Junior Philippine Institute of Accountants

Business and Accountancy Department

ACLC College of Tacloban

COMPREHENSIVE EXAMINATION 3

BUSINESS LAW AND TAXATION

MULTIPLE CHOICE

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.

1.

a) Both are true.

b) Both are false.
c) First is true, second is false.
d) First is false, second is true.
2.

a) Both are true.

b) Both are false.
c) First is true, second is false.
d) First is false, second is true.
3.

a) Both are true.

b) Both are false.
c) First is true, second is false.
d) First is false, second is true.
4. A, B, C, D, E, F and G are the duly elected directors for 2012 of FIDELITY Corporation whose articles of
incorporation provide for 7 directors. On August 1, 2012, Directors A, B, C, D, and E met to fill the two
vacancies in the board brought about by the valid removal of F for disloyalty to the corporation and the
death of G. In the said meeting, the remaining directors voted for X to replace F, and Y a son of G, to
replace his father. Both X and Y are owners of at least one share of stock of the corporation. The
election of X and Y by the remaining directors:
a) Valid for both X and Y.
b) Not valid for both X and Y.
c) Valid with respect to X, not valid with respect to Y.
d) Valid with respect to Y, not valid with respect to X.
5. Corporations are distinguished from partnerships
a) The liability extends up to private properties
b) Created by agreement
c) Interest or ownership is transferable only if the owners consent
d) No dissolution in case of death, withdrawal or resignation of the owner.
6. One of the following does not have voting rights:
a) Preferred shares
b) Redeemable shares
c) Treasury shares
d) Common shares
7. Which of the following is not a requisite for a close corporation?
a) The number of stockholder shall not exceed twenty.
b) That no close corporation has a stockholder thereof owning at least 2/3 of the voting stock. 
c) There is a restriction in the transfer of the shares.
d) There is no public offering of shares.
8. Rayermoon, after a day of rest and after her plane landed in the Philippine jurisdiction following a
surgery she underwent in Thailand and just after ruling of the court rendering an order/judgement that
he is a she, subscribe to 10,000 shares of stock of NORTHERN Corporation located at the heart of
Baguio along the foot of Session road and head of Burnham Park. She paid 25% of the said
subscription. During the stockholders meeting, can Rayermoon vote all her subscribed shares?
a. No, because the subscription has not yet been fully paid.
b. No, because A’s shares have became delinquent which cannot be voted.
c. No as to the unpaid percentage of subscription.
d. Yes, because the unpaid shares not delinquent can be voted.
9. A corporation created in strict compliance with all the legal requirements and whose right to exist as a
corporation cannot be successfully attacked in a direct proceeding for that purpose by the State is
a) De jure corporation
b) De facto corporation
c) Corporations by estoppels
d) Corporation by prescription
10. Under this theory, the nationality of corporation is that of the country whose law it was formed
a. Control test
b. Incorporation test
c. Domicile test
d. Grandfather rule
11. The operator of one of the following places is not subject to amusement tax:
a. Cockpits
b. bowling alleys
c. Racetracks
d. KTV karaoke joints
12. One of the following statements is correct. The donor’s tax return:
a) Must be filed within thirty days after the end of the calendar year.
b) Must be filed within thirty days from the date of donation.
c) Must be accompanied by a certificate of an independent Certified public Accountant if the
gross gift is P50,000 or more.
d) In the case of husband and wife making donations, one donor’s tax return shall be filed and
signed by either the husband or the wife.
13. One of the following statement is false:
a) Contracts of donation between husband and wife are void in most cases.
b) The donation by the public works contractor to a Mayor, in view of her public office is void in all
cases.
c) Donations between persons guilty of adultery or concubinage are void.
d) Donation to a conceived or unborn child is valid.
14. In computing the gross estate of a decedent:
 a) If he was a non-resident, but citizen of the Philippines, tangible and intangible properties,
regardless of location, shall be included
b) If he was a resident who was not a citizen of the Philippines, tangible and intangible properties,
regardless of location, shall be included
c) If he was a non-resident who was not a citizen of the Philippines, tangible and intangible
personal properties, located in the Philippines, shall be included
d) All above statements are correct
15. Which of the following is not included in the gross estate?
a) Revocable transfer where the consideration was not sufficient
b) Revocable transfer where the power of revocation was not exercised
c) Transfer under a general power of appointment where the consideration was not sufficient
d) Transfer under a special power of appointment
16. The gross gift if Ara is a resident and citizen of united states (without reciprocity).

