NOTRE DAME EDUCATIONAL ASSOCIATION

Purok San Jose, Brgy. New Isabela, Tacurong City

MOCK BOARD EXAMINATION

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTION
S.Y. 2016-2017

INSTRUCTIONS: This examination is good for three (3) hours. Select the best answer for each
item. Mark only ONE answer for each item by shading the letter of your choice on the ANSWER
SHEET. STRICTLY NO ERASURES. Use Mongol Pencil No. 2 Only.

1. The debtor shall lose every right to make use of the period EXCEPT
A. when after the obligation has been contracted he becomes insolvent, unless he gives a guaranty or
security for the debt.
B. when he does not furnish a guaranty or security for the debt.
C. when the debtor attempts to abscond.
D. when he violates any undertaking in consideration of which the creditor agreed to the period.

2. Decide whether each of the following statement is true or false.

Statement 1: Dolo causante is annullable, while dolo incidente obliges only the person employing it to
pay damages.
Statement 2: Patrick sold to Sanny Girl shoes which they honestly believed to be made in Marikina. It
turned out, however, that the shoes are made in Quiapo. In this case, the contract can be annulled on
the ground of mistake but not fraud because the misrepresentation was made in good faith.
A. True, False C. True, True
B. False, True D. False, false

3. Which of the following is a valid stipulation?

A. Squidward promise to give Bento P10,000, and if Squidward fails, he will drink orange flavored
muriatic acid to kill himself.
B. Squidward will give Bentong P10,000 if Bentong will kill the fiancé of Squidward’s crush.
C. Squidward agreed to give Patricia a house and lot if Patricia will agree to become his mistress.
D. Jake is to pay Mr. Baron P1,000,000 if he gets the eyes of Ms. Peregrine in a wicked way.

4. Karen and Donell issued a promissory note which reads as follows: “Pasig City, May 1, 2013. For value
received, we the undersigned, promise in solidum to pay Derrick or her order, on or before May 1,
2014, the sum of P1,000,000, plus an interest of 6%(Sgd) Karen and Donell. Assuming that Donell is
insolvent, which of the following statement is TRUE?
A. Derrick can recover all her claim amounting to P1, 000,000 from Karen who is solvent.
B. Derrick can recover only P500, 000 from Karen without prejudice to recover from Donell when her
finance improve.
C. Derrick cannot recover from Karen P1,000,000 because the latter is oblige only to pay P1,000,000
minus the share of Donell of P500,000 since insolvency is a matter of defense.
D. Derrick can recover all his claim amounting to P1, 000,000 from Karen who bound herself solidary
liable, without prejudice of course to his recovering later on from Donell, the share of the latter in
the debt, plus interest from the date of payment.

5. Kim, Ermon and Landseair are solidary debtors sharing at 1:2:3 of solidary creditors, Jamir and Edz
sharing 1:2. The obligation is P12,000. If Ermon is a minor and Landseair is insolvent and Jamir
condones the obligation of Kim without the consent of Edz, how much can Jamir collect from Kim?
A. P 6,000 C. P 2,000
B. P 8,000 D. P 0

6. On February 28, 2016, Laverna obliged herself to give Hugs her agricultural land if Hugs will marry his
ex-girlfriend, Kisses, on September 20, 2016. On September 5, 2016, knowing that the wedding day is
near, Hugs orally sold the agricultural land to Hershey and it is agreed that Hershey will pay when
Hugs effects the delivery. In the morning of September 20, 2016, Laverna volunteered to prepare the
breakfast of the soon-to-be-wed couple. Out of envy, she put poison on Kisses’ food requiring her
hospitalization resulting to Hugs’s failure to marry Kisses on September 20, 2016. As a result, which of
the following is CORRECT?
A. The sale to Hershey is void because Hugs did not fulfill the condition.
B. The sale to Hershey is enforceable because Laverna voluntarily prevented Hugs from fulfilling the
condition.
C. Hugs is entitled to the agricultural land hence, the sale to Hershey is valid.
D. Hershey can demand the delivery of the agricultural land because the sale made by Hugs is valid.

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 7. Aldwin lost P7,000 in a card game called tong its. Aldwin had no more cash to pay in full the winner at
the time the tong its session ended. Aldwin promised to pay Mobin, the winner, two weeks thereafter.
Aldwin failed to pay despite the lapse of two months, so Mobin filed in court a suit to collect the unpaid
amount. Will the collection suit against Aldwin prosper?
A. Yes, if Aldwin issued a promissory note
B. Yes, whether or not a negotiable instrument had been made by Aldwin
C. No, if Aldwin still has property to satisfy his obligation
D. No because tong its a game of chance

8. Kristoff and Jessy were in a relationship for 8 years already. They’ve been together since third year
high school. Finally, they both agreed to settle down in three months time. To express his love and
affection, Kristoff gave her a gift- a house and lot, which he had promised her during their 8th
anniversary. The donation of Kristoff was written in a love letter to Jessy. The latter wrote back,
accepting the donation and took possession of the property. A day before the wedding, Kristoff and
Jessy had a car accident that led to Jessy’s death. Can Jessy’s heirs get the property?
A. No, since the marriage did not take place
B. Yes, since all the requisites of a donation of an immovable are present
C. No, since the donation and its acceptance are not in a public instrument
D. Yes, since Kristoff freely donated the property to Jessy who became its owner

9. Kitty owes Kit the sum of P100,000, guaranteed by her long time boyfriend, Keith. Kurt, her secret
admirer offers to pay Kit P100,000 and the latter accepts the offer of payment. However, Kitty has
already paid Kit P45,000. The payment of Kurt is with the knowledge of Kitty but it is against her will.
This might trouble their relationship if Keith discovers. Kurt may recover from Kitty
A. P 100,000 and to be subrogated to the guaranty
B. P 55,000 and to be subrogated to the guaranty
C. P 100,000 but not entitled to be subrogated to the guaranty
D. P 55,000 only because this is the only amount which redounded to the benefit of Kitty

10. Ms. Ameera Spears agreed to live with Mr. Eufren Joey Abaya as the wife of the latter without the
benefit of marriage in exchange for the monthly support of twenty thousand (P20,000) that Mr. Eufren
Joey Abaya would give to Ms. Ameera Spears. Both Mr. Eufren Joey Abaya and Ms. Ameera Spears are
single, of legal age, and there is no legal impediment for them to get married. Their parents have no
objections to the two getting married since both of them are CPAs already. Based on the foregoing
information, which of the following is TRUE?
A. The agreement between Mr. Eufren Joey Abaya and Ms. Ameera Spears is void for being contrary to
morals
B. Mr. Eufren Joey Abaya may legally demand that Ms. Ameera Spears live with him as his wife.
C. Ms. Ameera Spears may legally demand that Mr. Eufren Joey Abaya give her the monthly support of
P20, 000 that he promised.
D. The agreement between Mr. Eufren Joey Abaya and Ms. Ameera Spears is valid because they can
legally get married if they want to.

11. Krissy is obliged to give Zorro her only kitten or her only elephant on December 31, 2016. Today,
Krissy was not in good mood because she had a misunderstanding with Zorro the other night. When
she saw the kitten, she remembered Zorro so, she choked the kitten that resulted to its death. Which of
the following is CORRECT?
A. The obligation of Krissy is converted to a simple obligation.
B. Krissy should replace the kitten with another kitten equally satisfactory.
C. The obligation of Krissy is extinguished.
D. Zorro may compel Krissy to deliver her only elephant or the value of the kitten plus damages.

