REVIEW MATERIAL 24: Regulatory Framework for Business Transactions

SOURCE: ReSA – The Review School of Accountancy

INSTRUCTIONS: Select the correct answer for each of the following questions. Mark
only one answer for each item by shading the box corresponding to the letter of your
choice on the sheet provided. STRICTLY NO ERASURES ARE ALLOWED. Use pencil
no. 2 only.

On June 7, 2015, S sent a letter to B offering to sell his house and lot for P1M, which
letter was received by B on June 10, 2015. B accepted the offer and sent his letter for
acceptance to S on June 13, 2015. S received B's letter of acceptance on June 16,
2015. B paid the purchase price on June 20, 2015 and S issued a receipt therefore. On
June 25, 20l5, S and B executed that the deed of sale, which was notarized on the
same day. On June 28, 2015, B transferred to his newly purchased house and lot.

1. When did B become owner of the house and lot?

a. June 13, 2015
b. June 16, 2015
c. June 25, 2015
d. June 28, 2015

2. When was the house and lot sold to B?

a. June 13, 2015
b. June 16, 2015
c. June 20, 2015
d. June 25, 2015

3. P orally appointed A as his agent for the sale of his residential lot. A said the
residential lot to B. A and B executed a deed of sale duly notarized by a Notary
Public and P immediately paid the purchase price of the presidential lot.
a. the contract of sale is valid
b. the contract of sale is void
c. the contract of sale is voidable
d. the contract of sale is rescissible

4. S sold his parcel of land to X on March 20, 2015. Then he sold it again to Y on
March 27, 2015. Y immediately took possession of the land and planted mango
trees thereon. On March 30, 2015, S sold the land again to Z and Z registered
the sale at the office of the Register of Deeds. The three contracts of sale were in
public instruments and the three (3) buyers paid P430, 000.00 each as purchase
price. Who has the better right to the parcel of land?
a. Y, who first possessed the parcel of land
b. Z, who first registered the sale
c. X, who possesses the oldest title
d. None of the buyers

5. On May 7, 2000, S sold to B his house and lot with a right to repurchase it within
five years from May 7, 2006. When will be the expiration of the seller’s right to
redeem?
a. May 7, 2008
b. May 7, 2009
c. May 7, 2010
d. May 7, 2011

6. Which of the following is considered a prima facie evidence of being a partner in

a partnership?
a. When a person receives a share in the profits as payment for a loan
b. When a person shares in the gross return of a business
c. When the person receives a share in the income as a co-owner
d. When a person receives a share in the profits
7. X has an obligation to the managing partner amounting to P50, 000 with a
penalty clause that if it is not paid at maturity, the amount shall be doubled. He
has also an obligation to the partnership amounting to P100, 000. Both debts are
payable on July 25, 2015 and on the maturity date, X paid P50, 000 to the
managing partner. X requested that his payment be applied to his loan to the
managing partner and the managing partner issued a receipt applying the
payment to his own credit. The payment of X should be applied:
a. to the two (2) loan proportionately
b. to the loan in favor of the partnership
c. to the loan in favor of the managing partner
d. to the two (2) loans equally

8. On July 7, 2015, P joined ABC Partnership. The total assets of the partnership at
the time P joined it was P550, 000.00 P contributed P150, 000.00, thereby
increasing the partnership assets, who shall be liable for the balance of P300,
000.00 to be paid to X?
a. A, B, and C at P100, 000.00 each
b. A, B, C, and P at P75, 000.00 each
c. A, B, and C in the amounts proportionate to their contribution
d. A, B, C, and P in the amounts proportionate to their contribution

9. A, B, C, and D are partners in a printing business. C died on July 23, 2015. On

July 24, 2015, B accepted a printing job from a customer not knowing that was C
already dead while D continued the printing of existing job orders despite the
knowledge that C is already dead and A received the proceeds of their approved
loan from the Bank although he was informed that C is already dead. Which of
the following statement is true?
a. Only the act of B binds the partnership
b. Only the act of D binds the partnership
c. Only the act of A binds the partnership
d. The acts of A, B, and D binds the partnership

10. X, Y, and Z are the partners of Golden Harvest Company. Z is an industrial

partner. X & Y contributed P75, 000.00 and P25, 000.00, respectively. After the
assets of the partnership have been exhausted, they all contributed P50, 000.00
each to pay the remaining obligation to the partnership creditors. Based on this
fact, which of the following statement is false?
a. Z has the right to demand reimbursement of what he has paid from X and
Y
b. The amount of P150, 000 shall be shared equally X and Y
c. Y has the right to demand reimbursement of P12, 500 from X
d. None of the above

11. X, Y, and Z have agreed to deliver a brand new Toyota Corolla Model 2016 to C.
The obligation of the debtor is:
a. solidary invisible
b. joint invisible
c. joint obligation
d. invisible obligation

12. In relation to No. 11, which of the following statements is correct?

a. If Z will become insolvent, his share shall be borne by X and Y
b. If the car is not delivered on maturity, C can demand delivery from all of
them
c. If X will become insolvent, C can demand delivery from Y and Z
d. If X will become insolvent, C can demand delivery from Y or Z.

