
18. Which of the following corporate acts requires the approval of the majority of the
outstanding capital stock 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
19. The right given to the corporation itself to operate its corporate business, with all the
powers and attributes conferred upon it
a. Primary franchise
b. Secondary franchise
c. Pre-emptive right
d. Appraisal right
20. The following are qualifications of a corporate director, except:
a. Must own at least one share of stock
b. Must continuously own at least one share during his term as director
c. Majority of directors are citizens of the Philippines
d. Ownership of share must be recorded in the books of the corporation.
21. Which of the following is the disadvantage of forming a corporation?
a. The free and ready transferability of ownership
b. The shareholders are not liable for the debts of the business
c. Because of the power of succession, the existence of the entity is not affected by the
personal vicissitudes of the individual stockholders
d. The subservience of minority stockholders to the wishes of the majority subject only to
equitable restraints
22. First Statement - If the surplus profits of the stock corporation reaches the level equal to its
paid-up capital, the SEC may compel the corporation to declare dividends, otherwise it will
be liable for surtax on improperly accumulated surplus.
Second Statement - In a corporation, two or more positions may be held concurrently by the
same person, except that no one person shall act as President and Chairman of the Board.
a. Both statements are true
b. Both statements are false
c. Only the First Statement is true
d. Only the Second Statement is true

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23. Any director of a corporation maybe removed from office by a vote of
a. Majority of the members of the board
b. Majority of the stockholder’s present
c. 2/3 of the stockholder’s present
d. 2/3 of the outstanding capital stock
24. First Statement - A majority of the number of directors or trustees as fixed in the Articles of
Incorporation shall constitute a quorom for the transaction of corporate business, and every
decision of at least a majority of the directors or trustees present at a meeting at which
there is a quorom shall be valid as a corporate act, except for the election of the officers
which shall require the vote of a majority of all the members of the board
Second Statement - No person convicted by final judgment of an offense punishable by
imprisonment for a period exceeding five years, or a violation of the corporation code
committed within six years prior to the date of his election or appointment, shall qualify as a
director, trustees or officer of any corporation
a. Both statements are true
b. Both statements are false
c. Only the First Statement is true
d. Only the Second Statement is true
25. A corporation was organized for the purpose of engaging in the buying and selling of home
appliances. Which of the following is not correct?
a. The buying and selling of motor vehicles would be ultra-vires although it is in itself
lawful.
b. The buying and selling of unlicensed firearms would be ultra-vires act.
c. The buying and selling of refrigerators would be ultra-vires act.
d. The buying and selling of contraband goods would be an illegal act.
26. Which of the following corporate acts requires the approval of the majority of the
outstanding capital stock or of the members of the private corporation?
a. To adopt by laws
b. To dissolved the corporation
c. To invest corporate funds in another corporation or business
d. to amend the articles of incorporation

27. The authorized capital stock of a proposed corporation is P100, 000.00 divided into 1,000
shares with a par value of P100.00 each. At least P25,000 or 250 shares of the authorized
capital stock must be subscribed. The 250 shares was subscribed by 25 subscribers. To
meet the minimum amount of subscription that must be paid.
a. It is enough that 25% of the total subscription is paid, regardless of the amount paid
by each individual subscriber.
b. Each and every subscriber must always pay P250 which is 25% of their individual
subscription.
c. Seven of the subscribers paid P6,250 and the rest of the subscribers did not make
any payment.
d. None of these.

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28. Which of the following is not a requisite for the existence of a de facto corporation?
a. The existence of a valid statute under which a corporation, with some of the
purposes in question, can be formed.
b. An attempt in good faith to form a corporation according to the requirements of law.
c. A user of corporate powers. There must be a transaction of business in some ways
as if it were a corporation.
d. The organization is not registered in the Securities and Exchange Commission.
29. For qualifying A to be one if the directors of X, Inc., one share of stock is issued to him. The
agreement is that he will retransfer the stock on ceasing to be a director. A assigned to B
certificate of stock, as a security of a promissory note in another transaction. B is not aware
of the secret agreement of A to retransfer the stock on ceasing to be a director. Decide.
a. B has a better right to the share than X, Inc., because the certificate of stock is
considered quasi-negotiable.
b. X, Inc. has a better right of the share because no matter how innocent B is of the
defect of title of prior parties, will not acquire ownership.
c. Having clothed A will apparent title over the stock, said X, Inc. is estopped from
asserting its title over it, hence B has a better right to the share than X, Inc.
d. B acquired no better right than that of the transferor of the share in spite of
innocence of the infirmity of the certificate.
30. Stock corporations are prohibited from retaining surplus profits in excess of one hundred
percent (100%) of their paid-in capital stock. Three of the following enumeration are
exceptions. Which does not belong to the exception?
a. When justified by definite corporate expansion projects or programs approved by the
board directors.
b. When there is pension plan agreed in Collective Bargaining Agreement.
c. When the corporation is prohibited under any loan agreement with any financial
institution or creditor, whether local or foreign, from declaring dividends without its
consent.
d. When it can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation such as providing fro probable
contingencies.
31. The number of the Board of Trustees in a non-stock corporation:
a. Shall not be less than five but not more than eleven.
b. May be more than fifteen upon its organization.
c. May be less than five upon its organization.
d. Shall not be less than five but not more than fifteen.
32. One of the following is a ground for the suspension or revocation of the certificate of
incorporation by the Securities and Exchange Commission.
a. If the corporation has commenced its business transactions and afterwards ceased
operation continuously for a period of at least five (5) years.
b. If the corporation fails to commence and start to operate and the failure is due to a
cause beyond the control of the Corporation.
c. If the corporation does not formally commence its business transaction and
subsequently become continuously inoperative for a period of two (2) years.
33. Right of the corporation to continue as a juridical entity for the term stated in the articles of
incorporation despite the death of any stockholder.
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a. Juridical Personality
b. Pre-emptive right
c. Right of succession
d. Right of existence
34. Original signatories in the articles of incorporation are called:
a. Corporators
b. Promoters
c. Stockholders
d. Incorporators
35. They regulate different internal matters of the corporation such as calling and defining the
conduct of the meeting of stockholders and directors.
a. Board of Directors
b. By-laws
c. Articles of Incorporation
d. Proxy
36. The document conferring authority to vote stock in a corporate meeting:
a. Power of Attorney
b. Shares of stock
c. Capital stock
d. Proxy
37. The minimum requirement of the corporation law to corporate formation:
Authorized Capital Subscribed Capital Paid-up Capital
a. P500,000.00 P100,000.00 P25, 000.00
b. P500,000.00 P125,000.00 P31, 250.00
c. P500,000.00 P100,000.00 P20,000.00
d. P500,000.00 P125,000.00 P25,000.00
38. The Morlan Realty Development Corporation has a capital stock of P1, 000, 000.00 divided
into 10, 000 shares with par value of P100.00 each. 5, 000 shares are common stock and
5, 000 share are 10% preferred stock. In 1988 there was no declared dividends but in 1989
dividend in the amount of P200, 000.00 were declared. The holders of the preferred stock
are entitled to receive:
a. P50, 000.00 if cumulative, non-participating.
b. P125, 000.00 if non-cumulative, participating.
c. P125, 000.00 if cumulative, participating.
d. P100, 000.00 if non-cumulative, non-participating.
39. Persons who compose the corporation whether as stockholder in a stock corporation or
members in a non-stock corporation, are called:
a. Incorporators
b. Subscribers
c. Promoters
d. Corporators
40. In three (3) of the following, these persons qualify to be incorporators. Which is the
exception?
a. Must have paid at least 25% of their subscription.
b. Natural persons not less than five, not more than 15.
c. Majority are residents of the Philippines.
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d. Need not be citizens of the Philippines.
41. Which of the following situation complies with the minimum requirement of the law for
corporate formation and registration?
Authorized Capital Subscribed Capital Paid-up Capital
e. P50,000.00 P12,500.00 P3,125.00
f. P60,000.00 P15,000.00 P5,000.00
g. P100,000.00 P10,000.00 P5,000.00
h. P100,000.00 P25,000.00 P5,000.00
42. Dividend are declared and paid out of the:
a. Paid-up capital
b. Capital stock
c. Net income of the current year
d. Unrestricted retained earnings
43. This is a right to financial statements.
a. Within ten (10) days from the receipt of a written request of any stockholder, the
corporation shall furnish to him the most recent financial statements.
b. At the regular stockholders’ meeting, the board of the directors shall present to such
stockholders’ unaudited financial statements.
c. At the regular stockholders’ meeting upon request of the stockholders and within ten
(10) days from such meeting the board of directors will submit to the stockholders
the audited financial statements.
d. If the paid-up capital of the corporation is P50, 000.00 or more, the financial
statement may be certified under oath by the treasurer and this will suffice for the
purpose of submission to the stockholders.
44. The interest or right of the owner in the corporation’s profits or in the net assets of the
corporation on dissolution is:
a. Dividend
b. Share of stock
c. Certificate of stock
d. Capital
45. Requirement to effect the amendment of the by-laws of a corporation.
a. Majority vote of the Board of Directors.
b. Vote of 2/3 of the outstanding capital stock.
c. Majority vote of the Board of Directors and majority vote of the outstanding capital
stock.
d. Majority vote of the outstanding capital stock.
46. The nationality of the corporation is determined by the place of the controlling stockholders.
This test is:
a. Control test
b. Domicile test
c. Incorporation test
d. Management test
47. The following person cannot be incorporator of a corporation.
a. A resident alien
b. A married woman without the consent of the husband even if the payment of her
shares is her paraphernal property
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c. A subscriber on the shares of the corporation who pays less than 25% of his
subscription.
d. A corporation organized under the laws of the Philippines.
48. Any officer of a corporation may hold two (2) or more positions noncurrently in a
corporation except that no one person shall be:
a. President and Secretary
b. Chairman and Treasurer
c. Secretary and Treasurer
d. Vice President and Secretary
49. One of the following is not required and does not form part of the three-fold duty of directors
of a corporation. Which one?
a. Duty of Diligence
b. Duty of Loyalty
c. Duty of Obedience
d. Duty of Efficiency
50. These do not form part of the outstanding capital stock:
a. Bonus shares
b. Treasury shares
c. Founder’s shares
d. Redeemable shares
51. A stock which has been issued by a corporation as fully paid up when in fact it is not,
because it has been issued as bonus or otherwise, without any consideration at all, all or
for less than par, or for property, labor, or services at an overvaluation.
a. Promotion stock
b. Treasury stock
c. Watered stock
d. Bonus stock
52. A private corporation commences to have corporate existence and juridical personality from
the date:
a. The officers of the corporation are elected by the stockholders.
b. The incorporators sign the Articles of Incorporation.
c. The Articles of Incorporation and by-laws are presented to the SEC.
d. The SEC issues a certificate of incorporation under its official seal.
53. Contracts between a corporation and third persons must be made by or under the authority
of its:
a. Board of Directors.
b. Stockholders.
c. President and Chief Operating Officer.
d. General Manager.
54. How many number of votes of the Board of Directors are required to change the name of a
corporation?
a. 2/3 vote of all members of the Board.
b. 2/3 vote of all present.
c. Majority vote of all present constituting a quorum.
d. Majority vote of the Board.

