CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA FINAL PREBOARD EXAMINATION REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS Saturday, April 18, 2020 10:30 AM–12:30 PM INSTRUCTIONS: 1. Select the correct answer for each of the following questions. 2. Mark only one answer for each item by shading the box corresponding to the letter of your choice on the answer sheet provided. 3. Strictly no erasures allowed. 4. Pray earnestly. QUESTIONS: 1. Spouses A and B died leaving a mango orchard to their 2 sons, W and Y. Later, W and Y made an extra judicial settlement giving the administration of the mango orchard to W and to divide the net harvest equally. Which of the following is correct? a. W and Y are partners and will report their respective share in the net harvest as part of taxable income b. W and Y are not partners but will report their respective share in the net harvest as part of taxable income c. W and Y are partners and their respective share in the net harvest will be subject to final tax d. W and Y are not partners, hence their respective share in the net harvest are not taxable 2. A, B, C and D are partners in AB and Company, contributing Php 20,000, Php 30,000, Php 50,000 and industry respectively. Due to financial reverses, they decided to dissolve the partnership. At the time of dissolution only Php 10,000 is left but the obligation to Y – Php 50,000; to partner B – Php 30,00 and to partner C – Php 20,000 remain unpaid. Which of the following is correct if there is no profit and loss sharing agreement? a. The partnership, A, B, C and D will pay Y Php 10,000 each b. Y can collect Php 12,500 each from partners A, B, C and D c. D is exempt from loss, hence only A, B and C will bear the Php 90,000 loss in proportion to their capital contribution d. Only partner A will make additional contribution because partners B and C can claim legal compensation 3. A, B and C are partners in AB and Co. Limited where C is the limited partner, contributing ; A – Php 40,000; B – Php 60,000 and C – services. After exhausting the partnership assets, the partnership still owes creditor Y – Php 30,000. Which of the following is correct, if there is no profit and loss sharing agreement? a. Y can collect Php 15,000 each from partners A and B b. Y can collect Php 30,000 from either A or B c. Y can collect Php 10,000 each from partners A, B and C d. Y can collect Php 12,000 from A and Php 18,000 from B 4. A, B, C and D are partners contributing Php 10,000, Php 20,000, Php 30,000 and Php 40,000 respectively. A, B and D are the general partners while C is the limited partner. If only Php 30,000 assets remain and the partnership has unpaid obligations to Y – Php 50,000, to partner B – Php 30,000 and to partner C – Php 20,000. Which of the following is correct if there is no profit and loss sharing agreement? a. Y collects Php 30,000 from the partnership and Php 5,000 each from partners A, B, C and D b. C is exempt from loss hence, he can recover the Php 20,000 obligation of the partnership to him from either A, B or D c. The Php 20,000 obligation of the partnership to C can be used to offset C’s capital deficiency d. Y collects Php 30,000 from the partnership and the balance of Php 20,000 will be collected from A, B and D in equal share 5. When a partner has been appointed manager in the articles of partnership, which of the following is not correct? a. He may execute all acts of administration despite the opposition of his partners unless he acts in bad faith b. His power is irrevocable without just or lawful cause c. If with just or lawful cause, his appointment can be revoked by majority vote of the partners d. If without just or lawful cause, his appointment can be revoked only with the consent of all the partners including the managing partner 6. If two or more partners have been entrusted with the management of the partnership without a stipulation that one of them shall not act without the consent of all the others or without specification of their respective duties. Which of the following is correct? a. Each one may separately execute all acts of administration despite the opposition of his partners b. If any of the managing partners should oppose the act of the others, the decision of majority of all the partners shall prevail c. In case any of the managing partners oppose the acts of the others, the matter shall be decided by the managing partners owning the controlling interest d. In case of opposition by the other managing partners, the decision of the majority of the managing partners shall prevail 7. A, B, C and D are partners in AB and Company. A parcel of land in the name of AB and Company was sold by A in the name of AB and Company but without express authority to Y, which of the following is correct? a. Title to the property passes to Y even if AB and Company is not engaged in buying and selling of land if Y acted in good faith b. AB and Company may recover the land if it is not engaged in selling of land c. If Y donated the land to W, AB and Company can no longer recover such land d. AB and Company may recover the land from Y because the sale made by A to Y is unenforceable 8. A, B, C and D are partners contributing Php 20,000, Php 30,000, Php 50,000 and industry, respectively. The partnership failed so the partners decided to dissolve the partnership. At the time of liquidation, the unpaid obligation amounted to P100,000 distributed as follows: To partnership creditor, Y Php 50,000 To partners A 30,000 B 20,000 If the remaining cash amounting to Php 10,000 was given to Y as partial payment. Which of the following is correct? a. b. c. d. Y can collect Php 10,000 from the separate property of D As an industrial partner, D is not liable to Y A, B and C are liable to Y in proportion to their capital contribution A, B and C are liable to Y at Php 13,333 each 9. Using the above information, if Y succeeds in collecting the deficiency from the partners concerned, which of the following is not correct? a. Only C will be liable to the other partners c. D is entitled to get reimbursement from A, B and C b. A and B will not make additional contribution d. C will pay Php 35,000 to his partners 10. 