13. X is obliged to give Y his only car in July 15, 2015. X did not deliver the car in
July 15, 2015. On July 20, 2015, an earthquake destroyed the building where the
car was in the garage and the car was destroyed. Is X still liable?
a. No. Considering that no demand to deliver was made by Y and the
specific thing was lost due to fortuitous event, the obligation is
 extinguished.
b. No. The obligation is extinguished, even if the debtor is already in default,
because the debtor can plead impossibility of performance.
c. Yes. X is already in legal delay, thus the obligation to deliver the lost
specified thing is converted into monetary claim for damages.
d. Yes. The creditor can instead demand for a substitute of equivalent value
from the debtor.

14. C in the creditor of D in the amount of P50, 000. G is the guarantor of D. D paid
C partially with P20, 000. A, not knowing the partial payment of D effect of this
payment in the obligation?
a. The obligation is extinguished. A cannot recover any amount from D, but
A can demand reimbursement from G in the amount of P50, 000.
b. The obligation is extinguished. A can demand P30, 000 from D
because this amount benefited D, or A having been subrogated into
the rights of C can proceed against guarantor.
c. The obligation is not extinguished. A’s payment being against the will of D
does not extinguish the obligation.
d. The obligation is extinguished. A can demand P30, 000 from D, but if D
cannot pay, A cannot ordinarily proceed against guarantor G because A is
not entitled to subrogation.

15. A signs a promissory note and binds himself to pay X P100, 000 plus 15% per
annum interest on June 30, 2015.
a. Before June 30, 2015, X can demand payment
b. If before June 30, 2015 A is paying X, X cannot refuse the payment for he
has the benefit of the period.
c. Because the period is for the benefit of the debtor, A can compel creditor
X to accept payment any date before June 30, 2015.
d. Because the period is for the benefit of the debtor and creditor, X can
refuse any tendered payment before June 30, 2015.

16. A, B and C owed in solidum P15, 000 to D as evidence by a promissory note due
on September 30, 2005. The note prescribed on October 1, 2015. On October
10, 2015 A paid D. In this case, A is:
a. Entitled to collect P5, 000 each from B and C
b. Not entitled to reimbursement from his co-debtors for the shares of
the latter
c. Entitled to recover from D
d. Answer not given.

17. A, B and C are joint debtors creditors W, X, Y and Z in the amount of P300, 000.
How much can W and X collect from B?
a. P75, 000
b. P100, 000
c. P150, 000
d. None of the above

18. A sold a parcel of land to B by word of mouth and delivered to the latter the
Transfer Certificate of Title of the land. Can B compel A to execute the deed of
sale of the land?
a. B cannot compel A to execute the deed of sale of the land
b. B cannot compel A because the sale is void being oral
c. B can compel A because the contract is enforceable because of the
delivery of the TCT to him
d. B can compel A because the sale is merely voidable and therefore
enforceable, binding until annulled

19. Statement no. 1. Contract of lease of a parcel of land for a term of one year must
be written otherwise unenforceable.
Statement no. 2. Contract of sale of a parcel of land must be in public instrument
otherwise unenforceable.
 a. First statement is false while the second is true
b. Both statements are true
c. First statement is true while the second is false
d. Both statements are false

20. Statement no. 1. There is acceptance of the offer only after it has come to the
knowledge of the offerer.
Statement no. 2. Lesion or inadequacy of cause shall as a rule make contract
defective.
a. Both statements are true
b. Second statement is true while the first is false
c. Both statements are false
d. First statement is true while the second is false

21. D borrowed a sum of money from C with certain rate of interest. C now wants to
increase the rate of interest without the consent of D. What principle in contracts
prohibits C from doing so?
a. Autonomy of contracts
b. Relativity of contracts
c. Mutuality of contracts
d. Consensuality of contracts
e. Obligatory force and compliance in good faith

22. A delivers a bearer check to B. B then specially indorses it to C and C later

indorses it in blank to D. E steals the check from D and forging the signature of
D, succeeds in “negotiating” it to F, who acquires the same in good faith and for
value. If, for any reason, the drawee bank refuses to honor the check, can F
enforce the against A?
a. No, because of the forgery in the indorsement of D, F did not acquire title
over the check.
b. Yes, because despite the forgery in the indorsementof D, F acquired
title to the instrument.
c. Yes, because a holder in due course can always enforce the instrument
against all the parties liable thereon.
d. No, because forgery is the real defense which can be put up even against
a holder in due course such as F.