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55. The share in the profits of a partner is regarded as received by him and thus taxable
although not yet distributed. This principle is known as:
a. Advance reporting of income.
b. Actual receipt of income
c. Accrual method of accounting.
d. Constructive receipt of income
56. Purely ultra vires acts of the officers of a corporation to invest corporate funds in another
business or corporation, i.e., acts not contrary to law, morals, public policy may be ratified
by:
a. The stockholders holding two-thirds (2/3) of the voting power.
b. Majority vote of all members of the Board.
c. The stockholders holding one-half (1/2) of the voting power.
d. Majority vote of Board of Directors present.
57. The following, except one, are qualifications of corporate directors:
a. Must continuously own at least one share during their term as directors.
b. Must own at least one share of stock.
c. Ownership of shares must be recorded in the books of corporation.
d. Majority are citizens of the Philippines.
58. In a corporation, two or more positions may be held concurrently by the same person,
except that no one person shall act as:
a. President and chairman of the board.
b. Secretary and treasurer.
c. Treasurer and director.
d. President and secretary.
59. Which of the following is the disadvantage of forming a corporation
a. The shareholders are not liable for the debts of the business.
b. The subservience of minority stockholders to the wishes of the majority subject only
to equitable restraints.
c. Because of the power of succession the existence of the entirety is not affected by
the personal vicissitudes of the individual shareholders.
d. The free and ready transferability of ownership.
st
60. 1 statement: No dividends can be declared out of appraisal surplus as this could amount
to declaration of dividend out of capital.
nd
2 statement: If the surplus profits of the stock corporation reaches the level equal to its paid-
up capital, the SEC may compel the corporation to declare dividends otherwise it will be liable
for a surtax on improperly accumulated surplus.
Which of the following is correct?
a. 1st statement is false but 2nd statement is true.
b. Both statements are false.
c. 1st statement is true but 2nd statement is false.
d. Both statements are true.

61. The voting proportion required to enable a corporation to invest its fund in any other
corporation on business or for any purpose other than its primary purpose:
a. 2/3 vote of the Board of Directors and ratified by majority of the outstanding capital
stock.
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b. Majority vote of the Board of Directors and ratified by majority stockholders.
c. Majority vote of the Board of Directors and ratified by 2/3 of the stockholders.
d. Majority vote of the Board of Directors and ratified by 2/3 of the outstanding capital
stock.
62. Which of the following conditions will allow corporate formation and Securities and
Exchange Commission registration?
Authorized Capital Subscribed Capital Paid-in Capital
a. P50,000.00 P12, 500.00 P3, 125.00
b. P100,000.00 P20,000.00 P5,000.00
c. P100,000.00 P25,000.00 P5,000.00
d. P60,000.00 P15,000.00 P6,000.00
63. An officer of a corporation may hold two or more positions in the corporation but not as:
a. Chairman of the Board and President.
b. President and Treasurer.
c. Secretary and Treasurer.
d. Vice President and Secretary.
64. The right of a corporation to exist as juridical person during its term as stated in its Articles
of Incorporation despite the death of any of its stockholders is:
a. Right of Existence.
b. Right of Redemption.
c. Right of Succession.
d. Pre-emptive Right.
65. A corporation created in strict or substantial conformity with the statutory requirements for
incorporation and whose right to exist as a corporation cannot be successfully attacked
even in a direct proceeding for that purpose by the State is known as:
a. De jure corporation
b. De facto corporation
c. Corporation by estoppel
d. Answer not given
66. One of the characteristics of treasury shares is that:
a. They have the status of outstanding shares.
b. They may not be reissued or sold again.
c. They participate neither in dividends non in the meetings of the corporation as voting
stocks.
d. Answer not given.
67. Which of the following will not qualify as incorporator of a corporation?
a. A minor who is emancipated by voluntary concession or marriage.
b. A married woman without the consent of her husband where the property involved in
the act of incorporation is paraphernal.
c. A corporation.
d. Answer are not given.
68. The Articles of Incorporation is required to state the names, nationalities and residences of
persons who shall act as directors or trustees until the first regular directors or trustees are
duly elected and qualified. This requirement is intended to provide a basis by which the