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 have 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 11. A and B are partners. On June 15, 2018 when the total obligation of the partnership totals Php 80,000, C was admitted as a new partner. At the time of his admission, the partnership creditors were M for P50,000 and N for Php 30,000. After June 15, the partnership borrowed from O, Php 20,000 and Php 10,000 from P. On December 15, 2018, the partnership became insolvent leaving an obligation of Php 110,000 and the partnership assets amounting to Php 30,000. 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 12. Essential elements of pledge, except a. Pledgor is the absolute owner of the thing pledged. b. The person constituting the pledge has the free disposal of his property or if he is an agent or representative, that he is legally authorized c. The thing pledged must be placed in the possession of the creditor or of a 3rd person by common agreement d. To bind third persons there must be an affidavit of good faith 13. Essential elements of chattel mortgage, except a. The object is a personal or movable property b. The thing mortgaged is not delivered to the creditor c. The mortgagor cannot sell without the consent of the mortgagee d. Description of the thing mortgaged must appear in a public instrument 14. Essential elements of real estate mortgage, except a. In case of foreclosure sale, the mortgagor is entitled to the excess b. The mortgagor can sell even without the consent of the mortgagee c. The thing mortgaged must be delivered to the creditor d. To bind third persons it must be recorded in the Registry of Property 15. Which of the following statements is not correct? a. If the thing pledged is returned by the pledgee to the pledgor, the obligation is extinguished b. In sale at public auction, the pledgor may bid and his bid is valid even if he is the only bidder c. Any stipulation authorizing the pledgee to appropriate the thing pledged is void and without effect d. Shares of stock can be the object of pledge or mortgage 16. M delivers a negotiable promissory note payable to P or order. Later, P makes a special indorsement to A and A delivers the note to B. Who is the holder? a. B, because he is in possession of the note c. P, because he is the payee b. A, because he is the indorsee d. No one can be considered as holder 17. 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 18. A owes B Php 10,000 as gambling debt and A issued a promissory note to B to cover the debt, as follows: “I promise to pay B or order Php 10,000. Sgd. A” Which of the following statements is correct? a. b. c. d. B can collect from A because the note is negotiable B cannot negotiate the note because the consideration between A and B is illegal If B negotiates to C, a holder in due course, C can collect from A A is not liable because of illegal consideration 19. A, a minor issued a promissory note to B as follows: “I promise to pay B or order Php 10,000. Sgd. A” Which of the following statements is not correct? a. b. c. d. The promissory note is not negotiable because the maker is a minor B cannot collect from A because A is a minor If B negotiates to C, a holder in due course, C cannot collect from A If B negotiates to C, a holder for value, C cannot collect from A 20. Below are two promissory notes prepared by A: 1) “I promise to pay B or order Php 100,000 if he will pass the CPA Board Examinations. Sgd. A” 2) “I promise to pay C or order Php 100,000 if he kills Z. Sgd. A” Which of the following statements is correct? a. Both promissory notes are negotiable c. Only the first promissory note is negotiable b. Both promissory notes are non-negotiable d. Only the second promissory note is negotiable 21. Using the above facts, and both conditions are satisfied, which of the following statements is correct? a. Both B and C can collect from A c. Only B can collect from A b. Neither B nor C can collect from A d. Only C can collect from A 22. Using the above facts, and B assigns the note to D, and C assigns the note to E, which of the following statements is correct? a. Both D and E can collect from A, if both acted in good faith b. Neither D nor E can collect from A, even if both acted in good faith c. Only D can collect from A even if both acted in good faith d. Only E can collect from A even if both acted in good faith 23. The articles of incorporation of ABC Corporation provides for 7 directors. In the monthly meeting of the board of directors held on April 8, 2015, directors B, C, D and E were present and the following resolutions were approved: A. A resolution for the purchase of a delivery truck from E Trading, a sole proprietorship owned by E. B, C, D and E voted for the resolution B. A resolution appointing T as the new corporate secretary where B, C, D and E voted for the resolution. Which is correct? a. b. c. d. Both resolutions are valid and do not need stockholders approval Both resolutions are valid but need stockholders approval Resolution A needs stockholders approval. Resolution B is valid Resolution A is not valid. Resolution B needs stockholders approval 24. 