23. Which of the following is not an effect of a crossed check?

a. The check may not be encashed but only deposited in a bank.
b. The check may be negotiated only once to one who has a bank account.
c. The act of crossing a check serves as a warning to the holder that the
check has been issued for definite purpose so that he must inquire if he
has received the check pursuant to that purpose; otherwise, he is not a
holder in due course.
d. The indorsee remains a holder in due course even if he does not
inquire into the right of the indorser to the check.

24. A issued an order promissory note to B indorses it to C. D stole the note from C
and forging the indorsement of C, “negotiates” it to E who also indorses it to F,
the holder in due course. Can F enforce a note against A, B and C?
a. Yes, because he is the holder in due course who holds the instrument
free from defenses available to prior parties among themselves
b. No, because he did not obtain title to the note because of the forgery in
the indorsement of C to D
c. No, because all prior parties are not liable to F because of the
forgery
d. Yes, because he is the holder in due course who holds the note free from
defects of title of prior parties

25. A issued B a check for P50, 000 as payment for a car. Without the knowledge of
A, B altered the amount of P150, 000 and deposited the said check without
noticing the alteration, paid the check, debiting the amount from the account of A.
 Which of the two banks shall suffer the loss?
a. X bank as indorser to Y bank, warrants the correctness of the amount
b. Y bank, as acceptor bank shall be liable for the loss
c. Both banks are jointly liable to A
d. X bank initially but with right of reimbursement from Y bank

26. A bought a pair of shoes from shoes store and repair shops. It was later
discovered, however, that the shoes did not belong to the store but to a customer
who had left the same for repair. Did A acquire good title to the shoes?
a. No, because it was sold by the store which is the owner thereof.
b. No, because it is the fault of A is not exercising due diligence in buying
the shoes as to its real ownership.
c. Yes, because it was bought from a store in good faith for value.
d. Yes, because the owner of the shoes was precluded from setting up the
want of authority of the store in selling the shoes

27. Three of the following are remedies of the buyer in case of the breach of
warranty by the seller. Which is not included?
a. Accept or keep the goods and set up the breach of warranty by the way of
recoupment or extinction of the price
b. Rescind the contract of the sale and refuse to accept the thing or if
already delivered refuse to return the same.
c. Accept or keep the goods and claim damages for the breach of warranty.
d. Refuse to accept the goods and claim damages for the breach of
warranty.

28. B in good faith purchased a diamond ring from C, a friend of his. C gave B a bill
of sale. Later on, O identified the ring as the one she had lost about a year
before. There is no question as to the truth of O’s allegation. In this case:
a. O cannot recover the ring from B because the letter was in good faith
when he bought the ring from C.
b. O cannot recover the ring from B because it was lost by him (O) and
found by C, therefore C, as finder will be keeper and the owner who could
transfer ownership to B, an innocent purchaser for value.
c. C is the one liable to O for damages while B becomes owner who could
not be disposed being an innocent purchaser for value
d. O can recover the ring from B even if he is an innocent purchaser for
value because C did not have title to convey to B.

29. X the owner of a certain jewelry delivered the same to Y, “on sale on return” upon
a specified period of time. Y sold the said jewelry to Z, but retains the price. Can
X recover the jewelry from Z?
a. X cannot recover the jewelry from Z being an unpaid seller whose
ownership was not transferred to Y upon delivery to him.
b. X can recover the jewelry from Z but after reimbursement of the price
paid.
c. X cannot recover the jewelry from Z because his seller (Y) has transferred
ownership to him
d. X cannot recover the jewelry from Z because it was sold by his
agent Y to Z and his only recourse is to go after Y for his failure to
remit the payment to him

30. When the preferred shares are issued by a corporation with affixed interest on
the face thereof, the effect is:
a. The contract of subscription subsists
b. The said stockholder is a creditor of the corporation
c. The said shares of stocks become negotiable instruments
d. The stockholder is a plain investor who may benefit or suffer with financial
success or failure of the corporation

