TEST BANK

PARNERSHIP & CORPORATION

FR: DIAZ
PARTNERSHIP
1. All present properties are contributed
A. Universal partnership[
B. General partnership
C. Limited partnership
D. None of the above

2. Composed of capitalist and industrial partners

A. Universal partnership
B. General partnership
C. Limited partnership
D. None of the above

3. Partners shall enjoy practically all the profits:

A. Universal partnership[
B. General partnership
C. Limited partnership
D. None of the above

4. They have no voice in the management of partnership affairs:

A. Managing partners
B. Silent partners
C. Both A and B
D. None of the above

5. They have priority if the partnership is insolvent:

A. Separate creditors
B. Partnership creditors
C. Both A and B
D. None of the above

6. May contribute money, property or industry to the common fund:

A. Both general and limited partners
B. Limited partner
C. General partners
D. Capitalist partners

7. One who takes charge of the winding up to partnership affairs upon dissolution:
A. Silent partner
B. General partner
C. Ostensible partner
D. Liquidating partner

8. A, B and C are partners. A contributed his services only; B, P20,000; and C, P10,000.The
 partnership was liquidated. After payment of the partnership’s obligation, only P9,000
worth
of assets remained. The share of A will equal to:
A. P3,000
B. Equal of share of B
C. Equal of share of C

9. A and B entered into a universal partnership of all present property. The common
property of
the partnership shall be:
A. All the properties which belonged to each of the partners at the time of the
constitution of the partnership.
B. All the properties which belonged to each of the partners after the constitution of the
partnership.
C. All the properties which belonged to each of the partners at the time of the
constitution of the partnership as well as the profits which they may acquire
therewith.
D. All the properties which belonged to each of the partners at the time of the
constitution of the partnership as well as the profits which they may acquire
thereafter.

10. A capitalist partner engaged for his own account in an operation which is of the kind of
business in which the partnership is engaged. Said partner can be
A. Compelled to sell his interest in the partnership to the other capitalist partners.
B. Compelled to dissolve or discontinue the operation of his business
C. Compelled to bring to the common funds of the partnership any profits accruing
to him from his transactions.
D. Denied his share in the profits of the partnership.

11. If a partner in a partnership is insolvent, the first order of preference in the distribution of
his
assets are:
A. Partnership creditors
B. Partners contribution to the partnership
C. Separate creditors of the debtor
D. Pro-rata between the separate creditors of the debtor and the partnership creditor

12. A, B and C are partners in a partnership. C contributed his industry. After payments of
the
partnership’s obligations, only P6,000 cash remains. No other assets. In the absence of
terms
to the contrary, the share of C in the remaining assets is:
 A. Equal to share of A
B. Equal to the share of B
C. P2,000
D. Nothing

13. X, Y and Z are equal partners of Xyz Partnership. A owes the XYZ Partnership for
p9,000.
Z, a partner collected from A, P3,000 before X and Y received anything. Z issued a
receipt
on the P3,000 as his share of what A owes. When X and Y collected from A, A was
insolvent.
A. Partner Z shall share partners X and Y with the P3,000
B. Z cannot be required to share X and Y with the P3,000
C. X and Y should first exhaust all remedies to collect from A.
D. X and Y can automatically deduct from the capital contributions of Z in the
partnership their respective share in the P3,000

14. A and B are partners in a real estate partnership . The partnership owns a piece of land
which
C desired to buy. C contacted A and inform him of his desire to buy the land and A did
not
tell to B about it. A bought B out of the partnership and afterwards sold the land to C with
a
big profit.
A. The partnership is dissolved when A became the sole owner
B. The sale of the land to C is void because it was without the knowledge of B.
C. A is not liable to B for the latter’s share in the profits
D. A is liable to B for the latter’s share in the profits

15. A, B and C are partners in ABC Partnership. D represented himself as a partner in ABC
Partnership to E, who, on the belief of such representation, extended P50,000 credit to
ABC
Partnership. Assuming only B and C consented to such representation, who will be held
liable to E?
A. E extended the credit to ABC Partnership, so a partnership liability exists, thus, all the
partners, A, B and C are liable
B. B, C and D are partners by estoppels and thus, are liable prorate to E
C. Partners A, B and C who benefited from the credit extended by E are liable.
D. D who made the representation is liable to E
16. A and B are partners in a real estate business. A and B were approached by X who
offered to
buy a parcel of land owned by the partnership. Thereafter, b sold to A, B’s share in the
partnership. Then, A sold the land to X at a big profit.
A. A is liable to B for B’s share in the profits
B. The partnership is dissolved when A became the sole owner
C. A is not liable to B for the latter’s share in the profits
D. The sale of the land to X is void.