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Securities and Exchange Commission could determine whether the Articles of
Incorporation has complied with the requirement that:
a. At least a majority of the directors or trustee are residents of the Philippines.
b. All the directors or trustees are residents of the Philippines.
c. 2/3 of the directors or trustees are residents of the Philippines.
d. Answer not given.
69. The power to revoke corporate franchise of causes specified by law is vested only in the:
a. President of the Republic of the Philippines.
b. Securities and Exchange Commission.
c. Court of component jurisdiction/
d. Answer not given.
70. Corporate dissolution may take place by voluntary inaction which will result in the cessation
of its corporate powers and the corporation shall be deemed dissolved. Such voluntary
inaction may result from:
a. Inaction by the corporation through its failure to formally organize and commence
with the transaction of its business or the construction of its works within two (2)
years from the date of its incorporation;
b. Failure of the corporation to submit the annual reports required by the Securities and
Exchange Commission for a period of five (5) years.
c. Merger or consolidation with respect to absorbed corporation;
d. Answer not given.
71. Watered stock are shares of stock issued by a corporation for consideration less than its
par or issued value or for a consideration in any form other than cash, valued in excess of
its fair value. In this regard:
a. The issue itself is void;
b. The agreement that it shall be paid for less than its par value illegal and void and
cannot be enforced;
c. The subscriber or purchaser shall not be liable for the full par value of the shares;
d. Answer not given.
72. Three (3) of the following are attributes of a corporation. Which is the exception?
a. An artificial being.
b. Has the right of succession.
c. Has powers, attributes and properties expressly authorized by law or incident to its
existence.
d. Created by agreement of the incorporators.
73. Three (3) of the following are qualifications of the Board of Directors. Which is the
exception?
a. He must own at least one (1) share of the capital stock.
b. At least majority of them are citizens of the Philippines.
c. The shares owned must be recorded in the books of the corporation.
d. He must continuously own at least one (1) share of the stock corporation.
74. The voting requirement to increase or decrease capital stock.

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a. Majority vote of the board of directors and consented to by the stockholders
representing two-thirds (2/3) of the outstanding capital stock.
b. Two-thirds (2/3) vote of the board of directors with the consent of majority of the
outstanding capital stock.
c. Majority vote of the board of directors with the consent of majority of the outstanding
capital stock.
d. Majority vote of the board of directors and three-fourths (3/4) vote of the outstanding
capital stock.
75. A dividend payable party in cash and partly in stocks, as to class of dividend is a:
a. Optional dividend
b. Property dividend
c. Liquidation dividend
d. Composite dividend
76. Bonds which are not secured by any specific mortgage, lien or pledge or corporate property
but the general credit of the corporation are:
a. Guarantee Bonds
b. Debenture Bonds
c. Income Bonds
d. Redeemable Bonds
77. These are rule and guidelines adopted by the stockholders of a corporation for the internal
government.
a. Rules and Regulations
b. Articles of Incorporation
c. Minutes of the meetings
d. By-laws
78. Which of these conditions comply with the minimum requirement of the law to corporate
formation?
Authorized Capital Subscribed Capital Paid-up Capital
a. P100,000.00 P25,000.00 P12,500.00
b. P64,000.00 P16,000.00 P4,000.00
c. P200,000.00 P50,000.00 P10,000.00
d. P200,000.00 P40,000.00 P10,000.00
79. A distribution by a corporation of shares held by it in another corporation is:
a. Stock Dividend
b. Sales of Capital Assets
c. Property Dividend or actual distribution of Corporate Assets
d. Sale of Treasury Stock
80. Based on the Provision of the Corporation Code of the Philippines, the following will qualify
to corporate formation and registration with the Securities of Exchange Commission.
Authorized Capital Subscribed Capital Paid-up Capital
a. P500,000.00 P100,000.00 P25,000.00
b. P1,000,000.00 P250,000.00 P50,000.00
c. P78,000.00 P19,500.00 P4,875.00

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d. P200,000.00 P100,000.00 P50,000.00
81. In the corporation, any two (2) or more positions may be held concurrently by the same
person, except that no one (1) person shall act as:
a. Chairman of the Board and President.
b. Secretary and Treasurer.
c. President and Secretary.
d. Treasurer and Director.
82. The following are similarities between a partnership and a corporation. Which is the
exception>
a. Both have juridical personalities separate and distinct from that of the individuals
composing them.
b. Like a partnership, a corporation can act only through agents.
c. Both are organizations composed of an aggregate of individuals.
d. The individuals composing both have little voice in the conduct of the business.
83. The number of the Board of Trustees in a non-stock corporation:
a. May be more than fifteen (15) upon its organization.
b. Shall not be less than 5 but not more than 11 upon organization.
c. Shall not be less than 5 but not more than 15 upon organization.
d. May be less than 5 upon of organization.
84. A corporation may invest its funds in any other corporation or business or for any purpose
other than primary for which it was organized.
a. There is a majority vote the Board of Directors and ratified by the stockholders
representing 2/3 of the outstanding capital stock.
b. It is reasonably necessary to accomplish its secondary purpose, the approval of the
stockholders not necessary.
c. There is majority vote of the Board of Directors.
d. There is majority vote of the outstanding capital stock.
85. The following are advantages of no-par value share of stock. Which is the exception?
a. No-par value shares allow flexibility in price.
b. The stockholders of no-par value shares are relieved of personal liability for unpaid
stock subscription.
c. It allows the issue of stocks in exchange of property.
d. No-par value shares afford a possible remedy of relief from the evil of over-
capitalization and stock watering.
86. The right to vote at meetings, the right to receive dividends and the right to receive copies
of financial statements is known as:
a. Right of existence
b. Director’s right
c. Pre-emptive right
d. Stockholder’s right
87. Corporations organized by private persons performing public function and for profit to
private persons are:
a. Public Corporations

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b. Government Controlled Corporations
c. Quasi-public Corporations
d. Private Corporations
88. This is a document of a corporation acknowledging the interest of a stockholder in the
corporation’s asset.
a. Certificate of stock
b. Share of stock
c. Capital stock
d. Stockholder’s equity
89. These are the persons who sign the Articles of Incorporation.
a. Corporators
b. Board of Directors
c. Promoters
d. Incorporators
90. In order that a person be selected president of corporation, he must:
a. Be a citizen and resident of the Philippines.
b. Not be a stockholder or director of a competitor corporation.
c. Not be the president of any other corporation.
d. Be a director of the corporation.
91. The following situation complies with requirements of the law for corporate organization and
registration:
Authorized Capital Subscribed Capital Paid-up Capital
a. P500,000.00 P125,000.00 P25,000.00
b. P500,000.00 P100,000.00 P25,000.00
c. P60,000.00 P15,000.00 P5,000.00
d. P64,000.00 P16,000.00 P4,000.00
92. The following are ways of enforcing payment of unpaid subscription, which is the
exception?
a. Sale at public at auction of delinquent stocks.
b. Denying delinquent stocks cash dividends.
c. Filing a court action to recover unpaid subscription.
d. Denying delinquent stocks the right to vote and be voted upon.
93. May a director enter into a contract with another corporation of which he is also a partner?