31. Three of the following are not authorized to issue no-par value shares. Which
one is the exception?
 a. Industrial companies
b. Insurance companies
c. Trust companies
d. Public utilities

32. G was appointed as the guardian of M who owns a parcel of land valued at P1M.
M sold the land only for P2M to B. The contract is defective because:
a. Unenforceable
b. Rescissible
c. Voidable
d. Void

33. D tearing that his creditor C, would go after his only parcel of land to satisfy his
claim for payment of D’s debt, sold his said land to X who did not know of D’s
intention. Decide:
a. C can ask for annulment of the sale as this is voidable contract
b. C may ask for damages against X since he was damaged by the sale
c. C can file an action for rescission of the sale
d. C cannot ask for the rescission of the sale

34. A appointed B to sell his land:

If the authority of B is oral and the sale is in public instrument, the sale is void.
If the authority of B is in writing and the sale is oral, the contract is unenforceable.
a. The first statement is false; the second is true
b. The first statement is true; the second is false
c. Both statements are true
d. Both statements are false

35. A and B agreed on February 3, 2013 that B will construct the house of A in
January 2015, The contract was orally entered into. B received a down payment
from A with the balance payable after completion of the house.
The contract is:
a. Voidable because it is not in public instrument.
b. Enforceable even if not in writing, having been ratified.
c. Unenforceable because it is not in writing and yet performance there is
after one year from perfection.
d. Void because it is not in writing as required by law.

36. Statements:
When the defect of the contract consists in the incapacity of one of the
contracting parties, the incapacitated is obliged to make restitutions unless he did
not benefit by the thing or price received by him. The action for annulment of
contracts shall be extinguished when the thing which is the is the object thereof is
lost through fortuitous event or fraud or fault of the person who has a right to
institute the proceedings.
a. Both statements are incorrect.
b. Both statements are correct.
c. First statement is correct, second statement is incorrect.
d. Second statement is correct, first statement is incorrect.

37. A, a director of X corporation, through an agent bought the shares of stocks of

another stockholder without revealing to the seller stockholder that negotiations
were in progress to enhance the value of the share. The sale is defective
contract being:
a. Void because of fraud committed by A against the other stockholder.
b. Voidable because of mistake on the part of the seller-stockholder.
c. Rescissible because of the damage suffered by the seller.
d. Voidable due to the fraud concealment by A against a fellow stockholder.

38. S orally sold B a parcel of land for which the letter paid P1M. B now wants to
register the sale so that he can have a transfer Certificate of title in his name.
Decide:
 a. S cannot be compelled to execute the public document of sale
because the sale is unenforceable.
b. S can be compiled to execute the public document of sale because the
sale is enforceable.
c. The sale is, void and therefore cannot be registered.
d. S cannot be compelled to execute the public document of the sale
because the sale is voidable.

39. A was having his house repaired B, who needed certain materials. So A told the
store owner, 'Give B the materials. I shall be responsible. I shall stand good.' This
was orally entered into.
a. The contract is unenforceable because A made an oral agreement to
answer for the default of another, that is B.
b. The contract is enforceable because A did not make a special promise to
answer for the default of another person.
c. The contract shall be enforceable if there is ratification by A.
d. The contract shall be enforceable if it has been executed.

40. A and B mutually promised to marry each other. The promise being verbal and
without witnesses to the promise, A did not marry B. B is now suing A for
damages. Decide:
a. The contract is unenforceable; hence, A is not liable.
b. The contract is unenforceable because mutual promise to marry is
covered by the Statute of frauds.
c. A is liable for damages even if the contract is unenforceable.
d. A may be liable for damages because mutual promise to marry is not
covered by the Statute of frauds.

41. A and B, neighbors orally agreed that from that day, B would not erect a garage
on his property till after three years. A week later, B begun to erect a garage in
violation of the agreement. A complains B sets up the defense of the contract
being unenforceable. Decide.
a. The contract is unenforceable because it is not to be performed within
one year from the making thereof, and it is oral.
b. B can becompelledto demolish the fence because he failed in his
obligation not to do.
c. A canhave a third person to undo what has been done by B in
violation of his obligation not to do.
d. A has a right to complain and enforce the contract because it is
enforceable.

42. A and B orally agreed that A would sell and B would buy A's radio for P200.00
three years from date of the agreement. At the end of three years, A refused to
hand over the radio although b was willing to pay. Is A bound to deliver the radio
sold?
a. A is obliged to deliver what he sold since it was an enforceable sale.
b. A is obliged to deliver if B is ready to pay the price.
c. A is not bound to deliver because the sale is unenforceable.
d. A is not bound because the sale is void.