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 outstanding capital stock entitled to vote c. 2/3 of the stockholders of voting and non-voting shares d. 2/3 of the outstanding capital stock entitled to vote 25. When by-laws are adopted and filed prior to incorporation, which of the following is correct? a. Approved and signed by all the incorporators b. Approved by the stockholders representing at least 2/3 of the outstanding capital stock c. Approved by the stockholders representing at least a majority of the outstanding capital stock d. Approved and signed by at least 2/3 of the incorporators 26. When by-laws are adopted and filed after the incorporation, which of the following is correct? a. Submitted within one (1) month after the filing of the Articles of Incorporation with the SEC b. Approved and signed by at least a majority of the incorporators c. Approved by the stockholders representing at least 2/3 of the outstanding capital stock d. Approved by the stockholders representing at least a majority of the outstanding capital stock 27. The by-laws as distinguished from the articles of incorporation a. Submitted to the SEC before the issuance of certificate of incorporation b. A condition precedent in the acquisition by a corporation of a juridical personality c. The amendment may no longer require ratification if delegated by the stockholders to the board of directors d. Majority of the outstanding capital stock of voting shares is required for its ratification 28. This vacancy in the board of directors may be filled by the board of directors if the remaining directors still constitute a quorum a. Removal of a director c. Increase in the number of directors b. Death of a director d. Expiration of the term of a director 29. A pledged his ring to B for Php 20,000. A failed to pay his obligation. B sold it at a public auction for Php18,000. Can B recover the deficiency? a. Yes, even without stipulation c. No, even if there is stipulation b. Yes, if there is stipulation d. No, unless there is stipulation 30. C mortgaged his car to B for Php 200,000. C failed to pay his obligation. B sold it at a public auction for Php180,000. Can B recover the deficiency? a. Yes, even without stipulation c. No, even if there is stipulation b. Yes, only if there is stipulation d. No, unless there is stipulation 31. A sold his piano to B for Ph p200,000 payable in installment. A chattel mortgage was constituted on the piano. B defaulted in two installment payments. A demanded payment of the unpaid obligation amounting to Php 120,000 and a writ of attachment was issued and the piano was sold for Php 100,000. Can A still recover the deficiency? Statement 1 – No, the foreclosure of the piano extinguishes B’s obligation Statement 2 – Yes, if stipulated that in case of foreclosure the buyer will pay any deficiency a. Both statements are true b. Both statements are false c. Only Statement 1 is true d. Only Statement 2 is true 32. In a partnership, the liability of the partners shall be joint and solidary I. Obligations in favor of partnership suppliers by virtue of sales contract II. Obligations in favor of a partnership client for return of deposits misappropriated by one of the partners III. Obligations in favor of a pedestrian hit by the delivery van driven by one of the partners in the course of partnership business a. I and III b. II and III c. I and II d. I, II, and III 33. The principle of “caveat emptor” or let the buyer beware will not apply in a. Sheriff’s sale b. Sales of animals in pairs c. Auction sales d. Sales of livestock as condemned 34. A and B entered into a contract of partnership for the purpose of operating a car repair shop. A promised to contribute Php 500,000 on April 15, 2020. B as industrial partner, will manage the business. On April 15, 2020, A did not effect contribution. Thus a. A is in delay if B makes a demand b. A is a debtor in default c. B shall be entitled to damages d. The partnership is dissolved due to lack of object 35. A is the listed owner of 10,000 with par value of Php 100/share common shares in ABC Corporation. ABC sued A for the payment of A’s indebtedness of P1M. A contends that such debt must be compensated by his shares of stocks with the plaintiff corporation. The contention of A is a. Valid due to legal compensation b. Valid by virtue of judicial compensation c. Untenable since he is not a creditor of the corporation d. Automatically extinguished if the fair market value of the shares is Php 1M 36. A gave B Php 50,000 for the purchase of a TV set in behalf of the former, with the obligation of returning the amount if the TV set was not bought within a week. A did not buy the item but did not return the amount. An estafa case was filed by A against B. B pleaded A to drop the case. In return, B issued a promissory note in favor of A for the amount involved. Is the promissory note valid? a. No, the consideration of the note is the stiffling of the crime of estafa b. No, the consideration of the note is unlawful c. Yes, if the note is negotiable because of mutual consent d. Yes, the note is in consideration of a pre-existing debt 37. Which of the following statements is false? a. Treasury shares revert to the unissued shares of the corporation and being in the treasury they don’t have the status of outstanding shares b. Shares issued without par value shall be deemed fully paid and non assessable and the holder of such shares shall not be liable to the corporation or its creditors in respect thereto c. Redeemable shares may be redeemed regardless of the existence of unrestricted retained earnings provided such redemption would not cause insolvency or inability of the corporation to meet its debts as they mature d. When par value shares are issued above par, the premium or excess is not to be considered as part of the legal capital 38. In case the members of the board of directors of a corporation still constitute a quorum, and there are vacancies, who will fill up such vacancies? Removal a. b. c. d. Stockholders Board Stockholders Stockholders Resignation Expiration of term Board Board Board Stockholders