a) 13,895,000
b) 8,520,000
c) 8,955,000
d) 0
17. The net taxable estate in the Philippines is:

a) 5, 840,000 b) 5, 480,000 c) 5,280,000 d) 5,820,000

18. The gross estate if the decedent was a non-resident alien (no reciprocity)-    
\

a) 1,750,000 b) 1,570,000 c) 1,735,000 d) 1,375,000

19. How much is the percentage tax payable?

a) 60,000 b) 60,450 c) 48,750 d) 75,000

20. The franchise tax of grantees of radio and/or television broadcasting whose annual gross receipts of the
preceding year do not exceed P 10 000 000 shall be:
a. 2% of the gross receipts
b. 10% of the gross receipts
c. 3% of the gross receipts
d. 12 % of the gross receipts
21. Among the properties included in the gross estate of the decedent at the time of death is a three-story
commercial building with a fair market value of P12,000,000. During the settlement of the estate and
before the last day of paying the estate tax, the said property is destroyed by fire. the fair market value
at the time of the incident was P13,000,000. Assume that 70% of the property is destroyed by fire and
the property is not insured. The deductible loss will be:
a) 9,100,000 b) 8,100,000 c) 8,400,000 d) 9,400,000
22. Value to include in the gross estate is:

a) 250,000 b) 300,000 c) 0 d) 50,000

23. The value added tax payable is:
 a) 44,280 b) 42,480 c) 60,690 d) 69,090
24. The gross estate that should be reported in the Philippines is:

a) 0 b) 2,800,000 c) 3,800,000 d) 3,000,000

25. A VAT-registered person is engaged in the sale of VAT taxable goods and at the same time is also
engaged in non-VAT business, in the same business establishment. During the quarter, the taxpayer
made sales of goods in the amount of P280,000 inclusive of VAT. The sales of the non-VAT business
amounted to P250,000 with a separate percentage tax of P6,000 for a total of P256,000. During the
same quarter, repairs in the building used in business amounted to P56,000 inclusive of VAT. Supplies
purchased for common use amounted to P11,200 inclusive of VAT. The VAT payable is:
a) 24, 600 b) 25,600 c) 0 d) 26,400
26. The gross estate if the decedent was a non-resident alien (with reciprocity)-  

a) 1,570,000 b) 1,750,000 c) 1,320,000 d) 1,230,000

27. The gross estate of Pedro is:

a) 821,000 b) 812,000 c) 816,500 d) 815,600

28. A resident citizen taxpayer is allowed to pay his income tax due on installment basis if:
a) Basic income tax is P2,000 or below
b) Basic income tax is over P2,000
c) Basic income tax is over P5,000
d) Basic income tax is over P1,000.
29. Personal property with a cost of P400,000 and a fair market value at the time of death P900,000, but
subject to a mortgage of P250,000
a) Shall be in the taxable net estate at P500,000
b) Shall be in the gross estate at the decedent’s equity of P650,000
c) Shall be in the gross estate at P400,000
d) Shall be in the gross estate at P900,000
30. Where compromise penalties is not allowed*
a) Failure to preserve or keep books of accounts and accounting records.
b) Failure to keep records of accounts or records in a native language or in English.
c) Failure to have books of accounts audited and have financial statements attached to income
tax return certified by an independent CPA.
d) Keeping two (2) sets of books of accounts or records.
31. The gross gift if Ara is a resident or citizen

a) 13,895,000 b) 8,520,000 c) 8,955,000 d) 0

32. The gross estate is:

a) 1,560,000 b) 2,660,000 c) 1,100,000 d) 3,660,000

33. Beneco is a holder of franchise to distribute and sell electricity. In a particular quarter, its gross receipts
amounted to P 2 000 000 from distribution and sale of electricity. It has also receipts from the lease of
its auditorium and theater amounting to P 600 000. The value-added tax or percentage tax due for the
quarter is.
a) P 40 000 percentage tax
b) 52 000 percentage tax
c) 72 000 value-added tax
d) 312 000 value-added tax
34. The input taxes are:

a) 67,200 b) 77,760 c) 72,000 d) 80,640

35. The business tax payable if it is not VAT-registered/VAT registered

a) P 261 000 P 48 000

b) 261 000 24 000
c) 21 000 48 000 
d) 21 000 24 000

36.

a) Both corporate acts are valid.

