CPAR

CPA Review School of the Philippines

FINAL PRE-BOARD EXAMINATION APRIL 2021

Regulatory Framework for Business Transactions

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

1. 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.

2. ABC Corporation issued redeemable shares. Under the terms of the issuance, the shares shall be redeemed at
the end of 10years 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

3. 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.

4. 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

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5. 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

6. A stale check is a check

a. That cannot anymore be paid although the underlying obligation still exists
b. That cannot anymore be paid and the underlying obligation under the check is also extinguished
c. That can still be negotiated or indorsed so that whoever is the holder can claim payment therefrom
d. Which has not been presented for payment within a period of 30 days

7. 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

8. 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

9. 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

10. 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

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11. 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

12. 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.

13. 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”

14. 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

15. 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

16. 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

17. 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 sublease 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

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18. 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

19. 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

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

21. The following are examples of real contracts, except

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

22. 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

23. 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

24. 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.

25. Consider these two instruments:

(no date)
I. “ I promise to pay B or order P10,000, 30 days after date”. Sgd. A.

II. “Pay to the order of B P10,000, 30 days after sight”. Sgd. A

a. Only I is negotiable b. Only II is negotiable c. Both are negotiable d. Both are non-negotiable
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26. S sold his car to B on installments and a chattel mortgage was constituted on the car. B defaulted in two
installment payments. S foreclosed the chattel mortgage and sold the car at a public auction. If there is
deficiency, can S 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

27. B borrowed P100,000 from S secured by a chattel mortgage on B’s car. The debt is payable in installment.
When B defaulted in 2 installment payments, S foreclosed the chattel mortgage and sold the car at a public
auction. If there is excess, who is entitled to the excess?
a. S, even without stipulation c. S unless there is stipulation
b. B, only if there is stipulation d. B, even without stipulation

28. B pledged his ring to S. B failed to pay his obligation. S sold the ring at a public auction. If there is deficiency,
can S recover the deficiency?
a. Yes, if there is stipulation c. Yes, even without stipulation
b. No, even if there is stipulation d. No, unless there is stipulation

29. Real estate mortgage as distinguished from pledge

a. The sale of the thing extinguishes the obligation c. The creditor bears the deficiency
b. The debtor is entitled to the excess of the proceeds d. Possession of the thing is with the creditor

30. 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

31. Will require stockholders 2/3 approval

a. Election of corporate officers c. Granting of authority to the board to amend the by-laws
b. Election of members of the board d. Amendment of by-laws

32. 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

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

34. A, B and C are partners who contributed P30,000, P15,000 and industry, respectively. After payment of all
liabilities and expenses only P18,000 remain as partnership assets. A will get
a. P9,000 b. P12,000 c. P6,000 d. P5,000

35. Using the above statement, but the assets amount to P60,000, B will get
a. P15,000 b. P20,000 c. P18,750 d. P22,500

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36. Where the language of the instrument is ambiguous or there are omissions therein, the following rules of
construction apply, except:
a. Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat
it as either at his election
b. Where a signature is so placed upon the instrument that it is not clear in what capacity the person making
the same intended to sign, he is to be deemed an indorser
c. Where the instrument provides for the payment of interest, specifying the date from which interest is to
run, the interest runs from the date of the instrument, and if the instrument is undated, from the issue
thereof
d. Where there is a conflict between the written and printed provisions of the instrument, the written
provisions prevail.

37. 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

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

38. 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 delivery
c. Entitled to the payment of the price based on the fair market value at the time of perfection of the contract
of sale
c. Not entitled to payment of the price because the price has not yet been fixed as agreed upon

39. The principle of “caveat emptor” or let the buyer beware will not apply in
a. Sheriff’s sale c. Auction sales
b. Sales of animals in pairs d. Sales of livestock as condemned

40. A is the listed owner of 10,000 with par value of P100/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 P1M

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41. A gave B P50,000 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

42. 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

43. A and B entered into a universal partnership of all present property. No stipulation was made regarding
future property. After the perfection of the contract, A inherited a parcel of land and B acquired a car as
remuneration for services rendered. The properties acquired after the perfection of the contract belong to
Land Car Land Car
a. A B c. Partnership B
b. A Partnership d. Partnership Partnership

44. 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

45. 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 Resignation Expiration of term Increase in the number of Directors
a. Stockholders Board Stockholders Board
b. Board Board Stockholders Stockholders
c. Stockholders Board Stockholders Stockholders
d. Stockholders Stockholders Board Stockholders

46. A, B and C organized ABC and Co, limited, a limited partnership with A as a general partner, B as a limited
partner, and C as an industrial partner, contributing P200,000, P200,000 and industry respectively. The
partnership failed and after disposing all its assets to pay partnership debts, there still remains a note
payable in the sum of P30,000. Against whom can the creditor demand payment?
A B C A B C
a. P30,000 P0 P0 c. P10,000 P10,000 P10,000
b. P15,000 P0 P15,000 d. P15,000 P15,000 P0

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

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49. Which of the following statements is true?
a. Unless otherwise agreed upon by the parties, the sale of the mortgaged property extinguishes in full the
obligation of the mortgagor to the mortgagee
b. Pledge and mortgage are considered principal contracts
c. When the obligation is secured by a pledge or mortgage and it is not paid when due, the pledgee or
mortgagee may dispose the collateral even if there is no agreement to that effect between the parties
d. In both pledge and mortgage the creditor is entitled to deficiency judgment

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

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

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

53. 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

54. May a stock certificate be issued before full payment?

Statement 1 – No, in case of stock with par value
Statement 2 – Yes, in case of stock without par value
a. True, true b. True, false c. False, true d. False, false

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

56. A, B, C and D are general partners contributing P20,000, P30,000, P50,000 and industry respectively. At the
time of liquidation, the partnership is indebted to Y for P50,000, to partner A for P30,000 and to partner B
for P20,000. If the assets of the partnership amount only to P20,000, which of the following is correct?
a. Y can collect P20,000 from the partnership and from partners A, B and C at P10,000 each
b. After exhausting the assets of the partnership amounting to P20,000, Y can collect from partners A, B,
C and D at P7,500 each
c. Y can collect P20,000 from the partnership and P30,000 from either partners A or B or C or D
d. If Y succeeds in collecting the P30,000 from the separate properties of the partners concerned,
partners A, B and C will be required to make additional contribution

57. 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

58. 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

59. 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 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

60. 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

61. 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

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62. 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

63. The following statements pertain to a voting trustee, except

a. The representative acquires legal title to the shares
b. It is good only for the meeting for which it was intended
c. It is generally irrevocable and the representative may vote even in the presence of the stockholder
d. The agreement giving the representative the power to vote must be duly notarized and a copy thereof
must be submitted to the SEC to be effective and enforceable

64. 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. Both resolutions are valid and do not need stockholders approval
b. Both resolutions are valid but need stockholders approval
c. Resolution A needs stockholders approval. Resolution B is valid
d. Resolution A is not valid. Resolution B needs stockholders approval

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

66. Subscription as distinguished from purchase of stock

a. Maybe made before or after the incorporation
b. Governed by the Statute of Frauds if the price is at least P500.00
c. Can vote only on the shares he has paid
d. Does not become a shareholder until he has paid the purchase price

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

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68. Which of the following statements is not correct?
a. An agreement to constitute a commodatum is binding and is perfected from the moment there is
meeting of minds
b. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by
the provisions concerning mutuum.
c. Precarium is a kind of commodatum where the bailor may demand the thing loaned at will
d. In case of extraordinary expenses, the debtor in mutuum will shoulder 50% if he is in actual use of the
thing borrowed.

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

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

The End!

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