Stockholders Stockholders Stockholders Board Increase in the number of Directors Board Stockholders Stockholders Stockholders 39. Claude, the registered stockholder of 1,000 shares of ABC Corporation pledged the shares to Conrad by endorsement in blank of the covering stock certificates and, execution of a Deed of Assignment of Shares of Stock, intended as collateral for a loan of Php 1M that was also supported by a separate promissory note. Under these facts, is there a valid pledge of the shares of stock to Conrad? a. No, because shares of stock are intangible personal properties whose possession cannot be delivered and, hence cannot be the subject of pledge b. No, because the pledge of shares of stock requires double registration with the Register of Deeds of the principal place of business of the corporation and of the residence of the pledgor c. Yes, because endorsement and delivery of the certificates of stock is equivalent to the transfer of possession of the covered shares to the pledgee d. Yes, because the execution of the Deed of Assignment of Shares of Stock is equivalent to a lawful pledge of the shares of stock. 40. Dennis subscribed to 10,000 shares of XYZ Corporation with a par value of Php 100/share. However, he paid only 25% of the subscription or Php 250,000. No call has been made on the unpaid subscription. How many shares is Dennis entitled to vote at the annual meeting of stockholders of XYZ? a. 10,000 shares c. 100 shares b. 2,500 shares d. 0 41. ABC Corporation issued redeemable shares. Under the terms of the issuance, the shares shall be redeemed at the end of 10 years from date of issuance at par value plus a premium of 10%. Choose the correct statement relating to these redeemable shares. a. ABC Corporation would need unrestricted retained earnings to be able to redeem the shares b. Corporations are not allowed to issue redeemable shares; thus, the issuance by ABC Corporation is ultra vires act c. Holders of redeemable shares enjoy a preference over creditors d. ABC Corporation may redeem the shares at the end of 10 years without need for unrestricted retained earnings provided that, after the redemption, there are sufficient assets to cover its debts 42. Arnold representing himself as an agent of Brian for the sale of Brian’s car, approached Dennis who appeared interested in buying the car. At Arnold’s prodding, Dennis issued a crossed check payable to Brian for Php 25,000 on the understanding that the check would only be shown to Brian as evidence of Dennis good faith and interest in buying the car. Instead, Arnold used the check to pay for the medical expenses of his wife in Brian’s clinic after Brian, a doctor, treated her. Is Brian a holder in due course? a. Yes, Brian is a holder in due course because he was the payee of the check and he received it for services rendered b. Yes, Brian is a holder in due course because he did not need to go behind the check that was payable to him c. No, Brian is not a holder in due course because Dennis issued the check only as evidence of good faith and interest in buying the car d. No, Brian is not a holder in due course because Brian should have been placed on notice: the check was crossed in his favor and Arnold was not the drawer. 43. Gawsengsit Corporation is a corporation incorporated in Singapore. It invested in Bumblebee Corporation, a Philippine corporation by acquiring 30% of its shares. As a result, Gawsengsit Corporation nominated 30% of the directors of Bumblebee Corporation, all of whom are Singaporeans and officers of Gawsengsit Corporation. Choose the correct statement relating to Gawsengsit Corporation. a. Gawsengsit Corporation is doing business in the Philippines and requires a license from the SEC b. Gawsengsit Corporation is not doing business in the Philippines by its mere investment in a Philippine corporation and does not need a license from the SEC c. Gawsengsit Corporation has to appoint a resident agent in the Philippines d. Gawsengsit Corporation cannot elect directors in Bumblebee Corporation 44. The BIR assessed ABC Corporation for deficiency income tax for taxable year 2010 in the amount of Php 26,731,208 inclusive of surcharges and penalties. The BIR can a. Run after the directors and officers of ABC Corporation to collect the deficiency tax and their liability will be solidary b. Run after the stockholders of ABC Corporation and their liability will be joint c. Run after the stockholders of ABC Corporation and their liability will be solidary d. Run after the unpaid subscription still due to ABC Corporation, if any. 45. Unknown to the other four proponents, Enrico (who had been given the task of attending to the Articles of Incorporation of the proposed corporation, Auto Mo Ayos Ko) misappropriated the filing fees and never filed the Articles of Incorporation with the SEC. instead, he prepared and presented to the proposed incorporators a falsified SEC certificate approving the Articles. Relying on the falsified SEC certificate, the latter began assuming and discharging corporate powers. Auto Mo Ayos Ko is a a. De jure corporation c. Corporation estoppel b. b. De facto corporation d. General partnership 46. Letter of Credit are financial devices in commercial transactions which will ensure that the seller of the goods is sure to be paid when he parts with the goods and the buyer of the goods gets control of the goods upon payment. Which statement is most accurate: a. The use of the letter of credit serves to reduce the risk of non-payment of the purchase price in a sale transaction b. The letter of credit can only be used exclusively in a sales transaction c. The letter of credit are issued for the benefits of the seller only d. A, B and C are all correct 47. The legal remedy of the warehouseman in case of conflicting claims is to a. File