1st answer: no, if the vote of such director is not necessary for the approval of the contract.
2nd answer: yes, if the presence of the director concerned is not necessary to constitute
quorum and he does not participate in the board approval of the contract which is deemed fair
and reasonable under the circumstances.
a. 1st answer wrong, 2nd answer correct.
b. Both answers are correct.
c. 1st answer correct, 2nd answer wrong.
d. Both answers are wrong.
94. As a rule, any provision or matter stated in the Articles of Incorporation may be amended
by the Board of Director or trustees by

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a. Unanimous vote
b. Majority vote
c. ¾ vote
d. 2/3 vote
95. Subscriber X has a total 1,000 delinquent share at P10 par value, to be sold at public
auction sale. Total amount recoverable includes; Total amount f the delinquent shares
P10,000.00 and total expenses of the sale P5, 000.00. Who will be declared the highest
bidder among the following bidders in the public sale?
a. N who is willing to pay the P15, 000.00 for 970 shares.
b. P who is willing to pay the P15, 000.00 for 900 shares.
c. O who is willing to pay the P15, 000.00 for 920 shares.
d. M who is willing to pay the P15, 000.00 for 950 shares.
96. The following are corporate acts in which a stockholder of a corporation shall have the right
to dissent and demand payment of the fair value of his shares of stock except one:
a. In case of an amendment to the articles of incorporation which has the effect of
changing or restricting the rights of any stockholder.
b. In case of merger or consolidation.
c. In case of sale, lease, mortgage or other disposal of all or substantially all of the
corporate asset.
d. In case of incurring, creating or increasing bonded debts.
97. A private corporation organized under the corporation law commences to have corporate
existence and juridical personality and its deemed incorporated from:
a. The date when the articles under incorporation is signed by the incorporators.
b. When the articles of incorporation and by-laws are presented and received by the
Security and Exchange Commission and the filing fee is paid.
c. From the date the SEC issues a certificate of incorporation under its official seal.
d. When the articles of incorporation is notarized by a Notary Public.
98. The following are the qualifications of incorporators. Choose the exception.
a. Majority of whom must be Filipinos.
b. Majority of whom are residents of the Philippines.
c. All are legal age.
d. Natural persons not less than five but not more than 15.
99. These are the shares of stock which have been issued and fully paid for, but subsequently
reacquired by the issuing corporation:
a. Redeemable shares
b. Treasury shares
c. Founder’s shares
d. None of the three
100. In the amendment if the Articles of Incorporation of a stock corporation, the following is
necessary:
a. Amendment by the majority vote of the Board of Directors plus a vote or written
assent of the stockholders representing at least 2/3 of the outstanding capital stock.
b. Amendment by a vote of 2/3 of the stockholders.
c. Amendment by a majority vote of the Board of Directors.
d. None of the three
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101. Corporation governed by special laws, aside from the requirements specified under the
corporation laws. In order that their articles of incorporation may be approved or accepted
must present before the Securities and Exchange Commission.
a. A favourable recommendation from the Ministry of Finance.
b. A copy of previous income tax return and a statement of assets, liabilities and net
worth.
c. A favourable recommendation of the appropriate government agency to the effect
that such article or amendment is in according with law.
d. An undertaking to change the name of the corporation if there is already registered
with the SEC a name or a name similar to the name of this corporation.
102. The following are some of the requisites of a de facto corporation. Choose the exception
a. Valid law under which it is incorporated
b. Attempt to incorporate
c. Assumption of incorporation power
d. None of the above
103. The following are qualifications of a director in a corporation. Choose the exception.
a. Majority of the directors must be Filipino citizens.
b. He must own at least one share of the stock in his name.
c. Majority of the corporate directors must be resident of the Philippines.
d. He must not have been convicted by final judgment of an offense carrying an
imprisonment exceeding 6 years or an offense constituting a violation of the
Corporation Code.
104. The secretary of a stock corporation shall be
a. A director or the corporation
b. An incorporator of the corporation
c. A resident and citizen of the Philippines
d. Of legal age and citizen of the Philippines
105. Directors or trustees who wilfully and knowingly vote or assent to potently unlawful acts
of the corporation or who are guilty of gross negligence or bad faith in directing the affairs
of the corporation or acquire any personal or pecuniary interest in conflict with their duty
shall be liable:
a. As trustees for the corporation
b. Criminally for violation of the corporation code
c. Jointly and severally for the damages suffered by the corporation
d. None of the above
106. The following are methods of dissolving corporation:
a. Expiration of the term
b. Failure to organize and commence business within two (2) years from the date of
issuance of certificates of incorporation
c. Shortening of the corporate term
d. All of the above
107. Any stockholder of a corporation shall have the right to dissent and demand payment of
the fair value of his share/s in three of the following corporate acts. Which is the exception?
a. In case of any amendment to the articles of incorporation which has the effect of
changing or restricting the rights of any stockholder or class of shares.
b. In case of merger or consolidation.
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c. In case of sale, lease, exchange transfer, mortgage, pledge or other disposition of all
or substantially all of the corporate assets and property of the corporation.
d. In case of incurring, creating or increasing bonded indebtedness.
108. When the preferred shares are issued by a corporation with a fixed annual interest on
the face thereof, the effect is:
a. The contract of subscription between the corporation and stockholders subsists.
b. The stockholder is a creditor of the corporation.
c. The shares of stock become negotiable instruments.
d. The stockholder is a plain investor who may benefit or suffer with the financial
success or failure of the corporation.
109. There of the following corporations are not authorized to issue no-par value shares of
stock. Which one is the exception?
a. Industrial companies
b. Insurance companies
c. Trust companies
d. Public utilities
110. The corporation has a nine-member board. Two of the members of the Board have sold
their shares while two others are abroad. To have an quorum, this number is required.
a. Seven
b. Five
c. Three
d. Four
111. The following defects will preclude the creation of even a de facto corporation:
a. The name of the corporation closely resembles that of a pre-existing corporation that
it will tend to deceive the public.
b. The incorporators of a certain number of them are not residents of the Philippines.
c. Lack of Certificate of Incorporation from the Securities and Exchange Commission.
d. Answer not given.
112. The distinction between subscription of shares from purchase of shares is that
subscription of shares:
a. It is an independent agreement between the individual and the corporation to buy
shares of stock from it at a stipulated price.
b. It takes place before or after incorporation and is generally paid in instalment or
upon call.
c. In case of insolvency of the corporation, the subscription price cannot be enforced
on the theory that the corporation can no longer perform its obligation to deliver the
certificate of stock.
d. Answer not given.
113. Cash dividends as distinguished from stock dividend:
a. It does not involve any disbursement.
b. It is still part of the corporate asset.
c. It increases legal capital.
d. It is declared only by the Board of Directors.
114. Which of the following is the disadvantage of forming a corporation?
a. The subservience of minority stockholders to the wishes of the majority subject only to
equitable restraints.
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b. The shareholders are not liable for the debts of the business.
c. The free and ready transferability of ownership.
d. Because of the power of succession, the existence of the entity is not affected by the
personal vicissitudes of the individual shareholders.
115. Statement 1: After the quasi-reorganization of the corporation has been affected and
approved by SEC, the corporation shall disclose on all its financial statements for a
minimum period of three (3) years the effects of such quasi-reorganization to the financial
condition of the company.
Statement 2: In quasi-reorganization, for purposes of dividend declaration, the retained
earnings of the company shall be restricted to the extent of the deficit wiped out by appraisal
surplus. Which is correct?
a. First statement is true but second statement is false.
b. Both statements are true.
c. First statement is false but second statement is true.
d. Both statements are false.
116. One of the following does not require stockholders’ approval:
a. Merger or consolidation
b. Change of corporate name
c. Investment of corporate fund for a purpose outside of the main purpose of the corporation.
d. Declaration of cash dividend.
117. Under this test, a corporation is a national of the country pursuant to whose laws it is
incorporated:
a. Nationality test
b. Capitalization test
c. Control test
d. Incorporation test
118. A stockholder who does not approve the action taken by the Board of Directors in
proposing to amend the Articles of Incorporation is not allowed to withdraw from the
corporation in one of the following instances:
a. Merger or consolidation
b. Investment of corporate funds in another corporation
c. Creating, incurring, increasing or decreasing any bond indebtedness.
d. Shortening or prolonging corporate existence.
119. 1st Statement: Membership in a non-stock corporation, and all rights arising therefrom
cannot be transferred even if provided in the articles of incorporation or by laws, because
membership and the rights arising therefrom are personal and non-transferable.
nd
2 Statement: Treasury stocks sold for less than their par or issued value are considered
“watered stock” and as such are prohibited by law. Which is correct?
a. 1st statement is true but 2nd statement is false.
b. Both statements are false.
c. 1st statement is false but 2nd statement is true.
d. Both statements are true.
120. Mukasa Kho, Farrah Tingleyt, Tong Himotre, Nick Collins and Sue Rocha formed Super
Corporation and submitted their articles of incorporation to the SEC. Inadvertently, through an
oversight; the SEC approved the articles and issued a certificate of incorporation. Thereafter, it

