07/28/12

FIRST PRE-BOARD EXAMINATION

July 28, 2012
1. A owes B P100,000 which is already due and demandable. Later, through violence
and intimidation, A forced B to sign a promissory note which reads I promise to
pay A P150,000 on April 10,2012. Sgd. B. On April 10, 2012, how much can A
collect from B?
a. P50, 000
b. P100,000
c. P150,000
d. 0
2. Using
a.
b.
c.
d.

the above facts, on April 10, 2012, how much can B collect from A?
P50, 000
P100,000
P150,000
0

3. Using the facts in no. 1, If A assigns the promissory note to C without the
knowledge of B, how much can C collect from B?
a. P50, 000
b. P100,000
c. P150,000
d. 0
4. If B assigns his credit to D without the knowledge of A, how much can D collect
from A?
a. P50, 000
b. P100,000
c. P150,000
d. 0
5. Assume that the obligation of A to B is not yet due, and A assigns the promissory
note to C on April 10, 2012 without the knowledge of B, how much can C collect
from B?
a. P50, 000
b. P100,000
c. P150,000
d. 0
6. Dolo as distinguished from culpa
a. The action to enforce liability maybe waived
b. Responsibility arising therefrom is demandable
c. There is deliberate intention to cause damage to another
d. Liability maybe reduced by the courts
7. In payment of the merchandise purchased, A makes a promissory note which
reads I promise to pay B P100,000. Sgd. A. Later, B transfers the note to C. Then
Y stole the note from C and Y transfers the note to D who acquired the note in
good faith. Which of the following statements is correct?
a. A is liable to D
b. C can collect from A
c. B is liable to C
d. D can collect from C

8. Which of the following statements is true?

1

07/28/12
a. An obligation subject to a condition is demandable on the day the condition
is fulfilled
b. A person who is civilly liable is also criminally liable
c. In dacion en pago, the debtor must be solvent
d. A waiver of an action for fraud is void
9. On April 10, 2012, A offered to give B his only cow if B will pass the May 2013 CPA
Board Examination. B accepted the offer by sending a letter of acceptance dated
April 12, 2012, which was received by A on April 20, 2012. On April 16, 2012, A
was admitted to the Center for Mental Health due to insanity. On November 24,
2012, A was declared to be of sound mind, and on May 26, 2013, the results of
the CPA Board Examination show that B passed. On May 28, 2013, the cow gave
birth. The contract between A and B is
a. Perfected on April 10,2012 because the condition is fulfilled
b. Perfected on April 12,2012, the date the acceptance was made
c. Perfected on April 20,2012, the date A received the letter of acceptance
d. Without any effect
10. Using the above facts, who has the right over the cow and the young cow?
COW
Young COW
a.
A
A
b.
B
B
c.
B
A
d.
A
B
11.A, B, and C are solidary debtors sharing 1:2:3 of solidary creditors W and Y
sharing 1:2. The obligation is P12,000. If B is a minor and C is insolvent and W
condones the obligation of A without the consent of Y, how much can W collect
from A?
a. P8,000
b. P6,000
c. P2,000
d. P0
12.How much can Y collect from A?
a. P4,000
b. P6,000
c. P2,000
d. P0
13.A borrowed P100,000 from B. The loan was secured by a mortgage of As land in
favor of B. Without the knowledge of A, C paid B the sum of P100,000 for As debt.
As a result
a. C is entitled to get reimbursement from A but did not acquire the right to
foreclose the mortgage
b. C cannot claim reimbursement from A in as much as the payment was
made without the knowledge of A
c. C can recover the amount from A because there is legal subrogation
d. The obligation of A to B was extinguished and A should reimburse C the
amount of P100,000 otherwise C can foreclose the mortgage

14.A is obliged to give B either objects No.1 or No.2 or No.3 at As option. Before A
communicated his choice to B, object No.1 had been destroyed, thru As fault and
object No.2 had been destroyed by a fortuitous event. B may
a. Demand object No.3 only as it is still available
2