17. One of the following incidents may be a cause for involuntary dissolution of a
partnership.
Which is?
A. Termination of the term of the partnership
B. Insolvency of any partner
C. Express will of any partner
D. Expulsion of any partner

18. A and B are equal partners in AB Partnership. Y presented himself as a partner in AB

Partnership to Z, who relying on such representation, extended P50,000 credit to AB
Partnership. Of the two (2) partners only B knew and consented to the representation of
Y.
Who should be held liable to Z?
A. Only Y, who presented himself as partner is liable.
B. Since the credit was extended to AB Partnership, a partnership liability was created,
so the two (2) partners and Y are liable.
C. Partners A and B who benefited from the credit extended to the partnership AB
Partnership shall be liable to Z.
D. B and Y are partners by estoppel and, thus, are liable to Z.

19. The following persons are disqualified to form a universal partnership. Who are the
exception?
A. Brother and sister
B. Husband and wife
C. Those guilty of adultery and concubinage
D. Those guilty of the same criminal offense, if the partnership is entered into a
consideration of the same.

20. A is the capitalist partner and B the industrial partner. A is engaged personally in the
same
kind of business the partnership is engaged in.
A. If there are losses, the partnership will bear the losses
B. If there are profits, the profits will be shares by A and the partnership
C. If there are profits, A will give the profits to the partnership
D. A will be excluded from the partnership and pay damages.
21. A is the managing partner of ABC Partnership. X owes A personally and ABC
Partnership
 P20,000 each. A collected and receive from X, P10,000 and he issued a receipt wherein it
is
stated that the amount is applied against his personal credit.
A. The amount received will be applied in favor the partnership credit
B. The amount will be applied in proportion to both credits
C. The amount received will be applied in the credit of A
D. All the partners will decide as to whose favor it will apply
22. Three (3) of the following are similarities between a partnership and a corporation.
Which is
not?
A. The individuals composing both have little voice in the conduct of the business
B. Both have juridical personality separate and distinct from that of the individuals
composing them.
C. Like a partnership, a corporation can act only through agents
D. Both are organizations composed of an aggregate of individuals

23. A, B and C are general partners in ABC Partnership. A, the managing partner engaged
personally in a business that is the same as the business of the partnership without the
consent of B and C.
A. If there are profits, A will give the profits to the partnership
B. If there are losses, the partnership will bear the losses
C. If there are profits, they will be shared by partner A and the ABC Partnership
D. The profits or losses will be shared equally by A and the ABC Partnership

24. Three (3) of the following are rights of a general partner and also of a limited partner in a
limited partnership. Which is not?
A. To inspect and copy at reasonable hours the books of the partnership and have them
kept at the principal place of business
B. To demand true and full information of all matters affecting the partnership and a
formal account of partnership affairs
C. To have dissolution and winding up by decree of court
D. None of the above

25. The partnership is insolvent. These are preferred as regards to the partnership property.
A. Partnership creditors
B. Partners separate creditors
C. Partners with respect to their capital
D. Partners with respect to their profits

26.
27. Bears the loss of property contributed to the partnership
A. Capitalist partner
B. Limited partner
C. None of the above
D. Partners contributing usufructory rights
28. When cash or property worth P3,000 or more is contributed as capital. The Articles of
Co-
Partnership shall be in a public instrument and be registered with the Securities and
Exchange commission. If the said requirements are not complied with:
A. It will render the partnership void.
B. It will not affect the liability of the partnership and the partners to third parties.
C. It will not give a legal personality to the partnership.
D. It will give the partnership a de-facto existence.

29. A, B and C are equal partners in Santos Brothers Partnership. The partnership is indebted
to
PC for P150,000. Partner A is indebted to SC for P20,000 PC attached and took all the
assets
of the partnership amounting to P90,000. B and C are solvent while A is insolvent and all
what he owns is a land valued at P15,000.
A. SC has the priority to the land of A as a separate creditor.
B. PC has priority to the land of A to cover A’s share of the P60,000 remaining liability
of the partnership
C. B and C have priority to the land of A if they paid PC the 60,000 remaining liability
of the partnership.
D. PC and AC shall have priority to the land o A in proportion to their claim of P60,000
and P20,000 respectively