12. Krisanta brought her Samsung J1 at C-305 Phone Tech World for repair. The repair shop undertook to
return the cellphone by February 5, 2016. When the said date arrived, the repair shop informed
Krisanta that the job was not yet finished. They asked her to return five days after. On February 10,
2016, Krisanta went to the shop to claim the cellphone, but she was informed that the same was stolen
by a thief who entered the shop the night before. Later, the cellphone was found in the possession of
“Darkar”, the thief.
 1st Statement: The repair shop is not liable because the lost of the cellphone is due to force
majeure. The right of Krisanta is to proceed against Darkar, the thief.
 2nd Statement: The right of Krisanta is to proceed against the repair shop owner and ask for the
value of the cellphone plus damages because there was a breach of contract. The shop cannot
escape liability because there was a delay.
Decide whether each of the statement above is true or false?
A. True, True C. True, False
B. False, false D. False, True
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 13. A is indebted to B in the amount of P50,000 with C as guarantor. On due date, A tendered payment to B
but B refused. Because of B’s refusal, A deposited the amount in court. After the consignation of the
amount, A withdraws it with the consent of B. Which is true about the case?
A. B lost the right to collect as A’s obligation is extinguished.
B. B lost all the preference she might have over the amount deposited but C is still liable as a
guarantor.
C. B lost the right to collect from A and consequently lost her right to collect from C.
D. B lost all the preference she might have over the amount deposited and C as guarantor was likewise
released from liability.

14. Decide whether each case below is true or false.

Case 1 – Edzel hired Calvin for P100,000 to kidnap Amera, and he paid Calvin P50,000 in advance.
Before Calvin could kidnap Amera, Edzel relented and stopped Calvin from performing the contract.
The court may not allow Edzel to recover from Calvin the P50,000 paid in advance.

Case 2 – Ermon, at gun point, compels Landseair to marry him. Since the contract of marriage is
voidable, Landseair has the right of action to annul the contract.
A. Both cases are false C. Both cases are true.
B. First case is false, second case is true D. First case is true, second case is false.

15. Amazed by the skill of Boy Ilok who can paint portraits using paint brushes inserted in his right armpit,
Shiere entered into a contract with the former to have his own portrait done and gave Boy Ilok P50,000
as full payment therefore. After he has started painting the portrait, but before its completion, Boy Ilok
was sideswiped by a speeding car while walking beside the railway causing the doctors to have his
right arm amputated. In this case, what is the remedy of Shiere?
A. Substitute performance by allowing a third person to do his portrait with expenses therefore
charged to Boy Ilok.
B. Specific performance by compelling Boy Ilok to go on painting Shiere's portrait.
C. Specific performance by compelling Boy Ilok to go on painting Shiere's portrait.
D. Nothing, as the service became impossible by reason of an act independent of the will of the debtor.

16. Nathaniel Villaranda is a minister of a certain church whose members include Cel. Cel regularly
confides in Nathaniel Villaranda because of her many personal problems. Nathaniel is interested in
buying the lot of Cel and uses his position as elder of the church and confidant of Cel to convince her to
sell to him the lot. Should Cel sell the lot to Nathaniel by reason of him taking advantage of his
confidential relationship with Cel, the contract between them would likely be voidable because of
A. Intimidation C. Fraud
B. Undue influence D. Mistake

17. Which is the correct order of application of the rules in connection with solution of problems involving
innominate contracts?
A. The provisions of the Civil Code; then stipulation of the parties; then provisions of the most
analogous nominate contract and lastly custom or usage of the place.
B. Custom or usage of the place; then stipulation of the parties; then the provisions of Civil Code and
lastly provision of the most analogous nominate contract.
C. The stipulation of the parties; then the provisions of the Civil Code; then the provisions of the most
analogous nominate contract and lastly the custom or usage of the place.
D. The provisions of the most analogous nominate contract; then the stipulation of the parties; then
the provisions of the Civil Code and lastly the custom or usage of the place.

18. Jemusu, a person of legal age and an agent of Bambi, sold 10 grams of shabu to Em-Em who is a minor
and only 16 years old. The shabu was sold for P600 which is actually less than its actual market value
of P1,000 thereby incurring a loss of P400 on the part of Bambi. He suffered more than ¼ lesion
because of the sale. Worse, the contract of sale was not reduced into writing because Jemusu was
overwhelmed for selling it immediately and Em-Em, on the other hand, was excited to bring the shabu
to his boyfriend for their pot session. What is the status of the contract?
A. The contract of sale is voidable because one party is a minor.
B. The contract is rescissible because of lesion.
C. The contract is unenforceable considering it was orally done.
D. The contract is void.

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 19. Pretty Girl and Boy Tikig mutually promised to marry each other. Boy Tikig already incurred wedding
expenses. The promise being verbal and without witnesses, Pretty Girl did not marry Boy Tikig because
she is madly in love with the boyfriend of Em-Em. Boy Tikig is now suing Pretty Girl for damages.
Which statement is CORRECT?
A. The contract is unenforceable hence Pretty Girl is not liable.
B. The contract is unenforceable because mutual promise to marry is covered by the Statute of
Frauds.
C. Pretty Girl may be liable for damages because mutual promise to marry is not covered by Statute of
Frauds.
D. Pretty Girl is liable for damages even if the contract is unenforceable.

20. The pre-nuptial agreement of Verly and Limer provides for complete separation of property. Their
marriage didn’t work well. Later, Limer, with violence and intimidation, forced Verly to sell to him the
latter’s pieces of jewelry worth P60,000 for only P20,000. The sale is
A. rescissible because Verly suffered lesion of more than ¼ of the value of the property
B. voidable because the consent of Verly is vitiated
C. unenforceable because the value of the thing is greater than P500
D. void because Verly and Limer are not allowed to sell property to each other

21. Landseair a.k.a. Boy Astig entered into a contract of sale wherein Boy Astig will buy a knife from the
Edz, the Boy Siga of PAS41 for P3,000. However, Boy Astig bought the knife to kill Paloma his mortal
enemy. The contract between Boy Astig and Boy Siga is
A. valid C. void
B. rescissible D. unenforceable

22. In February 13, 2009, Lolits, 17 years old, was in need of money for his Valentine gift for Tine so he
sold his only car to Norfa, 21 years old. The sale was without the knowledge of Kristina, the guardian of
Lolits. Assuming that an annulment case is filed today. Which is CORRECT?
A. Lolits may bring the action for annulment
B. Tine may bring the action for annulment
C. Kristina may bring the action for annulment
D. Annulment will not prosper whoever will file it

23. An agreement in restraint of trade or establishing monopoly is

A. Perfectly valid C. Void
B. Voidable D. Unenforceable

24. Preng, a bachelor who has sired many children by different woman, donated a house and lot to Pre, his
illegitimate son from his second mistress, the deed of donation and its acceptance were in a public
instrument and a new certificate of title to the house and lot was issued in the name of Pre. Later, Preng
discovered that Pre was not his son. He was actually a son of their neighbor, to whom one of his
mistresses had an affair with. Can Preng annul the contract?
A. No, because all the requisites have been complied with and a new title had been issued in the name
of Pre
B. Yes, Preng may annul the contract on the ground of mistake as to the identity of Pre.
C. No, but Preng can ask for recession because he suffered anxiety and sleepless nights knowing that
his mistress had an affair with their neighbor
D. Yes, the contract is void ab initio