07/28/12
b. Demand the price of object No.1 only plus damages because it was
destroyed by As fault
c. Demand the value of object No.1 or object No.3 but without damages
d. Demand either object No.3 or the price of object No.1 plus damages
15.A is indebted to creditors B, C, and D, for P90,000. Without the knowledge of B
and C, D remitted the obligation of A. As a result
a. The obligation of A to pay P90,000 is extinguished
b. The obligation is not extinguished because there is no consent from B and
C
c. The obligation is extinguished only up to P30,000
d. The obligation is extinguished up to P60,000
16.Which of the following is valid stipulation?
a. A promises to give B P10,000, and if A fails, A will allow B to have sexual
intercourse with her
b. A will give B P10,000, if B will kill C
c. A agreed to give B a house and lot if B will be his mistress
d. A agreed to put poison on the food of Bs wife and if A fails, to pay B
P10,000 for damages
17.The debtor shall lose every right to make use of the period,
a. When after the obligation has been contracted, he becomes insolvent, even
if he gave a guaranty or security for the debt
b. When he does not furnish to the creditor any guaranty or security for the
debt
c. When through fortuitous events or by his own acts the guaranties or
securities have been impaired
d. When the debtor violates any undertaking in consideration of which the
creditor agreed to the period
18.On July 4, 2012, A, a movie producer, met B, a movie actress at the lobby of
Manila Hotel. A informed B that she is producing a movie, the filming of which
would start on September 1, 2012 and that she was offering B the lead role for a
fee of P1,000. B accepted the offer and shook hands with A to steal their
agreement and A gave B a check for P200 as initial payment. On September 1,
2012, A called B for the shooting of the movie but B refuses to honor the
agreement saying that it was not enforceable, not being in writing. Which is
correct?
a. A can enforce the contract against B because it was mutually agreed upon
b. A can require B to shoot the movie because B had accepted benefits under
the contract
c. B may just return the payment because the agreement was made orally
d. B is not bound under her agreement with A because the contract involves
an obligation to do
19.I. Condonation or remission is essentially gratuitous and needs the acceptance of
the debtor
II. In delegacion and expromission, the insolvency of the new debtor will revive
the original
debtors obligation if the latter is aware of the insolvency of the new debtor.
a. True, True
b. True, False
c. False, True
d. False, False

07/28/12
20.A owes B P10,000. Later A paid B P7,000 leaving a balance of P3,000. C, a suitor
of A, paid B the sum of P10,000 thinking that A still owed B that amount. C did
this with the consent of A. Which is correct?
a. C can recover P10,000 from A
b. A cannot recover anything from B
c. A can recover P10,000 from B
d. C can recover P3,000 from A
21.A, B, and C are solidarily indebted to D for P90,000 representing the purchase
price of 1 gram of shabu but As consent has been obtained by violence and
intimidation, and B is a minor. How much can D collect from C?
a. P9,000
b. P6,000
c. P3,000
d. P0
22.Paul borrowed P2,000 from Juan on January 23, 2011. He executed a promissory
note promising to pay the indebtedness on January 23, 2012. Upon arrival of the
designated date for payment, is demand necessary in order that Paul shall incur
delay?
Answer I Yes, because the law or obligation should expressly add the obligor
shall incur in
delay if he fails to fulfill the obligation upon the arrival of the
designated date.
Answer II No, there was a stipulation that the indebtedness shall be paid on
a designated
date and therefore upon the arrival of such date, demand shall
not be necessary.
a. True, True
c. False, True
b. True, False
d. False, False
23.On January 23, 2010, A borrowed P10,000 from B. The debt is evidenced by a
promissory note signed by A, as principal debtor, and by C as guarantor, by virtue
of which it was promised that the entire debt shall be paid on January 23, 201.
When the note matured, X, a third person paid the entire debt of P10,000 to B.
The payment was made with the consent of A. what are the rights of X as a result
of the payment?
Answer I X should demand reimbursement from C of the entire amount
which he has paid
to B because there is legal subrogation
Answer II X is now subrogated to all the rights of B, not only against the
debtor but even
against third person, such as those arising from a guaranty,
mortgage or penalty.
a. True, True
b. True, False
c. False, True
d. False, False
24.Using the above data, suppose on July 23, 2010, the creditor B had condoned
of the debt and subsequently on January 23, 2011, X, a third person paid the
entire amount of P10,000 to B, who accepted it. The payment was made without
the knowledge and consent of A, which of the following is not correct?
a. X can demand reimbursement of P50,000 from A
b. X can recover P5,000 from B
c. If X proceeds against A for reimbursement and A cannot pay by reason of
insolvency, X can proceed against the guarantor, C for reimbursement
d. If payment of an obligation is made by a third person without the
knowledge of against the will of the debtor, the third person who paid can
4