43. A made a donation to B. Lacer A contracted several debts. What A has left as
assets is much less than his present liabilities. May the donation to B have
rescinded?
a. No, because the debts were incurred after the donation has been made.
b. No, if A gave guaranty or security forhis debts.
c. Yes, because the donation is rescissible being in fraud of creditors.
d. Yes, because A has become insolvent after the donation.

44. A and B entered into an oral sale of the former's car for P1M which amount has
been credited to his bank account although the car has not yet been delivered to
the latter. Can B compel A to execute the deed of sale of the car?
a. No, because the sale is unenforceable.
 b. Yes, because it is enforceable.
c. Yes, if A used the money paid to him.
d. No, because the sale is void.

45. In all cases of extrajudicialforeclosure, the right of redemption can be exercised

by the mortgagor within one year from and after the juridical registration of sale.In
judicial foreclosure, the mortgagor may still exercise his equity of redemption
after the confirmation of the sale of the court.
a. Both statements are true.
b. Both are false.
c. First is false, second is true.
d. First is true, second is false.

46. A pledge his Toyota car to B for a loan of P1M. A was unable to pay the loan and
therefore B sold the car in a public auction but it was sold only for P.5M. Can B
recover the deficiency from A?
a. No, he cannot recover the deficiency in the absence of contrary
stipulation.
b. No, he cannot even if there is an agreement that he can.
c. Yes, he can even in the absence of stipulation allowing him.
d. Yes, he can provide it was agreed upon by the parties.

47. In a pledge created by operation of law, after payment of the debt and expenses,
the remainder of the price of the sale 1n auction shall be delivered to the obligor,
pledgor being entitled to the excess.
If a credit which has been pledge becomes due before it is redeemed, the pledge
may collect and receive the amount due and apply the same to the payment of
his claim with the excess going to the pledger.
a. Both statements are false.
b. Both are true.
c. First is false, second is true.
d. First is true, second is false.

48. X borrowed money from Y and gave a piece of land as security by way of
mortgage. It was agreed between the parties that upon non-payment of the loan,
the land would already belong to Y. If X failed to pay the debt would Y now
become the owner of the land?
a. Y would become the owner because it was agreed upon by them based
on the principle of autonomy of contract
b. Y would not become the owner because the agreement that he would
become the owner upon default of X is against law.
c. Y would become the owner but with right of redemption by X
d. Y would not become owner if X annuls the voidable agreement

49. A constituted in 2014 a real estate mortgage on his land and a chattel mortgage
on his car to secure the payment of a debt of P. 2M which he then owed to B, as
well as other loans he may receive from him in the future. A paid his debt of
P.2M but not the loan of P.03M which he obtained in 2015. Can A foreclose both
mortgages for the P.03M loan obtained in 2015?
a. No, because the mortgages can only foreclose one of the mortgages
applying the Recto Law to prevent collection at deficiency.
b. No, only the mortgage on the car can be foreclosed.
c. No, only the mortgage on the land can be foreclosed.
d. Yes, both mortgages.

50. D mortgage his Land to C with the stipulation that the former cannot sell his land
before he has paid his loan to C. D sold the land to X despite such agreement.
Which of the following is correct?
a. The contract of sale is void.
b. The consent of C is necessary before D can sell the land.
c. The stipulation prohibiting sale of the land is void.
d. The sale is valid if the buyer was not aware of the mortgage.
51. Private Corporation have the following attributes, except:
a. It is created by operation of law as juridical person.
b. It has the right of succession
c. It may be formed, organized and existing under a special charter
d. It has the powers, attributes, and properties expressly authorized by the
law or the incident to its existence.

52. In three of the following instances, shares with or without voting right can be
voted, except:
a. Increase or decrease of capital stock
b. Dissolution of the corporation
c. Election of directors or trustees
d. Merger or consolidation with other corporation

53. One of the following does not have voting rights:

a. Preferred shares
b. Redeemable shares
c. Treasury shares
d. Common shares
54. The executive committee cannot act on this matter except:
a. Filling of vacancy in the board of directors
b. Cash dividend declaration
c. Board resolution on depository bank of the corporation
d. Stock dividend declaration

55. At the annual meeting of ABC Corporation for the election of the five directors. A,
B, C, D, E, F, and G were nominated. A, B, C, D, and E received the highest
number of votes and proclaimed elected. F received ten votes less than E.
Subsequently, E sold his shares to F. Who between E and F has the right to
attend as director in the board meeting? The transfer of shares having been
registered with corporation.
a. E is the director because his term is one year until his successor elected
and qualified.
b. F is the director for he has acquired all the shares of E.
c. Either of them shall be the director.
d. Neither of them shall be the director.