Page 19 of 34
was discovered that they have not completed their required period of residency in the
Philippines. As a result, which of the following is not correct?
a. The corporation should be considered as a de-facto corporation and shall be allowed to
function as a corporation under the color of law
b. The right to exercise corporate powers, shall not be inquired into collaterally in any
private suit to which the corporation maybe a party
c. The Solicitor General has the right to question or contest the validity of its corporate
existence through a quo-warranto proceedings.
d. In a suit filed by May Talosa, against the corporation for breach of contract, she can
alleged that the corporation has no legal personality and therefore all incorporators shall
be held personally liable for damages.

121. 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 such are prohibited by law
a. True, true
b. True, false
c. False, true
d. False, false
122. One of the following is a ground for the suspension or revocation of the certificate of
incorporation by the SEC
a. If the corporation has commenced its business transactions and afterwards ceased
operations continuously for a period of at least 5 years
b. If the corporation fails to commence and start to operate and the failure to operate is
due to causes beyond its control
c. If the corporation does not formally commence its business operation or transactions
within two years from the date of incorporation
d. If the corporation has commenced its operations and subsequently become
continuously inoperative for two years
123. 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

124. After ten years, five out of nine incorporators who organized the corporation and signed
the articles of incorporation died. The corporation is
a. Dissolved as here will only be four left which is below the minimum of five incorporators
b. Dissolved as the corporation code requires that the incorporators be alive during the
operation of the business
c. Not dissolved as it still has forty years left in its term
d. Not dissolved as it enjoys the right of succession

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125. Cash dividend is distinguished from stock dividend
a. Corporate capital increased
b. Concurrence of the stockholder required
c. Involves disbursement to the stockholder is required
d. Being part of corporate property maybe reached by corporate creditors
126. May a stock dividend 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
127. Mukasa Kho, Farrah Tinglyt, Tong Hitmore, Nick Collins and Sue Rocha formed Super
Corporation and submitted their Article of Incorporation to the SEC. Inadvertently, through an
oversight; the SEC approved the Articles and issued a certificate of incorporation. Thereafter, it
was discovered that they have not completed their 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 and shall be allowed to
functions as a corporation under the color of law
b. The right to exercise corporate powers, shall not be inquired into collaterally in any private
suit to which the corporation maybe a party
c. The Solicitor General has the right to question or contest the validity of its corporate
existence through a quo-warranto proceedings
d. In a suit filed by May Tolosa against the corporation for breach of contract, she can alleged
that the corporation has no legal personality and therefor all incorporators shall be held
personally liable for damages.

128. The duty to make disclosure, where otherwise there would be a great and unfair
inequality of the bargaining position by the use of inside position as regards relation of
directors to stockholders.
a. Special circumstances rule
b. Trust fund theory
c. Doctrine of corporate opportunity
d. Incorporation theory

129. 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 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

Page 21 of 34
130. One of the following is a ground for the suspension or revocation of the certificate of
incorporation by the SEC
a. If the corporation has commenced its business transactions and afterwards ceased
operations continuously for a period of at least 5 years
b. If the corporation fails to commence and start to operate and the failure to operate is due to
causes beyond its control
c. If the corporation does not formally commence its business operation or transactions within
two years from the date of incorporation
d. If the corporation has commenced its operations and subsequently become continuously
inoperative for two years

131. 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 auction to recover unpaid subscription
d. Denying delinquent stock, the right to vote and be voted upon

132. After ten years, five out of the nine incorporators who organized the corporation and
signed the articles of incorporation died, the corporation is
a. Dissolved as there will only be four left which is below the minimum of five incorporators
required by law
b. Dissolved as the Corporation Code requires that the incorporators be alive during the
operation of the business
c. Not dissolved as it still has forty years left in its term
d. Not dissolved as it enjoys the right of succession

133. Cash dividend as distinguished from stock dividend


a. Corporate capital increased
b. Concurrence of the stockholders is required
c. Involves disbursement to the stockholders of accumulated earnings
d. Being part of corporate property may be reach by corporate creditors

134. 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

135. Which of the following does not bring about corporate dissolution?
a. Failure to formally commence within 2 years from the issuance of certificate of
incorporation
b. By legislative dissolution
c. By insolvency of the corporators
d. By expiration of the corporate term

136. Which of the following corporate acts requires the approval of the majority of the
outstanding capital stock or of the members of the private corporation
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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

137. The right given to the corporation itself to operate its corporate business, with all the
powers and attributes conferred upon it
a. Primary franchise c. Pre-emptive right
b. Secondary franchise d. Appraisal right

138. They are issued to those who helped in incorporating the company on for services
rendered in launching the welfare of the company;
a. Preferred stocks c. founders stock
b. Stock in escrow d. promotion stocks

139. Any director of a corporation may be removed from office by a vote of the stockholders
holding or representing:
a. Majority of the stockholders present c. 2/3 of the outstanding capital stock
b. ¾ of the outstanding capital stock d. Majority of the outstanding capital stock

140. Three (3) of the following are attributes of a corporation. Which is exception?
a. Created by agreement of the incorporators
b. An artificial being
c. Has a right of succession
d. Has power, attributes and properties excessively authorized by the law incident to its
existence

141. As regards to corporate by – laws, which of the following rules is not correct?
a. To adopt by-laws, majority of the outstanding capital is needed.
b. To delegate of the Board of Directors or trustees the power to amend or repeal the by-laws,
2/3 of the outstanding capital stock is needed
c. To revoke the power delegated to the Board of Directors to adopt a new by-law, 2/3 of the
outstanding capital stock or of its members is needed.
d. To amend or repeal the by-laws, majority of the Board of Directors and of the outstanding
capital stock is needed.