07/28/12
demand reimbursement from the debtor only to the extent that the latter
had been benefited by the payment.
25.A is indebted to B in the amount of P50,000, with C as guarantor. On due date, A
tendered payment to B but B refused. Because of Bs refusal A deposited the
amount in court. After the approval of the consignation, A withdraws the money
with the consent of B. Which is correct?
a. B lost the right to collect as As obligation is extinguished
b. B lost all the preference she might have over the amount deposited but C is
still liable as guarantor
c. B lost his right to collect from A and consequently lost also her right to
collect from C
d. B lost all his preference she might have over the amount deposited and C
as guarantor was likewise released from liability
26.On January 2, 2012, A sold to B specific car for P800,000. On May 2, 2012, the car
was totally destroyed which was traced to a crack in the engine block already
existing on January 2, 2012. A was not aware of the defect. Is A liable to B?
a. No, because A was innocent and a seller in good faith
b. No, because B has all the opportunity to examine the car before buying it,
applying caveat emptor policy
c. Yes, A is liable to return the price and expenses incurred by B
d. Yes, A is liable to return the price, expenses and to pay interest and
damages to B
27.A obliges himself to give B his car if B tops the October 2012 CPA Examination.
Then B enters into a contract to sell to C the car which he hopes to acquire from
A. As a result
a. The obligation of A is valid but the contract to sell is void
b. The obligation of A and the contract to sell are void
c. If B does not top the examination, the contingency is not fulfilled and he
does not get the car, the sale is deemed extinguished
d. If B does not top the examination, the sale remains valid
28.A and B entered into a contract with C. As consent was obtained only because B
had deceived or defrauded A. May A ask for annulment of the contract with C?
a. Yes, because the contract is voidable
b. Yes, because the consent of A was vitiated
c. No, because C was not a party to the fraud
d. No, unless B will also give his consent
29.Chattel mortgage as distinguished from paco de retro sale
a. A principal and independent contract
b. The title and possession are transferred to the vendee
c. Cannot appropriate the property mortgaged, nor disposed of it
d. Seller may exercise the right to repurchase
30.A 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. A 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?
Statement 1 No, the foreclosure of the piano extinguishes Bs obligation
Statement 2 Yes, even if there is no stipulation
a. Both statements are true
b. Bothe statements are false
c. Only statement 1 is true
d. Only statement 2 is true
5

07/28/12

31.An agricultural land is owned by A and D pro-indiviso. D sells his part to R, who
is the owner of the adjoining land. When A learned of the sale, he tried to redeem
the portion sold by D reimbursing R with the purchase price and expenses. Which
is not correct?
a. A can compel R to permit redemption
b. A co-owner of a thing may exercise the right of redemption in case the
shares of the other co-owners or any one of them are sold to a third person
c. The sale to R is valid but A can elect to exercise his right of redemption
d. The sale to R is valid and as adjoining land owner he is the one entitled to
redemption
32.In case the seller forecloses the chattel mortgage due to buyers default in two
installments and there is deficiency, can the seller recover from the buyer?
a. Yes, if stipulated
b. No, even if stipulated
c. Yes, whether or not there is stipulation
d. No, unless stipulated in writing
33.Statement 1 Commodatum is essentially gratuitous
Statement 2 Unenforceable contracts cannot be assailed by third persons.
a. Both statements are true
b. Both statements are false
c. Only statement 1 is true
d. Only statement 2 is true
34.X alleged that Y promised to give X one hectare of land. This is in consideration of
Xs meritorious service to Y. Y pleads in defense that since the promise was not in
writing, it is unenforceable under the Statute of Frauds. Which is correct?
a. The promise is unenforceable because it is not in writing
b. The Statute of Frauds is applied because X has rendered services already
c. The Statute of Frauds is inapplicable here, because the promise to give the
land and not a sale of real property
d. The Statute of Frauds can apply to partially executed contract
35.When the obligation imposes reciprocal prestations upon the parties, the fruits
and interests during the pendency of the condition
a. Shall belong to the debtor
b. Shall belong to the creditor
c. Shall be deemed to have been mutually compensated
d. Shall be determined by the courts
36.A married B in January of this year. In November, B gave birth to quadruplets. B
and two of the quadruplets died 2 days after the delivery and another child died
in January of the following year. What is As basic personal exemption for the
year?
a. P100,000
b. P125,000
c. P150,000
d. P75,000
37.One of the following is not an essential characteristic of taxation
a. Inherent power of the state
b. Exercised by the law making body of the state
c. It exists even without any constitutional grant
d. It is supreme, plenary, comprehensive and without limitation
38.A sold his residential lot, a capital asset for P2,000,000. The said lot was acquired
in 2000 at a cost of P1,700,000. The fair market value of the property as
6