an action for interpleader b. Give the goods to the first one who first presented the warehouse receipt c. Use his discretion as to who he believes has the prior right d. Keep the goods and appropriate them to himself 48. An insurance contract is a contract of adhesion, which means that in resolving ambiguities in the provision of the insurance contract a. The general rule is that, the insurance contract is to be interpreted strictly in accordance with what is written in the contract b. Are to be construed liberally in favor of the insured and strictly against the insurer who drafted the insurance policy c. Are to be construed strictly against the insured and liberally in favor of the insurer d. If there is an ambiguity in the insurance contract, this will invalidate the contract 49. The AAA Bus Company picks up passengers along EDSA. X, the conductor, while on board the bus, drew his gun and randomly shot the passengers inside. As a result, Y, a passenger, was shot and died instantly. Is AAA Bus Company liable? a. The bus company is not liable for as long as the bus company can show that when they hired X, they did the right selection process b. The bus company cannot be held liable because what X did is not part of his responsibility c. The bus company is liable because common carriers are liable for the negligence or willful act of its employees even though they acted beyond the scope of their responsibility d. The bus company is not liable because there is no way that the bus company can anticipate the act of X 50. The Articles of Incorporation of AAA Corporation was approved by the SEC. After the receipt of the Certificate of Approval from the SEC, AAA Corporation decided to immediately start the operation of its business despite the fact that it has no approved by-laws. What is the legal status of the AAA Corporation? a. A de jure corporation c. A corporation by estoppel b. A de facto corporation d. An unregistered corporation 51. X, the President of ZZZ Corporation was authorized by the Board of Directors of ZZZ Corporation to obtain loan from YYY Bank and to sign documents in behalf of the corporation. X personally negotiated for the loan and got the loan at very low interest rates. Upon maturity of the loan, ZZZ Corporation was unable to pay. Which statement is most accurate? a. Because X was personally acting in behalf of the Corporation, he can be held personally liable b. X, as President, cannot be personally held liable for the obligation of the corporation even though he signed all the loan documents, because the loan was authorized by the Board c. YYY Bank can choose as to who it wants to hold liable for the loan d. If ZZZ Corporation cannot pay, X can be held subsidiarily liable 52. X owns 99% of the capital stock of SSS Corporation. X also owns 99% of TTT Corporation. SSS Corporation obtained a loan from VVV Bank. On due date, SSS Corporation defaulted. TTT Corporation is financially healthy. Which statement is accurate? a. X, being a controlling owner of SSS Corporation can automatically be held personally liable for the loan of SSS Corporation b. TTT Corporation, owned 99% by X, can automatically he held liable c. SSS Corporation and TTT Corporation, although both are owned by X, are two distinct corporations with separate juridical personalities. Hence, the TTT Corporation cannot automatically be held liable for the loan of SSS Corporation d. The principle of piercing the veil of corporation fiction can be applied in this case 53. XXX Corporation and YYY Corporation have agreed to be merged into one corporate. To facilitate the merger, both corporations agreed that the merger be made effective on May 31, 2019. The SEC approved the Articles of Merger on June 30, 2019. Which statement is most accurate? a. The effective date of the merger is May 31, 2019, the date stipulated by the parties as the effective date b. The effective date of the merger is always the date of the approval of the Articles of Merger by the SEC c. The effective date of the merger would be the date approved by the Board of Directors and the stockholders d. The stockholders and the Board of Directors can set the effective date of the merger any time after the approval of the SEC 54. X is a minority stockholder of CCC Corporation. Y is a member of the Board of Directors of CCC Corporation and at the same time he is the President. X believes that Y is mismanaging CCC Corporation hence, as a stockholder and in behalf of the other stockholders, he wanted to sue Y. Which statement is most accurate? a. X can institute a derivative suit in behalf of himself as a stockholder b. A derivative suit must be instituted in behalf of the corporation c. Derivative suit is an exclusive remedy that X can institute d. Derivative suit is not the remedy in this situation 55. The term of one year of the Board of Directors of AAA Corporation expired last February 15, 2020. No new election of the Board of Directors was called, hence the existing members of Board continue as Directors in hold over capacity. Which statement is most accurate? a. This is allowed provided there is a valid and justifiable reason for not calling for an election of the new members of the Board b. This is not allowed because the term of the directors must only be for one year c. The position of the members of the Board of Directors will be automatically declared vacant d. Acting as members of the Board of Directors in a hold over capacity must be ratified by the stockholders. 