25. Which of the following contracts may not be annulled on ground of mistake?
A. Hasula Review Center hired the services of Roger, as lecturer in Regulatory Framework for
Business Transactions because of his expertise on the said subject. His resume, which was made as
the basis for hiring him, indicates that he is a CPA-lawyer when in fact he is not a CPA although he
graduated with a degree of Bachelor of Science in Accountancy.
B. Christverly sold to Llanah 143 copies of the book “Single Ka. Single Ako. Damay Damay Na ‘to!” at
P150 each. Llanah paid P21,450 for the books and the amount appeared in the receipt issued was
P24,150.
C. Daniel owns a piece of untitled land located at the back of Barcelona Townhomes in Taguig City,
which to her knowledge measure 15 hectares and sold it to Kathryn for P300,000 and Kathryn
thinking it really contains 15 hectares bought it from Daniel.
D. None of the above

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 26. Robin was driving on his way to Taguig from Manila. When he reached Shaw Boulevard, he suffered a
busted tire. Not having any spare tire, he went to a nearby car spare parts store to buy a new tire.
However, he did not have sufficient money with him so he made a phone call with Julie, his friend, who
happened to know Jam, the store owner. Julie then instructed Robin to give to Jam the telephone
through which Julie told Jam “Don’t worry, if Robin cannot pay, just charge me”. Robin was thus able to
buy a new tire for P6,000 for which Jam issued Robin a sales invoice. Which is CORRECT?
A. If Robin cannot pay, Jam can proceed against Julie to make good his promise to pay Robin’s debt.
B. Julie’s promise cannot be enforced against her because she did not execute any writing for the
guaranty made.
C. Jam can enforce Julie’s promise to answer for Robin’s debt since the guaranty was witnessed by
Robin.
D. Jam can enforce Julie’s promise because there was an invoice evidencing the sale of tire.

27. A Japanese national and a Filipino national entered into a contract for services in Thailand. The
services will be rendered in Singapore. In case of breach, what law will govern?
A. Thailand Law C. Singapore Law
B. Philippine Law D. Japanese Law

28. If the doubts are cast upon the principal object of the contract in such a way it cannot be known what
may have been the intention or will of the parties. The contract shall be
A. voidable due to lack of meeting of minds
B. interpreted for there is doubt
C. reformed to express the true intention of the parties
D. void

29. 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 contracts maybe waived if the illegality is not
raised within the reasonable time.
C. If a void contract is novated by a valid one, such novation is valid.
D. The right to set up the defense of illegality of a void contract is imprescriptible.

30. Lani, with a violence in her eyes, intimidated her husband Thor to sell his exclusive property to her.
The contract to sell is
A. Rescissible C. Unenforceable
B. Voidable D. Void

31. Michelle “Mitch” Styles is a fourth year BSA graduating student of NDU. Since there are few more days
left before graduation day, there are emotions that she feels but cannot explain. Then suddenly, an
angel whispered to her saying, “Mitch, konti na lang! Kaya mo yan! Final exam na lang. Kaya niyo yan.
Do your best, and know that God always provides. Ayaw kabalaka.” Then above her unexplained
emotions, she remembered that she still has to pay her assessment before she can finally take the final
exam. Being a good daughter, she funded her own assessment. To obtain the P10,000 payment to the
assessment, Michelle borrowed P10,000 from Jude which is due after 3 months, pledging Michelle’s
antique ring as a security. Before the due date, Jude executed an instrument abandoning the pledge.

I. Michelle’s debt is extinguished.

II. The pledge of the antique ring is extinguished even if Mitch has not yet accepted the
renunciation of the pledge.
III. The pledge is not extinguished until Jude returns the antique ring to Mitch.
IV. The pledge is extinguished even if Jude has not returned the antique ring to Mitch.

Based on the foregoing, which are FALSE among the four statements above?
A. I and III C. I and II
B. II and IV D. I and IV

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 32. Moi is sitting in the couch, thinking about random stuff. When Moi and her friends’ eyes meet, her
friends wave their hands to say “Hi!” but get no response. The friends were tricked. Moi’s just giving a
blank stare. Too much of those deep thoughts, she finally got herself back and shouted, “Gusto kong
mag-abroad!” Moi immediately obtained a 12-month loan of P300,000 from Jessamae to fund her
travel. Moi constituted a mortgage on a certain lot which she knew belonged to Cueen. Which
statement is true regarding the mortgage?
A. Jessamae cannot collect from Moi because the obligation is rendered void, Moi, the mortgagor, not
being the owner of the mortgaged lot.
B. Jessamae can collect from Moi because although the mortgage is void, the loan obligation can stand
from it.
C. Jessamae can collect from Moi because the mortgagor need not be the owner of the property.
D. Jessamae cannot collect from Moi because the latter was not authorized by any power of attorney
to mortgage the lot.

33. Decide whether each statement below is true or false.

Statement 1: Voldemort promised to give Snape a specific car valued P1,000,000 after Snape killed
Dumbledore. Later, after the killing, the contract was novated. Instead of giving Snape a specific car, he
will just give a specific land to be delivered on February 28, 2016. Meantime, both parties died. In here,
the heirs of Snapemay compel the execution of the second contract, that is, the delivery of the specific
land.
Statement 2: Sirius sold to Lupin a specific residential house situated in Cotabato City for P1M,
unknown to both parties one hour before the sale the property was totally gutted by fire caused by
electrical defect. In here, Lupin can be required to pay the price of the sale, because the subject is
determine Sirius' obligation to deliver is extinguished, while Lupin's obligation remain to subsist.
A. True, True C. False, False
B. True, False D. False, True

34. Marie and Zark had a mutual feeling for each other. Everybody knew, except them. Since days are
numbered before graduation, both of them secretly planned a surprise for each other. Marie needs a
size 10 of model 101 of Moto Shoes regularly available to the public for Zark, but the same size is out of
stock so she placed an order for one. On the other hand, Zark placed an order for size No. 5, violet and
pink colored shoes to be given to Marie and good thing it was readily available so he can immediately
give it to her later this afternoon, after their exam in Taxation. Under Philippine setting, which is
CORRECT?
A. Both are contract of sale
B. Both are contract for piece of work
C. First is a contract of sale, second is a contract for piece of work.
D. First is a contract for piece of work, second is a contract of sale

35. Last Sunday afternoon, Soi borrowed P100,000 from Mr. Hin D. Nagbabasa to pay his hospital bills
because he was diagnosed of dengue, and he could not withdraw from his bank account because it is
Sunday. To secure the debt, he pledged his yacht, helicopter and private jet. That night, Mr. Hin D.
Nagbabasa went to the hospital to visit Soi whose platelet count gone too low. Anxious of Soi’s
condition, Mr. Hin D. Nagbabasa’s blood pressure went too high that causes his death leaving Zei, Bevs
and Shie as heirs. By agreement among heirs who inherited the credit, the yacht would secure the
share of Zei of the credit, the helicopter for the share of Bevs and the private jet for the share of Shie.
On the following day, Soi authorized Belle to go to the bank and withdraw P10,000 and give it to Zei.
Belle did what he was told. Which statement is CORRECT?
A. Soi can demand the extinguishment of the pledge of the yacht
B. Zei may release the pledge of yacht
C. The pledge of the yacht will remain until the shares of Bev and Shie are paid by Soi
D. Soi can demand the extinguishment of the pledge of the yacht, helicopter, and private jet because
there is already a partial payment.