07/28/12
determined by the BIR is P2,200,000 but the fair market value as shown in the
schedule of values of the City Assessors is P1,950,000. The entire proceeds were
utilized for the acquisition of As principal residence. The final tax due is
a. P120,000
b. P132,000
c. P117,000
d. P0
39.Using the above data, but only P1,600,000 was utilized for the acquisition of As
residence, the final tax due is
a. P24,000
b. P26,400
c. P120,000
d. P132,000
40.A has 4,000 shares of investment in the common shares of Delightful Corporation,
costing P500,000. During the current taxable year, he received from the
Delightful Corporation, 200 shares of Cheerful Corporation with a par value of
P100 per share as dividends. At the date of dividend declaration, the fair market
value of Cheerful Corporation was P120 per share and by the time he received the
dividend, the fair market value was P180/share. The dividend is
a. Subject to final tax
b. Exempt from income tax
c. Part of taxable income
d. A stock dividend
41.This is non-deductible interest expense
a. Interest paid on indebtedness incurred to finance petroleum exploration
b. Interest paid by a corporation on scrip dividends
c. Interest paid by a corporate taxpayer who is liable on a mortgage upon real
property of which the said corporation is the legal or equitable owner
d. Interest paid on tax deficiency if the tax where the interest is in itself an
item that is deductible from gross income
42.This is a deductible interest expense
a. Interest on deposits paid by authorized banks of the BSP to depositors, if it
is shown that the tax on such interest was withheld and paid
b. Interest paid on indebtedness between related taxpayers
c. Interest paid on preferred stock
d. Interest paid when there is no stipulation for the payment thereof
43.The taxpayer is not allowed to claim exemptions
a. Recognized natural son who celebrated his 21 st birthday January 1 of the
taxable year
b. Legally adopted daughter, 25 years old but incapable of self-support due to
mental defect
c. Illegitimate son, minor who died January 1 of the taxable year
d. Legitimate daughter who got married on December 30 of the taxable year,
one day before she turned 22
44.The following, except one are the basic principles of a sound tax system. The
exception is
a. It should be capable of being effectively enforced
b. It should consider the taxpayers ability to pay
c. It is generally payable in money
d. The sources of revenue must be sufficient to meet government
expenditures and other public needs
45.This is not a requisite for business expense to be deductible
a. It must be reasonable
b. It must be paid during the taxable year
7

07/28/12
c. The withholding tax otherwise required have been deducted and remitted
to the BIR
d. It must be ordinary and necessary
46.A, married, died on January 1, 2012. She left an estate with a fair market value of
P4M. During the year, the estate had a gross income of P800,000 and related
expenses of P300,000. The administrator gave P200,000 to B and another
P200,000 to C, As beneficiaries, 50% of the amounts given to B and C came from
the income of the estate and other 50% came from the estate. The net taxable
income of the estate is
a. P80,000
b. P250,000
c. P280,000
d. P268,000
47.Using the above data, assume that B is married, with gross income of P400,000
and business expenses of P250,000, his net taxable income is
a. P200,000
b. P300,000
c. P250,000
d. P350,000
48.As a rule, which of the following is subject to 10% tax on net income
a. Dividend received by a resident citizen from a domestic corporation
b. Royalty income from musical composition received by a resident alien
c. Off-shore banking units
d. Proprietary educational institutions
49.A, a rank and file employee, married, with five qualified dependent children
received the following during the calendar year 2011:
Composition income (net of payroll deduction)
P230, 000
Rice subsidy
20,000
Medical allowance
12,000
Christmas cash gift
8,000
Mid-year bonus
12,000
13th month pay
12,000
Monetized leave credit (12 days)
12,000
Payroll deduction:
Creditable withholding tax
20,000
SSS Premium contributions
3,600
Philhealth premiums contribution
1,200
Pag-ibig premiums contribution
1,800
Union dues
2,400
Health & hospitalization insurance premiums
3,000
a. The taxable income of A is
a. P106,000
b. P103,600
c. P101,600
d. P97,600