56. X maintains a savings deposit in the amount of Php 1M with ABC Bank Corporation. X also has obtained a loan from ABC Bank Corporation in the amount of Php 1M. In case of default a. ABC Bank can set-off the loan from the savings account being maintained by X with ABC Bank b. Set-off is not possible because legal compensation is not allowed in banking transaction c. Deposit accounts are usually earmarked for specific purpose hence, off-setting is not legally possible d. Off-setting is not possible because the obligation of X is a “simple loan” 57. Which phrase best completes the statement – The affidavit of good faith in a Deed of Chattel Mortgage is a. An oath where the parties swear that the mortgage is made for the purpose of securing the obligations specified and that the obligation is just and valid b. An affidavit, the absence of which will vitiate the mortgage between the parties c. Necessary only if the chattel being mortgaged are growing crops d. A certification form the mortgagor that he is the mortgagor of the chattel 58. In election for the Board of Trustees of non-stock corporations, members may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate. This is true a. Unless set aside by the members in plenary session b. In every case even if the Board of Trustees resolves otherwise c. Unless otherwise provided in the Articles of Incorporation or in the By-Laws d. In every case even if the majority of the members decide otherwise during the election 59. The rule is that the valuation of the shares of a stockholder who exercises his appraisal rights is determined as of the day prior to the date on which the vote was taken. This is true a. Regardless of any depreciation or appreciation in the share’s fair value b. Regardless of any appreciation in the share’s fair value c. Regardless of any depreciation in the share’s fair value d. Only if there is no appreciation or depreciation in the share’s fair value 60. X Corporation whose business purpose is to manufacture and sell vehicles, invested its funds in Y Corporation, an investment firm through a resolution of its Board of Directors. The investment grew tremendously on account of Y Corporation’s excellent business judgment. But a minority stockholder in X Corporation assails the investment as ultra vires. Is he right and, if so, what is the status of the investment? a. Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders ratification b. Yes, it is an ultra vires act of its Board of Directors and thus void c. Yes, it is an ultra vires act of its Board of Directors but voidable only, subject to stockholders ratification d. Yes, it is an ultra vires act of the corporation itself, and consequently void. 61. X, at Y’s request, executed a Real Estate Mortgage on his land to secure Y’s loan from Z. Z successfully foreclosed the mortgage when Y defaulted on the loan but half of Y’s obligation remain unpaid. May Z sue X to enforce his right to the deficiency? a. Yes, but solidarily with Y b. Yes, since X’s is deemed to warrant that his land would cover the whole obligation c. No, since it is the buyer at the auction sale who should answer for the deficiency d. No because X is not Z’s debtor 62. X executed a promissory note in favor of Y by way of accommodation. It says “Pay to Y or order the amount of Php 50,000. Signed X. Y then indorsed the note to Z and Z to T. When T sought collection from Y, the latter countered as indorser 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 indorser 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 indorser liable d. Yes, since the secondary liability of Y and Z would only arise after presentment for payment and dishonor by the maker. For 63 – 64: The following accounts show: Account Name Type of Deposit 1) Art Ty Savings 2) Art Ty and Fe Ty Time 3) Art Ty or Fe Ty Demand Account no. 01 02 03 63. The insured deposit of Art Ty is a. Php 500,000 b. Php 900,000 c. Php 950,000 d. Php 1,000,000 64. The insured deposit of Fe Ty and Feg Ty is a. Php 600,000 b. Php 450,000 c. Php 500,000 d. Php 1,000,000 Balance Php 600,000 400,000 800,000 65. DOSRI refers to a. Directors, Officers, Stockholders, and Retained Income b. Directors, Officers, Stockholders, and Retained Interest c. Directors, Officers, Stockbrokers, and Relative Interest d. Directors, Officers, Stockholders, and Related Interests 66. Any visible sign capable of distinguishing the goods or services of an enterprise a. Copyright c. Trademark b. Industrial design d. Patent 67. The abstract of the application for patent of the invention shall preferably be not more than a. 150 words c. 250 words b. 200 words d. 300 words 68. A patent shall take effect a. Upon approval by the Director of Patents b. Upon approval by the Director General c. Upon publication of the grant in the IPO Gazette d. Upon payment of the fees for the grant 69. A certificate of registration of mark or trade name shall remain in force for a. 20 years c. 10 years b. 30 years d. Lifetime of the registrant 70. The registrant of the mark shall file a declaration of actual use and evidence to that effect a. Within 1 year from the 4th anniversary of the date of the registration of the mark b. Within 1 year from the 5th anniversary of the date of the registration of the mark c. Within 1 month from the 4th anniversary of the date of the registration of the mark d. Within 1 month from the 5th anniversary of the date of the registration of the mark 71. In case of copyright on works of original and derivative works of joint creation, the economic rights shall be protected during the a. Lifetime of any of the authors and for 50 years after the death of any of the authors. b. Lifetime of the last surviving author and for 50 years after the death of the last surviving author. c. Lifetime of all the authors d. Lifetime of the last surviving author or 50 years whichever is later. 