36. S sold to B his car on January 10, 2001. On January 15, an absolute deed of sale was executed and
notarized. On January 20, the sale was registered with the LTO. On January 25, B took actual
possession of the car. When did B acquire title to the car?
A. On January 10 C. On January 20
B. On January 15 D. On January 25

37. S sold to B his car with the agreement to deliver the same one-week after the sale on January 10, 2001.
In this case
A. S may demand within reasonable time from the sale the payment of the price from B
B. S can demand payment only after he has delivered the car to B.
C. B may demand delivery of the car even before the expiration of the one-week period agreed upon
once he pays the price.
D. Payment and delivery shall take place only after one week from sale.
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 38. Bong stole a SAMSUNG J1 of Kichi and sold it to a Bazaar who pays for it in good faith, not knowing that
it was stolen. The Bazaar then sold it to Almirah, a student. Which statement is CORRECT?
A. The Bazaar having bought it in good faith becomes a legal owner, and as such, can transfer
ownership to Almirah.
B. Ownership is passed to Almirah because she bought it in a merchant store.
C. Kichi may recover the SAMSUNG J1 from Almirah without reimbursement because she is the legal
owner.
D. Almirah cannot become the owner because Bong, the original seller, is not the owner.

39. Decide whether each statement below is true or false.

I. The principle that the buyer bears the loss is Res Perit Domino.
II. The principle that the seller bears the loss is Res Perit Venditori.
A. True, True C. False, True
B. True, False D. False, False

40. All of the following are acceptable as unilateral promise to buy EXCEPT
A. Policitacion C. Visitacion
B. Solicitacion D. None of the above

41. Elaine has been suffering from sleepless nights because of reasons she cannot tell to anyone. One day,
she realized that it has to stop since it is bad for her health. So she borrowed P50,000 from Len to fix
herself up and start anew with Elaine convincing, “sige na, Len, please. Pambagong buhay lang. Ang
haba na ng pinagsamahan natin. Sige, para mas gumaan loob mo, ito o, 100 grams ng shabu, collateral.”
Len, being a soft-hearted person, accepted the shabu as pledge. On due date, Len demanded payment
but Elaine refused to pay raising the defense that her debt is void can Len collect from Elaine?
A. No, because the loan obligation and the pledge are contrary to law.
B. Yes, but if Elaine cannot pay, Len may go after the pledge to satisfy the claim.
C. No, because the nullity of the pledge carried with it the nullity of the loan obligation.
D. Yes, but if Elaine cannot pay, Len may have to resort to other remedies to satisfy his claim.

42. Abu Alibasa and Rai Musa, the sweetest couple of “PAS 41,” were tagged as “BuRai.” Upon reaching
“Tamang Panahon,” they realized that they’re meant for each other and eventually got married. They’ve
always been the perfect couple. But to prove that nothing is forever, Abu passed away because of
rheumatism. Rai suffered from sleepless nights, serious anxiety, heart break, and all. She misses Abu a
lot. To ease the pain in her chest, Rai went for a vacation. She decided to go to their favourite place in
Tantawan where her 2 lots, Lot A and Lot B, are located. Upon setting foot there, memories of him keep
flashing back. So she decided to buy a new lot worth P1,000,000 from Sharki, and executed deed of
mortgage covering the two lots, which is in Rai’s name in the certificate of title. The mortgage of Lot A
was recorded within one week in the Office of the Register of Deeds, but that of Lot B could not be
processed as other documents were being required by the Register of Deeds. In the meantime, Rai sold
Lot A to Vincelviea, and Lot B to Movain. Vincelviea knew nothing on the mortgage of Lot A, but Movain
was aware of the mortgage of Lot B. Which statement is TRUE?
A. Both Vincelviea and Movain are bound by the mortgage on the lot sold to each of them
B. Both Vincelviea and Movain will not be bound. In the case of Vincelviea, she knew nothing about
the mortgage. In the case of Movain, the mortgage was not registered
C. Vincelviea is bound by the mortgage of Lot A. Movain is not bound by the mortgage of Lot B
D. Vincelviea is not bound by the mortgage of Lot A. Movain is bound by the mortgage of Lot B

43. On January 17, 1931, defendant corporation, Tavera-Luna Inc., for the purpose of constructing the
Crystal Arcade building on its premises at Escolta, Manila, to secured this loan. The corporation
executed a first mortgage on said premises and on the building proposed to be erected thereon. On
February 11, 1932, Tavera-Luna, Inc., secured from El Hogar Filipino an additional loan of P300,000
with the same security executed for the original loan. The Tavera-Luna, Inc., thereafter, defaulted in the
payment of the monthly amortizations on the loan: whereupon, El Hogar Filipino foreclosed the
mortgage proceeded with the extra-judicial sale of the Crystal Arcade building, at which it was the
highest bidder for P1,363,555.36. One day before the expiration of the period of redemption, Carlos
Pardo de Tavera and Carmen Pardo de TaveraManzano, in their capacity as stockholders of the Tavera-
Luna, Inc., and El Hogar Filipino, Inc., to annul the two secured loans as well as extra-judicial sale made
in favor of the latter.(Tavera Vs. El Hogar Filipino Inc).
Which of the following is CORRECT regarding the remedies of creditor?
Statement 1 : to bring action for specific performance
Statement 2 : to petition for the sale of sale of real property as in a foreclosure of mortgage
under Rule 68 of the Rules of Court.
Statement 3: The parties may, however, may agree on an extrajudicial foreclosure.
A. Statement 1 only C. Statement 1,2 and 3
B. Statement 1 and 2 D. None of the above
Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 7
 44. Which of the following refers to commodatum?
A. Sheikha borrowed P20,000 from Rich to buy ticket for the concert of EXO.
B. Sheik would transfer to Rich the ownership of her books, and in return Rich will give Sheik her
solution manuals.
C. Sheik delivered to Rich her reviewers and Rich is obliged to return those after the NDEA mock
board examination.
D. Sheik delivered to Rich her fountain pen and Rich paid Sheik P1,000.

45. The bailor may demand the thing at will, and the contractual relation is called a
A. Precarium C. Pretoria
B. Pericardium D. Precatium

46. Decide whether each statement below is true or false.

I. Guaranty and surety are contracts of personal security.
II. Pledge and mortgage are contracts of real security.
A. True, True C. False, True
B. True, False D. False, False

47. Alexis and Bote entered into a universal partnership of all present property. No stipulation was made
regarding other properties. Subsequently, Alexis received a parcel of land by inheritance from his
father; and another parcel of land from “The Best Ito University” as remuneration for Alexis work as
professor therein. Which statement is TRUE?
A. The two parcel of land and their fruits are to be enjoyed by the partnership because the contract
entered is a universal partnership of all present property.
B. The two parcel of land and their fruits will not be enjoyed by the partnership because there is no
stipulation regarding future properties or their fruits.
C. The partnership is entitled only to the fruits but not to the two parcel of land.
D. The partnership is entitled to use the two parcel of land as usufructuary and also entitled to the
fruits produced by the property.