50.Based on the above data, the deductible expense of the employer is

a. P338,000
b. P335,000
c. P326,000
d. 331,000
8

07/28/12
51.Mr. A, single received the following during the taxable year:
Proceeds of his lifetime insurance paid at an annual premium of P15,000 within 25
years
P2M
Proceeds of his mothers life insurance paid at annual premium of P10,000 within
20 years
1M
House and lot inherited from his mother
4M
Rent income from inherited properties
200,000
For income tax purposes, how much of the above items must be included in his
gross income?
a. P2,200,000
b. P1,200,000
c. P200,000
d. P1,825,000
52.The inherent power of the sovereign state to legislate for the protection of the
health, welfare and morals of the community is
a. Power of eminent domain
b. Power of taxation
c. Police power
d. People power
53.Mrs. A took out a life insurance policy for P500,000 naming her son as beneficiary.
Under the terms of the policy, the insurer, Filipinas Insurance Corporation will pay
Mrs. A the amount of P500,000 after the 25th year of the policy, or her beneficiary
should she die before that date. Mrs. A outlived the policy and received the
proceeds. The premium paid on the policy was P400,000. The proceeds from the
life insurance policy of Mrs. A is
a. Exempt from income tax
b. Taxable to the extent of P100,000
c. Taxable in full
d. Taxable to the extent of P400,000
54.D Co. took two life insurance policies on the life of its Executive Vice-President,
Mrs. E. In one policy, the beneficiary is the corporation and the other, designates
Mr. F, the EVPs husband, as revocable beneficiary. The insurance premiums paid
by D Co. is
a. Deductible, only in so far as the first policy is concerned
b. Deductible for both policies
c. Not deductible for both policies
d. Deductible in so far as the second policy is concerned

55.C, married had the following transactions:

2011 Taxable income from business
P70,000
Dividends received from:
Resident corporation
9

07/28/12
3,000
Non-resident corporation
1,000
Interest from bank deposit
10,000
Interest from trade receivable
14,000
Capital gain on assets held for 6 months
34,000
Capital loss on assets held for 10 months
70,000
2012 Taxable income from business
40,000
Capital gains on capital assets held for 18 months
46,000
Capital loss on assets held for 9 months
6,000
Amount received as liquidating dividend (cost = P100,000)
held for 20 months
150,000
The taxable income before personal exemption in 2012 is
a. P62,000
b. P71,000
c. P72,000
d. P46,000
56. Using the above data, if the taxpayer is a corporation, taxable income in 2012 is
a. P78,000
b. P130,000
c. P86,000
d. P94,000
57.A and B are partners in AB and Co., a general professional partnership, and share
profit and loss in the ration of 40% and 60%, respectively. If the net income of the
partnership is P1,500,000, which of the following is correct?
a. The respective share of A and B in the partnership net income is subject to
10% final withholding tax
b. The respective share of A and B in the partnership net income is subject to
10% creditable withholding tax
c. The partnership shall withheld a combined creditable withholding tax
amounting to P195,000
d. The net distributive share of A is P540,000 and of B is P810,000
58.Acting on the information given by A, the government seized and confiscated
smuggled goods with a fair market value of P40M. A received his reward
amounting to
a. P4M
b. P3.6M
c. P900,000
d. P1M
59.Which of the following statements on fringe benefits is correct?
a. Not part of the taxable income of the employees
b. Part of the taxable of the employees
c. The monetary value is subject to fringe benefits tax
d. Maybe given to employees regardless whether managerial, supervisor or
rank and file