142. The power to deny pre-emptive rights as a corporate power is classified as:
a. Incidental power c. Implied power
b. Express power d. Discretionary power

143. As regards treasury stocks, which is not correct?


a. They have no voting right as long as they remain in the treasury
b. They may be distributed as property dividend if there are retained earnings from operations
c. They are not entitled to dividends
d. They are considered part of earned or surplus profits and therefore distributable as
dividends.
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144. The authorized capital stock of a proposed corporation is P100, 000.00 divided into
1,000 shares with a par value of P100.00 each. The minimum amount of subscription that must
be paid is.
a. P8, 750 or 87.5 shares.
b. P6, 250 or 62.5 shares.
c. P5, 000 or 50 shares.
d. P7, 500 or 75 shares.

145. A, B and C, co-owners of a particular parcel of land, borrowed P75,000 from X and Y.
The three debtors signed a promissory note on January 10, 2008, promising to pay the
creditors on or before April 3, 2008. In addition, the debtors constituted a mortgage on their
property in favor of the creditors. On maturity date, X demanded payment. How much can x
collect from C upon maturity of the obligations? (Creditors are solidary)
a. P37,500 as it represents the actual share of X in the credit.
b. P25,000 as the obligation is presumed to be joint and the amount represents C’s
share in the obligation.
c. P75,000 based on the promissory note.
d. P75,000 because the nature of the obligation is solidary.

146. In the above problem, if C paid X his share of the obligations, can he, as co-owner of
the property, seek a partial release of the mortgage constituted thereon?
a. Yes, because C is answerable only for P25,000.
b. Yes, because C’s obligation is already extinguished.
c. No, because mortgages are considered indivisible, payment in part shall not
extinguished the obligation.
d. No, because the obligation is solidary, payment in part shall not extinguished the
obligation secured by a mortgage.

147. A and B obliged themselves to deliver to C a specific car valued at P400,000 on


February 16, 2008. The due date came and C demanded delivery from A and B. A was
willing to deliver the car but B refused. In this case
a. An action for specific performance shall lie against either A or B.
b. A shall be liable for P200,000 without damages and B shall be liable for P200,000
with damages.
c. Both A and B shall be liable for P200,000 each with provision for damages.
d. A shall be liable for P400,000 without damages and B shall be liable for P400,000
with damages.

148. A and B are solidary debtors of W, X, Y and Z, joint creditors for P40,000.How much
can X collect from A?
a. P40,000

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b. P20,000
c. P10,000
d. P5,000
149. A and B are joint debtors of C, D, E and F, solidary creditors to the amount of P1,000.
How much can E collect from A?
a. P125
b. P250
c. P500
d. P1,000
150. A and B are solidary debtors of C, D, E and F, joint creditors to the amount of P1,000.
How much can E collect from A?
a. P125
b. P250
c. P500
d. P1,000
151. A and B are partners. On June 15, 2007 when total obligation of the partnership totals
P80,000, C was admitted as a new partner. At the time of his admission, the partnership
creditors were M for P50,000 and N for P30,000. After June 15, the partnership borrowed
from O, P20,000 and P10,000 from P. On December 15, 2007, the partnership became
insolvent leaving an obligation of P110,000 and the partnership assets amounting to
P30,000. The creditors are going after the separate properties of the partners to satisfy
their remaining claims. How are the creditors' claims satisfied?
Answer 1 - M and N can go after the separate properties of A and B but C's separate
properties are not answerable to their claims
Answer 2 - O and P can go after the separate properties of A, B and C
a. False, false
b. False, true
c. True, false
d. True, true
152. Mara, Jennifer and Grace formed a general partnership with a capital of P100,000 and
the partners contributing 50%, 30% and 20%, respectively. Orange has claim of P160,000
against the partnership. If Orange files a suit to collect her claim, which of the following is
not correct?
a. All the partners are liable to the extent of their separate property
b. All the partners shall be liable pro-rata with all their property only after the partnership
assets have been exhausted
c. The personal liability of the partners is merely joint not solidary
d. After exhaustion of the partnership assets, Mara, Jennifer and Grace shall be liable
50%,30% and 20% respectively to Orange for the unpaid claim
153. Pepe, Pipi, and Popo are partners in an import and export business. Customers desiring
to place an order for imported articles are always required to make a deposit of 25% of the
total cost of the order Pupu, a regular customer deposited P2,000 to Pepe for his order.
Pepe instead, of turning over the said amount to partnership, misappropriated it. As a
result, one is not correct?
Page 25 of 34
a. Pupu may institute a claim against the partnership and all the partners
b. The personal liability of the partners is merely joint and not solidary
c. The partnership is bound to make good the loss where one partner acting within the
scope of his apparent authority receives money or property of third person and
misapplies it
d. All the partners are liable solidarily with the partnership for everything chargeable to the
partnership
154. On April 1, 2008, A and B entered into a contract of partnership for the purpose of
buying and selling textbooks, with the former as capitalist partner and the latter as industrial
partner. It was agreed that A shall contribute P100,000 to the common fund on May 2,
2008. 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 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 with interest and damages without the
necessity of demand
d. The contract of partnership was never perfected because there was no delivery of
contribution by the partners
155. A, B and C formed a limited partnership with A as a general partner, B as limited partner
and C as an industrial partner. A and B contributed P20,000 each. The partnership failed
and after disposing all its assets to pay partnership debts, there still remains a note payable
in the sum of P15,000. Against whom can the creditor demand payment of the note
P15,000
a. Only A is liable to pay the P15,000 indebtedness
b. A and B are liable to pay the P7,500 each
c. A and C are liable to pay P7,500 each
d. A, B and C are liable to pay P5,000 each
156. This feature distinguishes a partnership from co-ownership
a. The purpose is to make profits
b. It has no juridical personality
c. The profits are divided in proportion to one's interest
d. Created not only by agreement of the parties but also by law
157. A and B are partners. On January 2, 2008, C was admitted as a new partner. at the time
of C's admission, the partnership creditors were M for P50,000 and N for P30,000. After
January 2, 2008, the partnership borrowed from O- P20,000 and P40,000 from P. On May
15, 2008, the partnership became insolvent leaving an obligation amounting to P140,000
and partnership assets amounting to P30,000. The creditors are going after separate
properties of the partners to satisfy their remaining claims. How are the creditors' claims
satisfied?
Statement 1 - M and N can go after the separate properties of A nad B but C's separate
properties are not answerable to their claims

Page 26 of 34
Statement 2 - O and P can go after the separate properties of A, B and C
a. True, true
b. True, false
c. False, true
d. False, false
158. A, B and C are partners in a joint venture engaged in real estate and land development.
A, without the knowledge of B and C offered to sell to D all the remaining unsold lots at a
price very much higher than the prevailing market prices. Later, A bought out B and C from
the partnership and thereafter finally sold all the lots at very big profits.
Statement 1 - When A bought out B and C from the partnership, the partnership was dissolved
so B and C has no more share in the profit of the sale
Statement 2 - The sale of the lots between A and D is void because it was without the
knowledge and consent of B and C
a. True, true
b. True, false
c. False, true
d. False, false

159. A partner who is not known to be a partner by outside parties but who takes active part
in the business is
a. Silent partner
b. Nominal partner
c. Dormant partner
d. Secret partner
160. A limited partnership name “A, B and C, Co., Ltd.” Was formed on October 25, 1986 by
A as general partner and B and X, as limited partners. In 1987, A and B got married. Did
the marriage dissolve or put an end to the partnership?
a. Yes, the partnership is dissolved by the marriage, because there is change in equity
among the partners.
b. No, the marriage did not dissolve the partnership.
c. No, because spouses can enter into a universal partnership.
d. Yes, because spouses cannot enter into a particular partnership or be members
thereof.
161. One of the following incidents may be a cause for involuntary dissolution of a
partnership. Which is?
a. Termination of the partnership.
b. Insolvency of any partner.
c. Express will of any partner.
d. Expulsion of any partner.
162. A and B are equal partners in AB and Company. Y represented himself as a partner in
AB and Company to Z, who relying on such representation, extended a P50, 000.00 credit
to AB and Company. Of the two (2) partners only B knew and consented to the
representation of Y. Who should be held liable to Z?
a. Only Y, who presented himself as partner is liable.