48. Jack, Jacque, Jake, Jokjok, and X are partners. Their business is engaged in drying goods. Jacque is the
manager. Suppose, X dies. Jacque knows the death of X but he still purchases goods from Julie, a
creditor who granted credit to the partnership before dissolution. Julie was specially notified of the
dissolution. Which statement is TRUE?
A. Julie can go after the assets of the partnership. If the partnership assets are not sufficient, she can
go after the separate assets of the all the partners including those of X.
B. Julie can go after the assets of the partnership. If the partnership assets are not sufficient, she can
go after the separate assets of the all the partners excluding those of X.
C. Only Jacque will be liable to Julie. He cannot call on the other partners and X’s legal representative
to share in the payment.
D. Julie can go after the assets of the partnership. If the partnership assets are not sufficient, she
cannot go after the separate assets of the all the partners.

49. The following persons are disqualified to form a universal partnership. Who are the exception?
A. Almirah Modiarat and Ferdie Jahhil Modiarat, siblings
B. Mr. Zark and his wife, Marie
C. Mr. Abellana and his other woman, whom he has a secret affair with.
D. Those guilty of the same criminal offense, if the partnership is entered into a consideration of the
same

50. Tina La, Calvin Lee and Allaine Lu were general partners in La, Lee and Lu partnership who are
engaged in a Kitchen Equipment business. On behalf of the partnership, Tina La contracted to purchase
20 stoves from Veck. Unknown from Veck, Tina La was not duly authorized by the partnership
agreement to make such contracts. She just wanted to surprise Calvin Lee and Allaine Lu. On the
following day, Calvin Lee and Allaine Lu went together at their office. To their surprise, Veck is already
waiting for them for the delivery of the stoves, but the two partners refused to accept such delivery.
Enraged by the refusal, Veck sought to enforce the contract. Will the court be in favor of Veck?
A. No, because Tina La’s action was not authorized by the partnership agreement
B. No, because Tina La was not the agent of the partnership
C. Yes, because Tina La had an express authority to bind the partnership
D. Yes , because Tina La had an apparent Yes authority to bind the partnership

Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 8
 51. Ferdie and March are general partners who contributed P800,000 and P400,00, respectively. Marbel is
a limited partner with a contribution of P600,000 and Halil is an industrial partner. The total assets of
the partnership after its dissolution amounted to P620,000 but the partnership liabilities to Harrybasa
amounted to P860,000. Who shall be liable to Harrybasa, out of their separate properties, for the
payment of the balance amounting to P240,000?
A. Ferdie, March and Marbel in proportion to their contribution. Halil- nothing
B. Ferdie and March in proportion to their contribution. Marbel and Halil- nothing
C. Ferdie, March and Halil for P80,000 each. Marbel- nothing
D. Ferdie, March, Halil and Marbel for P60,000 each

52. Jessa Mae and Jessamae agreed to contribute their respective farms to form a partnership. Jessa Mae
immediately delivered her land. Jessamae waited for two months so she could harvest some rice from
her farm. What may the parties do?
A. Jessame should deliver the land and the rice she harvested.
B. Jessamae is allowed to keep his land until a formal demand is made.
C. Jessa Mae should also be allowed to harvest any fruits in her land
D. Jessa Mae should ask for a rescission of the contract of partnership

53. Partners Blossom, Bubbles and Buttercup agreed to form a partnership. One afternoon, they were
going to their supplier Mojojojo when they met a tragic accident at the Quirino Bridge. Minutes after
the incident, Blossom and Bubbles were rescued and brought to the hospital. Blossom was declared
dead on arrival, while Bubbles’ condition was critical and she was rushed to the operating room. It was
at 7PM of the same day when Buttercup’s body was found and was brought immediately at the
emergency room. The doctors did their best to keep the two alive but Bubbles died just a few minutes
after Buttercup had her last breath. Who may wind-up in the partnership affairs?
A. Legal Representative of Blossom
B. Legal Representative of Bubbles
C. Legal Representative of Buttercup
D. The court should appoint a representative who will wind-up the partnership affairs

54. Tik, Tak and Toe agreed to form Tiktaktoe Partnership. It was orally agreed that Tik would contribute
P20,000, Tak P15,000 and Toe P5,000. It was also orally agreed that in the event the proved to be of
financial loss, all losses will be assumed by Tik only. There were no other expressed agreements. Under
these circumstances, which of the following is CORRECT?
A. Partnership is unenforceable because the agreement is not contained in a signed writing
B. Partnership is void because it exempts the other two partners from losses
C. Partnership is valid notwithstanding the failure to put the agreement in a public instrument
D. Partnership is voidable because the absence of such written agreement makes the partnership an
incapacitated juridical being

55. A limited partner may contribute

A. Money and/or property C. Property and/or services
B. Money and/or service D. Services only

56. A partnership formed for the exercise of a profession which is duly registered is an example of
A. Universal partnership of profits
B. Universal partnership of all present property
C. Particular partnership
D. Partnership by estoppel

57. Which of the following will not cause the automatic dissolution of a general partnership?
A. Death of a capitalist partner
B. Insolvency of a capitalist partner
C. Insanity of an industrial partner
D. Civil interdiction of an industrial partner

58. Can the partners stipulate that the newly admitted partner shall not be held liable for the obligations of
the partnership arising before his admission? Which of the following statements is NOT CORRECT?
A. No, because the newly admitted partner should be deemed to have assumed all the debts of the
partnership upon his voluntary participation in the partnership.
B. No, because newly admitted partner is liable with respect to his capital contribution which forms
part of the partnership
C. No, because the third person are always protected by law
D. No, because the subject of the stipulation is that the liability of the new partner should not be
satisfied out of the partnership property.

Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 9
 59. One or more but less than all the partners have no authority to perform the following acts, EXCEPT
A. Do any act which would make it impossible to carry on the ordinary business of the partnership
B. Submit a partnership claim or liability to arbitration
C. Renounce a claim of the partnership
D. Convey partnership property in the ordinary course of partnership business

60. A partnership suffered losses in the first year of its operation. Teng, a capitalist partner, cannot
contribute an additional share to the capital because of insolvency. Can Teng be obliged to sell his
interest to the other partners on the ground of such refusal?
A. Yes, Teng’ refusal to contribute additional share reflects his lack of interest in the continuance of
the partnership.
B. No, because there is actually no imminent loss of the business.
C. Yes, provided that Teng is paid the value of his interest.
D. No, because his refusal is justifiable

61. A, B and C are partners. Their contributions are as follows: A, P60.000; B, P40.000 and C, services. The
partners agreed to divide profits and losses in the following proportions: A, 35%; B, 25% and C,40%. If
there is a loss of P10,000, how should the said loss of P10,000 be shared by the partners?
A. A, P6.000; B, P4.000; C, nothing C. A, P3.500; B, P3.500; C, P3.000
B. A, P3,000; B, P2,000; C, P5.000 D. A, P3.500; B, P2.500; C, P4.000

62. Mahal Kita. Corp. whose business purpose is to manufacture and sell vehicles invested its funds in
Mahal Mo Siya Corp. an investment firm through a resolution of its Board of Directors. The investment
grew tremendously on account of Mahal Mo Siya corp excellent business judgment. But a minority
stockholders in Mahal Kita Corp. assails the investment as ultra vires. Are they right and if so, what is
the status of the investment?
A. Yes, it is an ultra vires act of the corporation itself and consequently void.
B. Yes, it is an ultra vires act of its Board of Directors but voidable only, subject to stockholders’
ratification.
C. Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders
ratification.
D. Yes, it is an ultra vires act of its Board of Directors and thus void.