10

07/28/12

60.A general professional partnership and its partners are subject to the following
rules, except
a. The general professional partnership is not subject to income tax
b. The partners shall be liable for income tax only in their separate or
individual capacities
c. Each partner shall report as gross income his distributive share in the
partnership net income
d. The share of the partner shall be subject to a creditable withholding tax of
10%
61.The ABC Bank is a domestic bank of authorized by the BSP to operate as a foreign
currency deposit unit. For the year 2011, it earned interest income of P100,000
from the foreign currency transactions with non-residents OBUs, and the other
FCDUs. The rate of tax applicable to such interest income is
a. 20%
b. 25%
c. 10%
d. 7.5%
62.A cash dividend of P100,000 received by a taxpayer in 2012 from a foreign
corporation whose income from Philippine sources is 50% of its total income is
Statement 1 Partly taxable if he is a resident citizen
Statement 2 Partly taxable if he is a non-resident alien
a. Both statements are true
b. Both statements are false
c. Only statement 1 is true
d. Only statement 2 is true
63.
A, and B, both rank and file employees received the following during the
month (the statutory minimum is P10,000/month)
A
B
Salary, gross
P10,000
P11,000
Overtime pay
5,000
2,000
Holiday pay
1,000
800
Night shift differential
2,000
1,200
Hazard pay
3,000
1,000
Total
P21,000
P16,000
How much will be included in As taxable income?
a. P0
b. P11,000
c. P10,000
d. P21,000
64.Statement 1 Amounts received by reason of involuntary separation remain
exempt from income tax unless the official or employee at the time of separation,
has rendered less than ten years of service and/or is below fifty years of age
Statement 2 Any amount received by an official or employee or by his heirs
from the employer due to death, sickness or other physical disability or for any
cause beyond the control of said official of employee, such as retrenchment,
redundancy, or cessation of business are exempt from income tax
a. True, True
b. True, False
c. False, True
d. False, False

11

07/28/12

65.This income is subject to final tax

a. Fringe benefits given to employees of a domestic corporation
b. Marriage fees, baptismal offerings received by a clergyman, evangelists or
religious workers for services rendered
c. Dividend income from a domestic corporation by a non-resident foreign
corporation
d. Share of an individual taxpayers from the distributable net income of a
general professional partnership
66.Police
a.
b.
c.
d.

power is different from the taxation power because

It involves taking of property
The amount collected is limited to the cost of regulation
It is an inherent power of the state
The benefit derived is the protection given by the state

67.The monetary value of this fringe benefit is 100% of the value of the fringe
benefit
a. The employer purchases the motor vehicle for the use of the employee
b. The employer provides the employee with cash for the purchase of a motor
vehicle in the name of the employer
c. The employer purchases the car in the name of the employee
d. The employer owns and maintains a fleet of motor vehicles for the use of
the business and the employees
68.Which of the following is a correct nature of restriction (limitation) to exercise
taxation power?
Constitutional
Inherent
a. Territorial jurisdiction
NO
YES
b. International comity
YES
NO
c. Rule of uniformity and equity
YES
YES
d. Due process of law
NO
NO
69.Which of the following is a qualified dependent?
a. A legitimate child who became of legal age last year
b. An illegitimate child who became a mother last year at age of 21
c. A legally adopted child who got married last year
d. A legitimate child who died last year at age 15
70.The levying or imposition of tax and the collection of the tax are processes which
constitute the taxation system, known as the
a. Basis of taxation
b. Scope of taxation
c. Aspects of taxation
d. Nature of taxation

12

07/28/12
ANSWERS: (JULY 28, 2012)
1. A
2. D
3. A
4. D
5. C
6. C
7. B
8. C
9. D
10.A
11.B
12.B
13.A
14.A
15.C
16.A
17.D
18.A

19.B
20.A
21.D
22.B
23.C
24.C
25.D
26.C
27.C
28.C
29.C
30.D
31.D
32.B
33.A
34.C
35.C
36.C

37.D
38.B
39.D
40.A
41.A
42.A
43.D
44.C
45.B
46.B
47.A
48.D
49.A
50.A
51.D
52.C
53.B
54.D

13

55.D
56.B
57.C
58.C
59.D
60.D
61.C
62.D
63.A
64.C
65.C
66.B
67.C
68.A
69.A
70.C

71.
72.
73.