56. ABC Corporation has an authorized capital stock of P1M dividend into 50,000
common shares and 50,000 preferred shares. At its inception, the Corporation
offered for subscription of all the common shares. However, only 40,000 shares
were subscribed. Recently, the directors thought of rising additional capital and
decided to offer the public all the authorized shares of the corporation at their
market value. Would Mr. X, a stockholder holding 4,000 shares have pre-emptive
right to the remaining 10,000 shares?
a. Yes, because all stockholders have pre-emptive rights to all issues
or dispositions of share of any class in proportion to shareholding.
b. No, because he did not subscribe to them offered at incorporation.
c. Yes, if approved by 2/3 of the outstanding capital stock
d. No, because pre-emptive right applies only in case of increase in the
capital stock.

57. Based on same facts, would Mr. X have pre-emptive rights to the 50,000
preferred shares?
a. Yes, because all stockholders have pre-emptive rights to all issues
or dispositions of shares of any class in proportion to shareholding.
b. No, because he did not subscribed to them when offered at incorporation.
c. Yes, if approved by 2/3 of the outstanding capital stock.
d. No, because pre-emptive rights apply only increase of capital stock.

58. The merger or consolidation of corporations becomes effective upon approval by

the constituent corporation of the plan of merger or consolidation as the case
 may be.
After the merger, the absorbed corporation must undertake dissolution and
winding-up procedures.
a. Both statements are false
b. Both statements true
c. First is false, second is true
d. First is true, second is false

59. Juan was a stockholder of X Corporation who sold his shares to Pedro and
delivered properly indorsed the Stock Certificate no. 1001 to the latter. The
following day, Juan went to the offices of the corporation and claimed the loss of
his stock certificate. The formalities prescribed by law having been complied with,
the corporation issued stock certificate no. 2002 in substitution of the “lost”
certificate. Juan forthwith transferred for valuable consideration the new
certificate to Jose who knew nothing of the prior sale to Pedro. Whom shall the
corporation recognize as rightful stockholder?
a. Both Pedro and Jose are rightful stockholders
b. Pedro shall be the rightful stockholder being the first buyer in good faith.
c. Jose shall be the rightful owner being the indorses of the most recent
stock certificate.
d. Pedro shall be the rightful stockholder because the stock certificate
delivered to Jose was null and void.

60. For the contract between the corporation and its directors, officers or trustees
may not be voidable. The following are conditions except;
a. The presence of the director or trustees is not necessary for the quorum
b. The contract is fair and reasonable under the circumstances
c. The vote of director or trustee is not necessary for the approval of the
contract.
d. Ratification by the majority of the outstanding capital stock or
members.

61. Redeemable shares may be taken up or purchased by the corporation even in

the absence of surplus profits.
Treasury shares may be reissued for a reasonable price even below par value.
a. Both statements are false
b. Both are true
c. Only the first is true
d. Only the first is false

62. In case of shares owned in common by two or more stockholders, the consent of
either is enough to the same.
The pledge or mortgages shall have right to vote the shares unless stipulated
otherwise.
a. Both statements are false
b. Both are true
c. Only the first is true
d. Only the first is false

63. Contracts between corporations with interlocking directors shall only be voidable
and not void because of the nominal interest of the director.
Management contracts shall be approved by 2/3 vote of the directors and
stockholders of both managed and managing corporation.
a. Only the first statement is false
b. Both are true
c. Both are false
d. None of the above

64. Vacancy in the board of directors can be filled up set by the remaining directors
in following, Cases, except
a. Increase in the number of director
b. Resignation of a director
 c. Death of director
d. None of the above

65. The following are requisites for de facto corporation, except one;
a. Valid law under which it is incorporated
b. Actual use of corporate powers
c. Attempt in good faith to organize
d. Non-issuance by the SEC of certificate of Incorporation

66. In an open corporation, only in certain case do stockholders have appraisal right
of dissenting stockholders while in a close corporation stockholders can at any
time for whatever reason demand payment
a. Both statements are true.
b. Both are false
c. Only first is true
d. Only first is false

67. The by-laws of a corporation may provide that the stockholders or trustees
meeting may be outside of the Philippines. The code of by laws may be filed with
the SEC either before or after incorporation.
a. Only the first is true
b. Only the first is false
c. Both are true
d. Both are false