63. On May 1, 2015 Ara subscribed to 1000 shares of stock of Animo Corporation at the per value of P
10.00 per share. Pursuant to the policy of the corporation which requires a down payment of 60% of
the sub subscription price, Ara paid 6000 upon the execution of the subscription contract. The balance
of the subscription must be paid after 30 days which in case of Ara is May 31, 2015. Which statement is
CORRECT?
A. Ara is already qualified to vote although he has not paid his subscription in full.
B. In case of delinquency, only 400 share will be considered delinquent.
C. Upon the execution of the subscription contracts Ara may demand the issuance to her of a stock
certificate covering 600 shares.
D. If Ara fails to pay the balance of his subscription on May 31, 2015, his shares will become
delinquent on June 1, 2015.

64. Reyes corporation increased its capital stock from P10 million to P15 million and in the process issued
1000 new shares dividend is to common shares “B” and common share “C”. Mika a stockholder owning
500 shares insists on buying the newly issued shares through a right of pre-emption.
The company claims however that its By-laws deny Mika any right of pre-emption. Is the corporation
CORRECT?
A. No, since pre-emptive right are governed by the articles of incorporation
B. Yes, but the denial of his pre-emptive rights extends only to 500 shares.
C. Yes, since the denial of the right under the BY-laws is binding on Mika.
D. No, since the By-laws cannot deny a shareholder his right of pre-emption.

65. Allaine, Bansawan, Calvin, Dyoan, Edzel, Farisha and Gardo are the duly elected directors for 2015 of
BiTriWanPayb Corporation whose articles of incorporation provide for 7 directors. On August 16,
2016, Directors Allaine, Bansawan, Calvin, Dyoan, and Edzel met to fill the two vacancies in the board
brought about by the valid removal of Farisha for disloyalty to the corporation and the demise of Gardo
due to Brokenheart Syndrome. In the said meeting, the remaining directors voted for XieXie to replace
Farisha, and Yoyo, a son of Gardo, to replace his father. Both Xiexie and Yoyo are owners of at least one
share of stock of the corporation.
The election of Xiexie and Yoyo by the remaining directors is
A. valid for both Xiexie and Yoyo
B. not valid for both Xiexie and Yoyo
C. valid with respect to Xiexie, not valid with respect to Yoyo
D. valid with respect to Yoyo, not valid with respect to Xiexie

Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 10
 66. Harry, Hermione, Ron, Neville, Luna, Ginny, Cho, Fred and George are directors of D.A.’s Brooms
Corporation whose articles of incorporation provide for 9 directors. In the meeting of September 2014,
directors Harry, Hermione, Ron, Neville and Luna were present to approve a contract for the purchase
of brooms from Luna who deals in the said product. The contract was deliberated upon exhaustively by
the said directors in the meeting including Luna. When the voting took place however, only Harry,
Hermione, Ron and Neville who found the contract fair and reasonable under the circumstances, voted
for its approval.
The contract between the corporation and Luna is
A. valid and Enforceable
B. voidable at the option of the corporation
C. unenforceable against the corporation
D. void because a corporation must not enter into a contract with any of its directors since a director
occupies a position of trust

67. Omar F. Salim, a stockholder of Walang Poreber Corporation, visited the corporate office and
demanded the inspection of the books of accounts of the company. Marlou, the director who was in
charge of such books, refused to allow Omar to inspect them on the ground that six months earlier,
Omar used some financial data that he obtained from MayPoreber Corporation of which he was also a
stockholder, in order to aid a competitor of MayPoreber Corporation to the detriment of the latter.
Was the refusal of Marlou justified?
A. No, because the data that Omar improperly used were taken from another corporation.
B. Yes, because such improper use of data, although pertaining to another corporation, is a legal
ground to deny a stockholder the exercise of his right to inspect the corporate books.
C. No, because such refusal is a violation of a stockholder’s right to inspect corporate books.
D. No, because such ground can be used only against Omar if he were to inspect the books of
MayPoreber Corporation.

68. Bulen, Moi, Jamir, Ate Juls, Kaka Jee, Kuya Lee, Jo Ann, Pags, CJ and Edzel distributed calling cards
identifying themselves as directors of Yellow Team Corporation, to several individuals during a
business conference. In reality, no such corporation is registered in the Securities and Exchange
Commission. Mother Wings who received a calling card granted credit amounting to P50, 000 to
“Yellow Team Corporation” believing that such a corporation really existed. When the supposed
corporation was unable to pay, Mother Wings brought a court action against it. At that time, “Yellow
Team Corporation” had assets of P30, 000.00. Which statement is CORRECT?
A. “Yellow Team Corporation” is liable only up to P30, 000.00, its remaining assets, since it is different
from the directors who are not liable in their individual capacities.
B. Mother Wings can go after the separate assets of the directors after exhausting the assets of
“Yellow Team Corporation”.
C. The directors can move for the dismissal of the court action because “Yellow Team Corporation”
has no personality of its own.
D. Mother Wings cannot allege the lack of juridical personality on the part of “Yellow Team
Corporation” because she is stopped from doing so.

69. Kitty, Kit, Kat, Kitty Kat, Kitkat, Katkat, Katty, Kitty Kit Kat, and Khate are directors of Strong Cement
Corporation whose articles of incorporation provide for 9 directors. In the meeting of September 2014,
directors Kitty, Kit, Kat, Kitty Kat and Kitkat were present to approve a contract for the purchase of
cement bags from Kitkat who deals in the said product. The contract was deliberated upon
exhaustively by the said directors in the meeting including Kitkat. When the voting took place,
however, only Kitty, Kit, Kat and Kitty Kat who found their contract fair and reasonable under the
circumstances, voted for its approval. The contract between the corporation and Kitkat is
A. valid and enforceable C. unenforceable against the corporation
B. voidable at the option of the corporation D. void because Kitkat is a self dealing director

70. AMPK Corp. operates a call center that received orders for pizzas on behalf of Spongebob Corp. which
operates a chain of pizza restaurants. The two companies have the same set of corporate officers. After
2 years, AMPK Corp. dismissed its call agents for no apparent reason. The agents filed a collective suit
for illegal dismissal against both AMPK Corp. and Spongebob Corp. based on the doctrine of piercing
the veil of corporate fiction. The latter set up the defense that the agents are in the employ of AMPK
Corp. which is a separate juridical entity. Is this defense appropriate?
A. No, since the doctrine would apply, the two companies having the same set of corporate officers.
B. No, the real employer is Spongebob Corp., the pizza company, with AMPK Corp. serving as an arm
for receiving its outside orders for pizzas.
C. Yes, it is not shown that one company completely dominates the finances, policies, and business
practices of the other.
D. Yes, since the two companies perform two distinct businesses.

Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 11
 71. In 2006, Amaya Corporation passed a board resolution removing Daryll from his position as manager
of said corporation. The by-laws of Amaya corporation provides that the officers are the president,
general manager, treasurer and secretary. Upon complaint filed with the SEC, it held that the general
manager could be removed by mere resolution of the board of director on motion for reconsideration.
Daryll alleged that he could only be removed by the affirmative vote of the stockholders representing
2/3 of the outstanding capital stock. Is Daryll’s contention legally tenable?
A. No, the vote required is majority of the board and 2/3 OCS consenting
B. Yes, the voting requirement is only 2/3 of the outstanding capital stock.
C. No, the required vote is MBD consented by MOCS.
D. No, the voting requirement is only majority of the Board of Directors.