72. Unclaimed balances shall be deposited with a. Bangko Sentral ng Pilipinas b. Treasurer of the Philippines c. President of the Philippines d. Philippine Deposit Insurance Corporation 73. Which of the following is correct? A conservator of a bank a. Is not entitled to remuneration b. Should be connected with the BSP c. Should not be connected with the BSP d. Is appointed by the monetary board 74. Powers and duties of a conservator, except a. To take charge of the assets, liabilities, and management thereof b. To reorganize the management c. To administer the assets for the benefit of the creditors d. To exercise all powers necessary to restore its viability 75. A leased a parcel of land to B for a period of two years. The lease contract did not contain any express prohibition against the assignment of the leasehold or the subleasing of the leased premises. During the third year of the lease, B subleased the land to C. In turn, C without A’s consent assigned the subleased to D. What is the status of: I. B’s sublease to C II. C’s assignment to D a. I and II are valid b. I and II are void c. Only I is valid d. Only II is valid 76. A, B, C and D organized a general partnership with A and B as industrial partners and C and D as capitalist partners. C contributed Php 200,000 and D contributed Php 100,000 to the common fund. By a unanimous vote of the partners, A and B were appointed as managing partners without any specification of their respective powers and duties. Later, W applied for the position of secretary and Y applied for the position of accountant of the partnership. The hiring of W was decided upon by A and B but was opposed by C and D. The hiring of W was decided by A and D but was opposed by B and C. Who can be hired by the partnership? a. Both W and Y b. Neither W nor Y c. Only W d. Only Y 77. A, upon request, loaned his passenger jeepney to B to enable B to bring his sick wife from Legaspi City to the PGH in Manila for treatment. On the way back to Legaspi, after leaving his wife at the hospital, people stopped the passenger jeepney. B stopped for them and allowed them to ride on board accepting payment from them just as in the case of ordinary passenger jeepney plying their route. As B was crossing Guinobatan, there was an onrush of lahar from Mount Mayon. The jeep that was loaned to him was destroyed. Which of the following is not correct? a. The contract between A and B is called commodatum b. B is obliged to pay A for the use of the passenger jeepney c. B is liable for the loss of the jeepney d. A can recover from B the value of the jeepney and payment for the use of the jeepney 78. Question A – Can a husband and wife form a limited partnership to engage in real estate business with the wife being a limited partner? Question B – Can two corporations organize a general partnership? a. Yes to both questions c. Yes only to Question A b. No to both questions d. Yes only to Question B 79. Spouses A and B borrowed money from a local merchant. To guarantee the payment, they left the Torrens title of their land with the merchant for him to hold until they pay the loan. There is a contract of a. Pledge b. Mortgage c. Antichresis c. Simple loan 80. A, B and C are general partners in a merchandising firm. They contributed amounts to the capital and also agreed on equal distribution of whatever net profit is realized per fiscal period. After three years of operation, however, C conveys her whole interest in the partnership to D, without the knowledge and consent of A and B. Which of the following is not correct? a. The partnership is dissolved. b. D cannot interfere or participate in the management or administration of the partnership business or affairs c. D shall receive the net profits to which C would have otherwise been entitled d. The conveyance by C of his whole interest in the partnership did not make D a partner 81. Which of the following obligations is not valid? a. If the debtor promises to pay as soon as she has the means to pay b. If the debtor will give his car if the creditor will pass the CPA Exam and if the creditor will fail, the creditor will have sexual intercourse with the debtor for one week. c. If the debtor will give his cow or will kill the friend of the creditor d. If the debtor will be the mistress of the creditor or if the debtor wants will give Php 1M to the creditor 82. If a pregnant woman passenger of a bus were to suffer an abortion following a vehicular accident due to the gross negligence of the bus driver, she and her husband can claim as damages from the bus company for the death of their unborn child, except a. Actual damages in the form of imdemnity for the loss of life of the unborn child b. Moral damages for mental anguish that attended the loss of the unborn child c. Exemplary damages since there is gross negligence d. Actual damages for the bodily injury she suffered from the loss of the fetus which is considered part of her internal organs. 83. A 16-year old high school student stabs his classmate who is his rival for a girl while they were going out of the classroom after their last class, under the law on quasi delict. Which of the following is not correct? I – The school, its administrators and teachers shall have substituted parental authority and responsibility over the minor child while under their supervision, instruction or custody. II – The persons identified by law to be liable may raise the defense that they exercised the proper diligence required under the circumstances , that is they observed the diligence of a good father of a family to prevent the damage. a. Both I and II b. Neither I nor II c. Only I d. Only II 84. In case a managing partner collects a demandable debt from his debtor who also owes the partnership a demandable debt, which of the following is not correct if payment is not enough to cover the two debts? a. The sum collected shall be applied to the partnership credit b. It shall be applied to the two credits in proportion to their amounts c. The debtor has the right to have the payment applied to his debt to the partner if it