b) Both corporate acts are not valid.
c) The election of Y as a manager is valid; the approval of the contract with CPA Supplies is not
valid.
d) The election of Y as a manager is not valid; the approval of the contract with CPA Supplies is
valid.
37. Stock dividends differ from cash dividend in that stock dividends
a) Do not increase the legal capital.
b) Involves the disbursement of corporate funds.
c) Require the approval of both the board of directors and stockholders
d) Once received by the stockholders, are beyond the reach of corporate creditors. 
38. At the annual meeting of REY BAL-REX BANG Corporation (a distributor of the nationwide overflowing
famous coffee known as “KAPE, DOS PESOS LANG”) for the election of 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 share 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 the
corporation.*
a) E is the director because his term is one year until successor is elected and qualified.
b) F is the director for he has acquired all the shares of E.
c) Either of them shall be director.
d) Neither of them shall be director.
39. In three of the following instance, shares with or without voting rights 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.
40. Rod Bake Corporation posted a P1M profit in its realty business and its real estate has appreciated in
value in the amount of P4M despite the El Nino phenomenon that struck the northern and southern
Philippines. The board then declared dividends to its stockholders computed on the basis of P5M
representing profits and appreciation in the 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 corporate asset.
c) Not valid because dividends must 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.
41. The person whose property is transmitted through succession, whether or not he left a will
a) successor
b) legatee
c) heir
d) decedent
42. A domestic carrier by water is engaged in the transport of passengers, goods, and cargoes. It is not vat-
registered and its annual gross receipts do not exceed P3,000,000. To what business taxes is it liable?*
a) 12% value added tax
b) 3% common carrier's tax
c) 3% tax on vat-exempt persons
d) Not subject to business tax 
43. Transaction by a VAT-registered taxpayer which is not subject to VAT:*
a) Foreign currency denominated sale
b) Export sale
c) Transaction deemed sale
d) Sale of services rendered in foreign countries 
44. Which of the following statements is not correct?*
a) Transitional input tax is 2% of the value of the inventory or the actual VAT paid, whichever is higher
b) Amounts received from services performed by an individual pursuant to an employer- employee
relationship are exempt from VAT
c) Export sales by VAT registered persons are not subject to VAT
d) Export sales by persons who are not VAT-registered are VAT exempt
45. One of the following is not subject to vat on importation*
a) Goods brought into the Philippines in the course Of trade or business by vat registered person.
b) Goods brought into the Philippines not in the course of trade or business by a person who is not vat
registered.
c) Tax free goods imported by tax-exempt importer who transferred them to a person who does not
enjoy exemption from vat on importation.
d) Goods exempt from customs duties classified as personal and household effects belonging to
residents of the Philippines returning from abroad. 

46. Which of the following statements is incorrect?*

a) A taxpayer whose annual gross sales and/or receipts exceed P 3,000,000 shall pay VAT even if he
is not VAT-registered.
b) A taxpayer whose annual gross sales and/or receipts do not exceed P 3,000,000 but who is VAT-
registered shall pay VAT.
c) Percentage tax may be imposed together with VAT.
d) Percentage tax may be imposed together with excise tax.
47. Which of the following statements is correct? A donation inter vivos by husband and wife, jointly during
the marriage*
a) Is a donation of conjugal property that will require one computation of the donor’s tax, if the
spouses are under the system of conjugal partnership of gains.
b) Is a donation of community property that will require one computation of the donor’s tax, if the
spouses are under the system of absolute community of property.
c) Is a donation of exclusive property by the either spouse that will require one computation of the
donor’s tax, if the spouses are under the system of conjugal partnership of gains.
d) Is a donation of each spouse to the extent of one-half that will require separate computation for two
donor’s taxes, under whichever property relationship exists between the spouses.
48. Choose from the following:

a) True; True
b) False; False
c) True; False
d) False; True
49. Shares of stock held as investment when sold through the local stock exchange shall be subject to:*
a) 6/10 of 1% based on gross selling price or gross value in money.
b) 12% VAT based on gross income.
c) 5% on first P 100 000 capital gain; 10% on excess of P 100 000.
d) 4%; 2%; 1% based on gross selling price or gross value in money.
50. On January 1, 2018, Pedro purchased a condominium unit including a parking space worth P4,200,000
from Maxima Realty Corporation. The value of the condominium unit, as stated in the contract of sale
was P3,200,000 while the parking space was worth P1,000,000. The transaction is*
a) Exempt from vat
b) Subject to vat
c) Subject to zero percent (0%) vat
d) None of the above