72. Izschey Corp. increased its capital stocks from Php10 Million to Php15 Million and, in the process,
issued 1,000 new shares divided into Common Shares “B” and Common Shares “C.” Yunnie, a
stockholder owning 500 shares, insists on buying the newly issued shares through a right of pre-
emption. The company claims, however, that its By-laws deny Yunnie any right of pre-emption. Is the
corporation CORRECT?
A. No, since the By-Laws cannot deny a shareholder his right of pre-emption
B. Yes, but the denial of his pre-emptive right extends only to 500 shares
C. Yes, since the denial of the right under the By-laws is binding on T
D. No, since pre-emptive rights are governed by the articles of incorporation

73. What group of persons may not be the incorporators of a corporation in the Philippines?
A. 15 Japanese citizens who are resident of Los Angeles, Pampanga
B. 10 Resident aliens and 5 non-resident aliens
C. 10 Americans residing in the Philippines and 5 Filipinos residing in San Francisco, California
D. 15 Filipinos who are residents of Solomon Islands

74. Plaintiffs filed a collection action against Hersainth Corporation. Upon execution of the court’s
decision, Hersainth Corporation was found to be without assets. Thereafter plaintiffs filed an action
against its present and past stockholder including Arriane Corporation which owned substantially all
of the stock of Hersainth Corporation. The two corporation have the same board of directors and
Arriane Corporation financed the operations of Hersainth Corporation. Will Arriane Corporation be
held liable because there was a delay?
A. Yes, under the principle of “Corporate Opportunity” of Interlocking Director
B. Yes, under the principle of “Trust Fund Doctrine”
C. No, under the doctrine of “Separate Entity”
D. Yes, under the principle of “Piercing the veil of corporate entity”

75. The “Manila Cigar Company” was organized with a capital stock of P50,000 divided into 500 shares of
P100 a share. Rish subscribed for 20 shares and paid P500 upon his subscription leaving unpaid
account thereof the sum of P1,500. Five years later, the company was declared insolvent and Manin
was duly appointed assignee who upon assuming his position, found that Rish has an unpaid
subscription in the amount of P1,500.Prior to the company’s declaration of insolvency, its board of
directors, by resolution, released Zsarra (another subscriber) from the payment of his Zsarra
remaining unpaid subscription. The assignee brought action to recover from Rish the amount
representing his unpaid subscription and against Zsarra, the recall of the release order. Which of the
following statements is INCORRECT?
A. Insolvency of the corporation makes all unpaid subscription immediately demandable.
B. The release of Zsarra of his unpaid subscription is void under the Trust Fund Doctrine.
C. Rish is considered released by invoking that Zsarra, another subscriber has been released by the
board.
D. The payment of unpaid subscription is immediately demandable whether or not a “call order” has
been made by the board of directors

Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 12
 76. Which statement is correct about the Board of Directors?
A. The Board of Directors may hold its meeting outside the municipality or city where its principal
place of business is located and the directors may attend by proxy, while the stockholders' meeting
must by held in the city or municipality where the principal place of business of the corporation is
located and the stockholders may attend personally or by proxy.
B. The Board of Directors may hold its meeting outside the municipality or city where its principal
place of business is located and the directors must attend personally and not by proxy; while the
stockholders meeting must by held in the city or municipality where the principal place of business
of the corporation is located and the stockholders may attend personally or by proxy.
C. The Board of Directors must hold its meeting only within the municipality or city where its
principal place of business is located and the directors must attend personally and not by proxy;
while the stockholders' meeting may be held within or even outside the city or municipality where
the principal place of business of the corporation is located and the stockholders may attend
personally or by proxy.
D. The Board of Directors may hold its meeting outside the municipality or city where its principal
place of business is located and the directors may attend by proxy; while the stockholders' meeting
must held in the city or municipality where the principal place of business of the corporation is
located and the stockholders must be in attendance personally.

77. A theory that a corporation is independent of State existence is called

A. Gennosenshaft Theory C. Economic Unit Theory
B. Concession Theory D. Manifestation Theory

78. During the 10th year anniversary of PAS41 Corporation, all the nine incorporators were given a tribute
for their efforts in organizing the said corporation. Five of them were also members of ‘Walang
Direksyon’, a popular boy band in the classroom, known for their admirable confidence. While
performing on the stage, featuring their golden voices, a storm came. Thunders roar, wind slashes, and
rain splashes. All of a sudden, a lightning hit the stage causing them to be electrocuted resulting to their
death. Will the corporation be dissolved?
A. YES, as there will only be four left which is below the minimum of five incorporators required by
the law
B. YES, as the Corporation Code requires that the incorporators be alive during the operation of the
business
C. NO as it has forty years left in its term
D. NO, as it enjoys the right of succession

79. Christian Joy, is the listed owner of 10,000 shares with par value of P100/ share in CJ Corporation. CJ
Corporation sued Christian Joy for the payment of Christian Joy’s indebtedness of P1M. The defendant
contends that such debt must be compensated by his shares of stocks with the plaintiff. The contention
of the defendant 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

80. Inadvertently, the SEC approved the Articles of Incorporation and issued a Certificate of Incorporation
to MobinHood 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 proceeding

Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 13
 81. Mr. Earth, named after his beautiful mother, Mrs. Nature and handsome father, Mr. Landseair,
subscribed to 100 shares of Makakagraduate ka ba? Corporation, paying 25% of the amount thereof.
The corporation refuses to issue to the former a stock certificate for his subscription despite the
demand of Earth for a stock certificate corresponding to 25 shares which he claims have been paid.
Meanwhile, the corporation has become insolvent and Earth now refuses to pay for his unpaid balance
on his subscription. Is Earth correct in refusing to pay for the remaining shares, the company being
already insolvent?
A. No, under the trust and fund doctrine upon the insolvency of the corporation to which he is still
liable for his unpaid subscription.
B. No, because of the doctrine of piercing the veil of corporate fiction.
C. Yes, his obligation extinguished due to the insolvency of the corporation and his discharge from the
liability by reason thereof.
D. Yes, because he is denied of his right to receive stock certificate

82. Rogelio, after a day of rest and after her plane landed in the Philippine jurisdiction following a surgery
she underwent in Thailand and just after ruling of the court rendering an order/judgement that he is a
she, subscribe to 10,000 shares of stock of NORTHERN Corporation located at the heart of Baguio along
the foot of Session road and head of Burnham Park. She paid 25% of the said subscription. During the
stockholders meeting, can Rayemoon vote all her subscribed shares?
A. No, because the subscription has not yet been fully paid
B. No, because A’s shares have became delinquent which cannot be voted
C. No as to the unpaid percentage of subscription
D. Yes, because the unpaid shares not delinquent can be voted

83. At the annual meeting of PAS41 Corporation (a distributor of the nationwide overflowing famous
coffee known as “KAPE, DOS PESOS LANG”) for the election of five directors, Jojo, Patrick, Khalfan,
Nurjan, Donell, Melvin and Derrick were nominated. Jojo, Patrick, Khalfan, Nurjan, and Donell received
the highest number of votes and proclaimed elected. Melvin received ten votes less than Donell.
Subsequently, Donell sold his share to Melvin. Who between Donell and Melvin has the right to attend
as director in the board meeting? The transfer of shares having been registered with the corporation.
A. Donell is the director because his term is one year until successor is elected and qualified
B. Melvin is the director for he has acquired all the shares of Donell
C. Either of them shall be director
D. Neither of them shall be director