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b. Since the credit was extended to AB and Company, a partnership liability was
created, so the two (2) partners and Y are liable.
c. Partners A and B who benefited from the credit extended to the partnership AB and
Company shall be liable to Z.
d. B and Y are partners by estoppel and, thus, are liable to Z.
163. The following persons are disqualified to form a universal partnership. Who are the
exception?
a. Brother and sister
b. Husband and wife
c. Those guilty of adultery and concubinage
d. Those guilty of the same criminal offense, if the partnership is entered into
consideration of the same.
164. A is the capitalist partner and B the industrial partner. A engaged personally in the same
kind of business the partnership is engaged in.
a. If there are losses, the partnership will bear the losses.
b. If there are profits, the profits will shared by A and the partnership.
c. If there are profits, A will give the profits to the partnership.
d. A will be excluded from the partnership and pay damages.
165. A is the managing partner of ABC and Company. X owes A personally and ABC and
Company P20, 000.00 each. A collected and received from X P10, 000.00 and he issued a
receipt wherein it is stated that the amount is applied against his personal credit.
a. The amount receive will be applied in favour of the partnership credit.
b. The amount receive will be applied in proportion to both credits.
c. The amount receive will be applied in the credit of A.
d. All the partners will decide as to whose favour it will apply.
166. Three (3) of the following are similarities between a partnership and a corporation.
Which is not?
a. The individual composing both have title voice in the conduct of the business.
b. Both have juridical personality separate and distinct from that of theindividuals
composing them.
c. Like a partnership, a corporation can act only through agents.
d. Both are organizations composed of an aggregate of individuals.
167. In the partnership of A, B, and C, A was appointed in the Article of Co-Partnership as
managing partner. As such manager and acting in good faith:
a. His power is revocable even without his consent.
b. His power can be revocable at any time even without just cause provided that it is
approved by the partners owning the controlling interest.
c. He may execute all acts of administration despite the opposition of B and C.
d. He can be removed for valid cause even without the vote of the partners owning the
controlling interest.
168. Ralph and Victor orally agreed to form a partnership. Each contributed cash and
personal properties worth P10, 000.00 to a common fund. But they did not register the
partnership with the Securities and Exchange Commission (SEC).
a. The partnership is still valid.
b. The partnership is void.
c. The partnership is voidable.
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d. The partnership is unenforceable.
169. A partnership which compromises all that the partners may acquire by their qork or
industry during the existence of the partnership is:
a. Universal partnership of present property.
b. Universal partnership of profits.
c. Particular partnership
d. General partnership
170. The buyer of the thing has the right to the fruits of the thing: (Phil CPA, 89-2)
a. From the time the thing bought is delivered
b. From the time the sale is perfected
c. From the time the obligation to deliver the thing bought arises
d. From the time the fruits are delivered

171. The obligation of the employer to pay death benefits and funeral expenses for his
employer’s death while in the course of employment as sanctioned by the Workmen’s
Compensation Act is one that arises from: (Phil CPA, 91-1)
a. Law b. Contracts c. Quasi Contract d. Answer not given

172. When A voluntarily takes charge of the neglected business of B without the latter’s
authority where reimbursement must be made for necessary and useful expenses, there is a:
(Phil CPA, 97-2)
a. Quasi delict b. Quasi Contract c. Negotiorumgestio d. Solutioindebiti

173. It is not a source of liability which will entitle the injured party to damages: (CPA, 93-2)
a. Culpa aquiliana or negligence committed in the performance of a spontaneous act.
b. MORA or delay
c. Dishonesty, malice or bad faith in the performance of an existing valid obligation
d. Contravention of the tenor of obligation

174. Unless the law or the stipulation of the parties required another standard of care, the
obligation to give a thing carries with it the obligation to take care of it with: (Phil CPA, 91-1)
a. Extra ordinary diligence
b. Ordinary diligence
c. Diligence of a good father of a family
d. Answer not given

175. Y sold his horse to Z for P50,000. No payment has yet been made and the sales
document does not provide the date of delivery. Before delivery and payment, the horse gave
birth to a baby horse. (Phil CPA, 88-1)
a. Z is entitled to the baby horse which was born after the perfection of the contract.
b. Y is entitled to the fruit (baby horse) as Z has not paid the price yet
c. Y is entitled to the fruit (baby horse) because it was born before his obligation to deliver the
horse
d. Z should pay additional amount for the baby horse to be entitled to it
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176. X is under obligation to deliver his Toyota car to Y. however, before delivery Z destroys
the car. Which one of the following is not correct? (Phil CPA, 98-1)
a. X’s obligation to give his car to Y is extinguished
b. X is allowed to recover from Z
c. Y has a right to bring action against Z
d. X is not obliged to give Y an equivalent value of the car

177. Mr. Montecillo entered into a contract with Mr. Villarojo by which Mr. Montecillo
promised to deliver 1,000 cases of glassware if the class and at the price stipulated in the
contract. Such delivery was to be made during the months of February and March, 1991. In
this case, no further demand or notice by Mr. Villarojo on Mr. Montecillo was necessary
because: (PHIL CPA, 91-1)
a. Time is the essence of the contract
b. The obligation expressly so provides
c. The demand would be useless
d. Answer not given

178. This person is liable for the loss of the subject matter by fortuitous event: (Phil CPA, 85-
2; 88-1; 89-1)
a. Creditor b. Debtor c. Both a and b d. None of them

179. A borrower who uses the thing for the purpose different from that intended, delays its
return, receives the thing under appraisal, lends it to a third person, ir saves his property
instead of the thing borrowed shall be liable even in case of fortuitous event, because: (Phil
CPA, 91-1)
a. The nature of the obligation requires the assumption of risk
b. The parties have expressly stipulated such liability
c. The law so expressly provides
d. Answer not given

180. Mr. ABC is obliged to give Mr. XYZ his only car on July 15,1987. Mr. ABC did nit deliver
the car on July 15, 1987. On July 20, 1987 an earthquake destroyed the building where the car
was in garage and the car was destroyed. Is Mr. ABC still liable? (Phil CPA, 88-1)
a. No. considering that no demand to deliver was made by Mr. XYZ and the specific thing was
loss due to fortuitous event, the obligation is extinguished.
b. No. the obligation is extinguished, even if the debtor is already in default, because the
debtor can plead impossibility of performance.
c. Yes. Mr. ABC is already in legal delay, thus the obligation to deliver the lost specific thing is
converted into monetary claim for damages.
d. Yes. The creditor can instead demand for a substitute equivalent in value from the debtor.