68. A subscribed to 1,000 shares of stock of X Corporation. She paid 25% of the said
subscription. During the stockholders meeting, can A vote all her subscribed
shares?
a. No, because the subscription has not yet been fully paid
b. No, because A’s shares have become delinquent which cannot be voted.
c. No, as to the unpaid percentage of subscription
d. Yes, because unpaid shares not delinquent can be voted

69. X Corporation posted a P1M profit in its realty business and its real estate has
appreciated in value to the tune of P4M. The board the declared dividends to its
stockholders computed on the basis of representing profits and appreciation in
value of its real estate. Is the dividend declaration valid?
a. Not valid because there was no approval of 2/3 of the outstanding capital
stock
b. Valid because it was based on profit and increment in the value of the
corporate assets.
c. Not valid because dividends must be only come from the
unrestricted retained earnings
d. Valid if no creditors shall be prejudiced and approved by the required
votes of the directors and stockholders.

70. A certificate of stock is not a negotiable instrument because it lacks the

requirement of;
a. The instrument must be in writing and signed by the maker of drawer.
b. It must contain an unconditional order or promise to pay a sum
certain in money.
c. It must payable to order or to the bearer
d. It must be payable on demand or at a fixed or determinable future time.

71. A gratuitous reissue of treasury shares will result in

a. Capital surplus
b. Stock dividend
c. Watered stock
d. Property dividend

72. This is a public instrument giving authority to vote for stockholder.

a. Proxy
 b. Voting trust agreement
c. Stock certificate
d. Voting trust certificate

73. They provide and regulate the internal matters of the corporation:
a. Articles of incorporation
b. By-laws of the corporation
c. Certificate of incorporation
d. Certificate of fling of by-laws

74. The minimum requirement for incorporation;

Authorized Capital Stock Subscribed Capital Paid – up Capital
a. P100, 000.00 P 20, 000.00 P 5, 000.00
b. P100, 000.00 P 20, 000.00 P 6, 250.00
c. P 100, 000.00 P 25, 000.00 P 5, 000.00
d. P1000, 000.00 P 25, 000.00 P 6, 250.00

75. These are the persons who sign the articles of incorporation and therefore must
be subscribers of shares.
a. Incorporators
b. Directors
c. Stockholder
d. Corporate Officers

76. This is the written acknowledgement of the interest of the stockholder in the
corporation.
a. Proxy
b. Share of stock
c. Voting trust agreement
d. Certificate of stock

77. In the matter of management of the corporation, this is supreme;

a. Majority of the shareholders
b. 2/3 of the stockholder
c. Board of directors
d. Officers of the corporation

78. This is the equitable right of the stockholders to subscribe to all issues of shares
in proportion to their shareholdings to maintain their equity participation in the
corporation:
a. Right of the firm refusal in close corporation
b. Right to dividends date entity
c. Pre-emptive right
d. Appraisal right of dissenting stockholder

79. As regards treasury shares, which is not correct?

a. They have no voting rights while in the treasury.
b. They may be distributed as property dividend if there is a surplus profit
c. They are not entitled to dividends
d. They are considered as part of the earned or surplus profits

80. The power to pre-emptive rights to stockholders is:

a. Incidental
b. Express power
c. Implied power
d. Discretionary power

81. As regards the corporate by laws, which of the following is false?

a. To adopt majority of the outstanding capital stock is needed
b. To delegate to the board of directors the power to amend, repeal or adopt
new by laws.
c. To revoke the power delegated to the board to amen, repeal, or adopt
 new by-law, 2/3 of the outstanding capital stock.
d. To amen, repeal, or adopt new by-laws, majority of the outstanding capital
stock.

82. A subscribed to 100 shares of X Corporation, in paying 25% of the amount

thereof. The corporation refuses to issue the former a stock certificate for his
subscription despite the demand of A for a stock certificate corresponding to 25
shares which he claims have been paid. Meanwhile, the corporation has become
insolvent and A, now refuses to pay for his unpaid balance on his subscription. In
the refusal of the corporation to issue the certificate valid?
a. Not valid because there can be issued a stock certificate for the number of
shared already paid
b. Valid because the stock certificate can only be issued after the full
payment of subscription
c. Valid with respect to the unpaid portion of the subscription
d. Not valid because only delinquent shares may be denied in a stock
certificate

83. Based on the same facts. Is A correct in refusing to pay for the remaining shares,
the company being already insolvent?
a. No, under the trust 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 liability by reason thereof.
d. Yes, because he is denied of his right to receive a stock certificate