84. The veil of corporate fiction may be pierced in the following cases, EXCEPT
A. when used as cloak to cover fraud, illegality or it results in injustice
B. to defeat public convenience, justify wrong, defend crime
C. where two factories are made to appear as one and used as a device to defeat the ends of law or as
a shield to confuse legitimate issues
D. where two corporations have the same president

85. Which of the following is a disadvantage for 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.

86. What need not be submitted out rightly to the SEC during incorporation stage?
A. Articles of incorporation C. Treasurer’s Affidavit
B. By-laws D. Bank Certification

87. The by-law provision of Magbebreak Din Kayo Corporation states that “rendering ineligible or if
elected, subject of removal, a director if he is also a director in a corporation whose business is in
competition with or is antagonist to said corporation” Is this provision valid and legal?
A. Yes, under the principle of “corporate opportunity”
B. No, under the principle of “separate entity”
C. Yes, provided it is approved by 2/3 of the outstanding capital stock
D. Yes, under the principle, “of vested interest”

88. A principal defense of minority stockholders against the abuses of the majority is called
A. Individual suit C. Derivative suit
B. Representative suit D. Bathing suit

Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 14
 89. How many shares are needed to elect 3 directors and assure each of them a seat in the board of
directors assuming that the articles of incorporation provide for 11 directors and the corporation has
5,000 shares outstanding and entitled to vote?
A. 1,251 shares C. 1,667 shares
B. 5,000 shares D. 1,364 shares

90. Under this theory, the nationality of corporation is that of the country whose law it was formed
A. Control test is called C. Domicile test
B. Incorporation test D. Grandfather rule

91. Cedric is a director in Desiree Corp. who was elected to a 1-year term on Feb. 1, 2010. On April 11,
2010, Cedric resigned and was replaced by Bekimon, who assumed as director on May 17, 2010. On
Nov. 21, 2010, Bekimon died. Bav was then elected in his place. Until which time should Bav serve as
director?
A. April 11, 2011 C. May 17, 2011
B. Feb. 1, 2011 D. Nov. 21, 2011

92. On October 1, 2016 His Heart, bought goods from the store of My Love amounting to P10,000.00,
issuing a check for P20,000.00 against his account with World Bank. His Heart knew that his fund with
World Bank was insufficient to cover the check. Consequently, the check was dishonored by World
Bank when My Love presented it for encashment. Assuming that both are citizens of the Philippines
and World Bank is a Philippine Corporation, under the Philippine law what offense may be charged
against His Heart?
A. Violation of Batas Pambansa Blg. 22 (Bouncing Checks Law)
B. Estafa under the Revised Penal Code
C. Violation of Anti-Money Laundering Act
D. Both (a) and (b).

93. Shiro, knowing that there is no such person by the name of Heartchuchubells, makes out and signs a
promissory note payable to Heartchuchubells or order. Shiro delivers the note to On-On. On-On in
turn delivers the note to Yan-Yan without indorsement. Later, yan-Yan delivers the note to Kulet, a
holder in due course. Which of the following is CORRECT?
A. Being payable to order, the note can be negotiated by indorsement and delivery
B. Kulet has no right to collect from On-On because a person negotiating an instrument merely by
delivery is liable only to the immediate transferee.
C. Kulet becomes holder only if Yan-Yan will indorse the instrument.
D. The instrument is not-negotiable because it is payable to the order of a non-existing person.

94. A promissory note states, on its face: “I, X, promise to pay Y the amount of Php 5,000.00 five days after
completion of the on-going construction of my house. Signed, X.” Is the note negotiable?
A. Yes, since it is payable at a fixed period after the occurrence of a specified event.
B. No, since it is payable at a fixed period after the occurrence of an event which may not happen.
C. Yes, since it is payable at a fixed period or determinable future time.
D. No, since it should be payable at a fixed period before the occurrence of a specified event.

95. Which of the following endorsers expressly warrants in negotiating an instrument that 1) it is genuine
and true; 2) he has a good title to it; 3) all prior parties have capacity to negotiate; and 4) it is valid and
subsisting at the time of his endorsement?
A. The irregular endorser C. The general endorser
B. The regular endorser D. The qualified endorser

96. X executed a promissory note in favor of Y by way of accommodation. It says: “Pay to Y or order the
amount of Php50,000.00. Signed, X.” Y then indorsed the note to Z, and Z to T. When T sought collection
from Y, the latter countered as endorser that there should have been a presentment first to the maker
who dishonors it. Is Y CORRECT?
A. No, since Y is the real debtor and thus, there is no need for presentment for payment and dishonor
by the maker.
B. Yes, since as an endorser who is secondarily liable, there must first be presentment for payment
and dishonor by the maker.
C. No, since the absolute rule is that there is no need for presentment for payment and dishonor to
hold an endorser liable.
D. Yes, since the secondary liability of Y and Z would only arise after presentment for payment and
dishonor by the maker.

Mock Board Examination for Accountancy: Regulatory Framework for Business Transaction Page 15
 97. Notice of dishonor is not required to be made in all cases. One instance where such notice is not
necessary is when the indorser is the one to whom the instrument is suppose to be presented for
payment. The rationale here is that the indorser
A. already knows of the dishonor and it makes no sense to notify him of it
B. is bound to make the acceptance in all cases
C. has no reason to expect the dishonor of the instrument
D. must be made to account for all his actions

98. Which check shall produce the effect of payment?

I. When the check has been encashed
II. When through the fault of the creditor the check has been impaired.
III. When a check has been cleared and credited to creditor’s account.
IV. When the creditor accepts the check as payment.
A. I, II and III C. I and II
B. I, II and IV D. All of these

99. This bill of exchange has to be presented for payment only and not for acceptance –
A. To Mr. X Oct 8, 2016
Unit 1, Barcelona Townhomes, Barangay Palingon Tipas, Taguig City
Sixty days after date, pay to Y or order P500,000. Sgd. Z
B. To Mr. X
Ilocos Street, Barangay Bago Bantay Quezon City
Ninety days after sight, pay to Y order P200,000. Sgd. Z
C. To Mr. X
Cayco Street, Sampaloc, Manila
Pay to Y or order on or before October 8, 2011 at the lobby of the PNB Bldg., Roxas
Boulevard, Pasay the sum of P1,000,000. Sgd. Z
D. Both B & C

100. Kit, through insidious words and machinations, made Keith to sign a promissory note which reads “I
promise to pay Kit or order P143,000. Sgd Keith. Then Kit negotiated the note to Kitty by qualified
indorsement, and Kitty to Kat by blank indorsement, then Kat to Katie by delivery, then Katie to Kitty
Kat also by delivery, then Kitty Kat to Kating by special indorsement, then Kating to Kitkat by qualified
indorsement, then Kitkat to Katkat by facultative indorsement, where Kitkat waived the notice of
dishonour, then Katkat to Kuting by conditional indorsement, then Kuting to Khate by restrictive
indorsement.

If the promissory note is in the hands of Katkat, which of the following is CORRECT?
A. If Katkat is a holder for value, but Kitkat is a holder in due course, Keith is liable to Katkat
B. All indorsers are liable to Katkat except for the qualified indorsers
C. The qualified indorsers and the persons who negotiated by mere delivery are not liable to Katkat
D. Katkat can strike out the indorsement of Kating because Kating is not liable to Katkat

END OF EXAMINATION 

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