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181. When the thing deteriorates pending the fulfilment of the suspensive condition without
the fault of the debtor, the impairment is: (Phil CPA, 98-1)
a. To be borne by the party who caused the deterioration
b. To be borne partly by the debtor and partly by the creditor
c. To be borne by the debtor
d. To be borne by the creditor

182. A promissory note signed by Martiniano and dated March 15, 1991 is worded as
follows: “I promise to pay Juanita the sum of Fify Thousand Pesos (P50,000) provided that if
she should fail the October, 1991 CPA examination, she shall return to me said amount.” The
above note gives rise to an obligation with: (Phil CPA, 91-2)
a. Suspensive condition
b. Casual condition
c. Resolutory condition
d. Answer not given

183. If the obligor binds himself to perform his obligation as soon as “he shall have obtained
a loan from a certain bank, this obligation is: (Phil CPA, 93-1)
a. With a term b. Conditional c. Suspensive d. Resolutory

184. A condition with, if imposed on an obligation will be disregarded and will therefore make
the obligation immediately demandable: (Phil CPA, 94-1)
a. If Juan commits suicide
b. If Juan passes the bar examination
c. If Juan kills Pedro
d. If Juan will not rise from the dead

185. A sell to B his lot and house in the city if A decides to transfer and live, in the
countrysideis an example of: (Phil CPA, 94-1)
a. Mixed condition
b. Potestative condition
c. Casual condition
d. Resolutory condition

186. The obligation is demandable on the date of the obligation and shall continue to be in
force up to the arrival of the day certain: (Phil CPA, 95-1)
a. Resolutory condition
b. Suspensive condition
c. Indefinite period
d. Legal period

187. When the debtor binds himself to pay when means permits him to do so, the obligation
is: (Phil CPA, 97-2)

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a. Conditional b. Pure c. Simple d. With a period

188. When the debtor binds himself to pay when his means permits him to do so, the
obligation is considered as one: (Phil CPA, 91-1)
a. With a condition dependent upon the debtor’s sole will
b. With a period
c. That is a void
d. Answer not given

189. On July 1, 1989 A signs a promissory note and binds himself to pay X P100,000 plus
15% per annum interest on June 30, 1991: (Phil CPA, 90-2)
a. Before June 30,1991 X can demand payment
b. If on June 30, 1990 A is paying X, X cannot refuse the payment
c. Because the period is for the benefit of the debtor, A can compel the creditor X to accept
payment any date before June 30, 1991
d. Because the period is for the benefit of the debtor and creditor, X can refuse any tendered
payment before June 30, 1991.

190. Whenever in an obligation a period is designated, it is presumed to have been


established for the benefit of: (Phil CPA, 98-1)
a. Both the creditor and the debtor
b. The creditor
c. The debtor
d. The third party

191. Mr. AB owes Mr. CD P150,000 due on August 31, 1987. Mr. AB executed a mortgage in
favor of Mr. CD on Mr. AB’s building to guaranty the obligation. On August 10, 1987 the
mortgaged building was totally lost due to a strong typhoon. On August 12, 1987, Mr. CD
demanded payment from Mr. AB. Is Mr. CD’s demand valid? (Phil CPA, 88-1)
a. No, the obligation is one with a definite period, thus the creditor cannot demand fulfilment of
the obligation as such would the prejudicial to the rights of the debtor.
b. No, the obligation is extinguished because the obligation is lost through a fortuitous event.
c. Yes, the debt becomes due at once because the guaranty was lost even though a
fortuitous event unless the debtor can mortgage another property that is equally
satisfactory.
d. Yes, the debt becomes due at once because, from the tenor benefit is given solely to the
creditor thereby giving the creditors the right to demand performance even before the date.

192. O gets a loan of P100,000 from P, which becomes due on November 23, 1993 and
mortgage his house as security for the debt. On September 22, 1993 the mortgaged house
was completely destroyed by fire. A week after, P demanded payment from O on September
29, 1993. Is P’s demand valid? (Phil CPA, 93-2)

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a. No, because the obligation is one with definite period and the demand would be prejudicial
to the rights of the debtor.
b. No, the obligation is extinguished because the object of the obligation is lost through a
fortuitous event.
c. Yes, the debts become demandable because the period established is for the benefit of the
creditor.
d. Yes, the debt becomes demandable because the collateral was lost through a fortuitous
event.

193. Mr. Santos secured and Mr. Dizon granted a load of P100,000 due for payment on
December 31, 1988. Mr. Santos executed a first mortgage of his residential house in favor of
Mr. Dizon to guaranty the P100,000 loan. On December 19, 1988 the residential house was
totally destroyed by a typhoon Unsang. On October 31, 1988 Mr. Dizon demanded payment of
the loam from Mr. santos. Is the demand of Mr. Dizon for payment valid? (Phil CPA, 89-1)
a. No, the obligation is one with a definite date for payment on December 31, 1988 and until
that date arrives, Mr. Santos is not liable to pay.
b. No, the object of the obligation was lost through a fortuitous event and the obligation was
extinguished.
c. Yes, the obligation became due at once because the guaranty was lost through a fortuitous
event
d. Yes, the obligation became due at once because from the tenor benefit, the creditors is
given the right to demand performance even before the due date stipulated.

194. When the period is on or before date the debtor has the benefit of the period. The
benefit is lost and the obligation becomes demandable when: (Phil CPA, 90-2)
a. The debtor attempts to abscond
b. After contracting the obligation, the creditor suspects the debtor to becoming insolvent
c. The guarantee given by the debtor is not acceptable to the creditor
d. Demand by the creditor could be useless

195. It is a contract by virtue of the terms of which the parties thereto promise and obligate
themselves to enter into another contract at a future time, upon happening of certain events, or
the fulfillment of certain condition
a. Resolutory contract
b. Option contract
c. Suspensive contract
d. Auto – contract
196. Which of the following statements is true as regards a void contract
a. A void contract may be ratified by the acceptance by a party to the contract of a
benefit under its term
b. The right to set up the defense of illegality of a void contract maybe waived if the
illegality is not raised within a reasonable time
c. If a void contract is novated by a valid one, such novation is valid

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d. The right to set up the defense of illegality of a void contract is imprescriptible
197. Under a contract between D and C, D is obliged to deliver 10 bags of cement to C. On
due date, D delivered to C 10 bags of cement which he mixed with 5% chalk. Which is correct?
a. The contract entered into between D and C is voidable because of the fraud employed
by D.
b. The contract is valid, but D is obliged to pay damages to C
c. The contract is void because of the fraud employed by D in the performance of his
obligation
d. The contract is rescissible because of the damages suffered by C
198. The Statute of Frauds applies only to contracts
a. Wholly executed by both parties
b. Wholly executed on the part of one of the parties
c. Partially executed on the part of one of the parties
d. Wholly executory to both parties
199. The following are characteristic of void or inexistent contracts, except
a. The right to set up a defense of illegality cannot be waived
b. The action or defense for the declaration of the inexistence of a contract does not
prescribe
c. Can be ratified by the courts
d. The defense of illegality of contracts is not available to third persons whose interest are
not directly affected
200. If the illegal contract between the parties is a criminal offense but only one party is
guilty, which of the following is wrong?
a. The guilty party will be criminally prosecuted
b. Neither party may compel the other to comply with his undertaking
c. The instruments shall be confiscated in favor of the government
d. The innocent party shall have no right to recover what he had given

“If you want to be good at anything in life, be prepared to be bad at it first. Every Master was once a Disaster”
Goodluck!!!

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