84. After dissolution but within the three-year period for liquidation a corporation’s
term may still be extended by amendment of its articles of incorporation.
The dissolution of a corporation shall take place because it has been in
continuous non-operation for five years.
a. Both statements are false
b. Both are true
c. First is false, second is true
d. First is true, second is false

85. The by-laws say provide that the holders of a majority of the outstanding capital
stock may elect all the members of the board of directors.
That it may also provide that no officer of the corporation shall be required to be
a stockholder.
a. Both statements are true
b. Both are false
c. First is true, second is false
d. First is false, second is true

86. Which of the following is not a require for a close corporation?

a. The number of stockholders shall not exceed twenty
b. That no close corporation does a stockholder thereof own 2/3 of the
voting stocks
c. There is a restriction in the transfer of shares
d. There is no public offering of shares.

87. The declaration of dividends out of the capital and not surplus profits is violation
of the doctrine of piercing the veil of corporate fiction. When the corporation is
used as alter ego or conduit to avoid the performance of an obligation is violation
of the trust fund doctrine.
a. Both statements are false
b. Both statements true
c. First is false, second is true
d. First is true, second is false
88. Majority of the following must be residents of the Philippines, except
a. Member of the board of directors
b. Members of the board of trustees
c. Incorporators
d. Officers

89. Stockholder’s meeting must be in the city or municipality where the principal
offices is located while members meeting of non-stock corporation may be
outside thereof.
The secretary of the corporation must generally be a citizen and resident of the
Philippines.
a. Both are true
b. Both are false
c. First is true, second is false
d. First is false, second is true

90. The doctrine of corporate opportunity on the unfairness of an officer or director of

a corporation taking advantage of opportunity for his own personal benefit
adverse to the corporation.
The by-laws must be filed with SEC for the corporation to acquire juridical
personality.
a. Both statements are true
b. Both are false
c. First is true, second is false
d. First is false, second is true

91. The number of trustees in the non-stock corporation may be:

a. Not less than five years but not more than fifteen
b. Not less than five but may be more than fifteen.
c. Not less than five but not more than eleven.
d. May be less than five and more than fifteen.

92. Which of the following is a limitation on proxy?

a. The proxy acquires legal titles to the shares of the stockholder
b. The proxy may attend the meeting even in the presence of the stockholder
c. The proxy as a rule for the meeting only from which it is issued
d. The proxy is not revocable at will of the stockholder

93. For de facto corporation exist, it is necessary that it is issued by the SEC,
certificate incorporation just like a de jure corporation.
In the corporation by estoppels, those who represent themselves as forming by a
corporation are liable as stockholders to third persons.
a. First statement is true, second is false.
b. First is false, second is false
c. Both are false
d. Both are true

94. The following are requirements for incorporations. Which is not?

a. Majority of them must be resident of the Philippines
b. Majority of the must be of legal age
c. They must be natural persons
d. They must be not less than five nor more than fifteen numbers.

95. To elect officers of the corporation, majority of the directors in a meeting

constituting a quorum is sufficient.
Members of Non-stock Corporation may all be without voting rights if provided for
in the articles of corporation or by-laws.
a. Both statements are false
b. Both are true
c. Only the first is false
d. Only the first is true
96. In three of the following corporate acts, dissenting stockholders have appraisal
rights except:
a. Merger or consolidation of corporations
b. Increase or decrease of capital stock, incurring, creating bonded
indebtness
c. Investment of corporate funds in another business or corporation or for
any purpose other than primary purpose
d. Disposition of all or substantially all of the corporate assets

97. Stockholders with or without voting rights may vote on the following matters
except:
a. Amendment of the articles of incorporation
b. Dissolution of the corporation
c. Election of directors
d. Adoption and amendment by-laws

98. The nationality of the corporation determined by the nationality of the

stockholders in control of the same is called:
a. Domicile test
b. Incorporation test
c. Management test
d. Control test

99. Directors and officers who approve illegal or fraudulent acts or guilty of gross
negligence or bad faith in conducting the affairs of the corporation are liable
jointly and severally.
In case of issuance of watered stock, only the directors and officers who
approved the same are liable for the “water” to the corporation and creditors but
not the stockholder who received shares.
a. Both statements are true
b. Both are false
c. Only the first is true
d. Only the second is true

100. Directors as a rule are entitled to compensation as directors but not

exceeding ten percent of the net income before tax of the preceding year.
All private corporations in the Philippines shall be incorporated under the
Corporation Code, which is general law.
a. Both statements are is true
b. Both are false
c. Only the first is true
d. Only the first is false.