should be onerous to him d. The partner cannot apply the payment to his own credit 85. A, B and C are partners who contributed Php 30,000, Php 15,000 and industry, respectively. After payment of all liabilities and expenses only Php 18,000 remain as partnership assets. A will get a. Php 9,000 b. Php 12,000 c. Php 6,000 d. Php 5,000 86. Using the above statement, but the assets amount to Php 60,000, B will get a. Php 15,000 b. Php 20,000 c. Php 18,750 d. Php 22,500 87. When real property is contributed to the partnership a. A real contract is perfected b. A written instrument is required c. A public instrument complete with inventory is required d. A partner can make important alteration if beneficial to the partnership 88. A sold to B a laptop computer covered by an invoice marked “on trial or satisfaction, 15 days”. On the 10 th day, B pledged the laptop computer at “Casa Agencia”. Unfortunately, everything in the pawnshop got lost due to robbery. In this case, a. B has no obligation to pay the price since ownership has not yet passed to him b. A cannot demand for payment of the price since he retains ownership c. Obligation to pay the price is demandable due to acceptance of the delivery d. No one is liable because the loss was due to a fortuitous event 89. In a contract of sale, the parties agreed that the buyer shall be the one to fix the price subject to approval by the seller. The object was delivered to and accepted by the buyer. After a reasonable period of time, the buyer has not yet fixed the price but has appropriated the thing. The seller is now demanding for the payment of the price, in this case, the seller is a. Entitled to the payment of a reasonable price therefore. b. Entitled to the payment of the price based on the fair market value at the time of deliver c. Entitled to the payment of the price based on the fair market value at the time of perfection of the contract of sale d. Not entitled to payment of the price because the price has not yet been fixed as agreed upon 90. A mortgaged his land to B to guarantee the debt of C. Despite repeated demands, C failed to pay B prompting the latter to foreclose the mortgage. However, the proceeds was not sufficient to settle the obligation of C to B. Can B go after A for the deficiency? a. Yes, A is a guarantor b. Yes, the mortgage is binding upon A c. No, only the land was offered as security d. No, the mortgage was not registered with the Registry of Deeds 91. A, B, C and D are partners in Y & Co., a limited partnership contributing Php 10,000, Php 20,000, Php 30,000 and Php 40,000, respectively. A, C and D are the general partners while B is the limited partner. The partnership failed and the partners decided to dissolve the partnership. At the time of liquidation, the unpaid obligation amounted to P100,000 distributed as follows: To partnership creditor Y Php 50,000 To partners A 30,000 B 20,000 If the remaining cash amounting to Php 20,000 was given to Y as partial payment, which of the following is correct? a. b. c. d. Y can collect Php 7,500 each from the separate properties of the partners Y can collect Php 30,000 from A, or C or D but not from B B is not liable to Y because B is also a creditor of the partnership Y can collect Php 10,000 each from A, C and D 92. Dividends on shares of stocks can only be declared out of unrestricted retained earnings of the corporation. Answer 1 – True, dividends whether cash or stock can be validly declared only out of unrestricted retained earnings. Answer 2 – False, during the receivership, the assets and properties of the corporation are being gathered for conversion into cash in preparation for distribution to creditors a. Both answers are correct c. Only answer 1 is correct b. Both answers are not correct d. Only answer 2 is correct 93. On April 1, 2014, 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 Php 100,000 to the common fund on May 2, 2014. 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 contributions by the partners 94. Real estate mortgage as distinguished from pledge a. The sale of the thing extinguishes the obligation b. The debtor is entitled to the excess of the proceeds c. The creditor bears the deficiency d. Possession of the thing is with the creditor 95. Will require stockholders 2/3 approval a. Election of corporate officers b. Election of members of the board c. Granting of authority of the board to amend the by-laws d. Amendment of by-laws 96. The drawee bank may refuse to pay checks drawn against it, except a. If the drawer is insolvent b. If there is a “stop payment” order issued by the drawer c. If the drawer’s deposit is insufficient d. When the drawee bank receives notice of the drawer’s death 97. A contract of loan is a a. Consensual contract b. Real contract c. Formal contract d. Solemn contract 98. The following are the effects of unlawful partnership, except a. The contract is void ab initio and the partnership never existed in the eyes of the law b. The profits shall be confiscated in favor of the government c. The instruments, or tools and proceeds of the crime shall be forfeited in favor of the government d. The contributions of the partners shall be confiscated in favor of the government 99. In commodatum, one of the following is not correct, which one is it? a. The object maybe fungible b. The bailor need not be the owner c. The bailor pays for the ordinary expenses d. The parties may stipulate that the bailee can also use the fruit of the thing loaned 100. If a partner is insolvent, the first order of preference in the distribution of his assets is a. Partnership creditors b. Partner’s contribution in the partnership c. Separate creditors of such partner d. Pro-rata between his separate creditors and partnership creditors END OF FINAL PRE-BOARD EXAMINATION GOD BLESS! U. I. O. G. D.