30. A partnership is not dissolved upon the death of a:

A. General partner
B. Industrial partner
C. Limited partner
D. General limited partner

31. A and B are equal partners in AB Partnership C contacted XYZ and Co. and represented
himself as partner in AB Partnership. XYZ and Co. contacted A who confirmed that C is
in
fact a partner of AB Partnership XYZ and Co. extended credit to C for AB Partnership in
the
amount of P60,000. Who is liable to XYZ and Co.?
A. A and C are partners by estoppels and are liable to XYZ and Co.
B. XYZ and Co. extended the credit to C for AB Partnership, so a partnership liability
exists, so both partners, A and B together with C are liable.
C. The AB Partnership benefited, so it is liable
D. Only C who made the representation is liable

32. A, B and C are partners in a trucking and freight business. B and C without the
knowledge
of A approached X and offered to sell to X all the trucks of the partnership at a price very
much higher than their book value. Then B and C bought-out A from the partnership and
thereafter X bought all the trucks with a big profit of B and C.
 A. The sale of the trucks to X is void because it is without the knowledge and consent of
A.
B. B and C are not liable to A whatsoever
C. B and C are liable to A for his share in the profits in the sale.
D. When A was bought-out of the partnership, the partnership was dissolved so A has no
more share in the profits in the sale.

33. When the capital (of a partnership) is P3,000 or more, it must be in a public instrument
and
must be recorded with the Securities and Exchange Commission (Article 1772). A, B and
C
agreed to form a partnership and each contributed P10,000 as capital of the partnership.
There was no compliance in the provisions of Article 1772.
A. The partnership was not established
B. The partnership did not have juridical personality
C. The partnership was established and any partner may compel the execution of a
public instrument
D. The partnership is void

34. A, as a partner contributed P30,000; B as partner, P15,000; and C as industrial partner,

his
services in the partnership. After payment of all liabilities and expenses, only P18,000
remain as partnership assets.
A. A, P12,000; B, P6,000; C, None
B. A, P6,000; B, P6,000; C, P6,000
C. A, P9,000; B, P9,000; C, None
D. A, P8,000; B, P4,000; C, P6,000

35. This is the order of preference in the liquidation of a partnership:

A. 1.Outside creditors
2.Partners with respect to their capital
3.Partners with respect to their profit
4.Partners aside from capital and profit

B. 1. Partners with respect to their capital

2.Partners with respect to their profit
3.Partners aside from capital and profit
4. Outside creditors

C. 1. Outside creditors
2. Partners aside from capital and profit
3. Partners with respect to their capital
4.Partners with respect to their profit

D. 1. Partners aside from capital and profit

2. Outside creditors
 3.Partners with respect to their capital
4.Partners with respect to their profit

36. Three (3) of the following are rights of a partners. Which one is not?
A. Right to associate another person to his share
B. Right to admit another partner
C. Right to inspect and copy partnership book
D. Right to ask dissolution of the firm at the proper time

37 The following are similarities between partnership and a corporation. Which is the
exception?
A. Both have juridical personalities separate and distinct from that of the individuals
composing them.
B. Like a partnership, a corporation can act only through agents
C. Both are organization of an aggregate of individuals
D. The individuals composing both have little voice in the conduct of the business.

38. In the partnership of A, B and C, A was appointed in the Articles of Co-Partnership as

managing partner. As such manager in good faith:
A. His power is revocable even without consent
B. His power can be revocable at any time even without just cause provided
C. He may execute all acts of administration despite the opposition of B and C
D. He can be removed for valid cause even without the vote of the partners owning the
controlling interest

39. In the ABC Partnership, A and B contributed P20,000 each and C , his services. After
paying all the creditors of the partnership, only P18,000 in cash remains. In the absence
of
terms to the contrary, the share of C is equal to:
A. P6,000
B. The share of A
C. The share of B
D. Nothing

40 . X and Y established a partnership by contributing, each at P50,000. Z, a third party

allowed
his name to be included in the firm name of the partnership. The partnership was
insolvent
and after exhausting all the remaining asset, there was left a liability to third persons the
amount of P30,000. The creditors can compel:
A. Z to pay P30,000 remaining liability
B. X, Y and Z to pay P10,000 each
C. X or Y to pay P30,000 remaining liability
D. X and Y to pay P15,000 each

41. W, X, Y and Z formed a partnership. W, X and Y are general partners and contributed
 P50,000 each while Z, an industrial partner contributed his services only. All the partners
signed an agreement stipulating that the liability of W is limited to its contribution After
all
the assets of the partnership were exhausted there remains an unpaid liability of P40,000.
The creditors of the partnership can compel:
A. X and Y to pay the P40,000
B. X, Y and Z to pay the P40,000
C. W, X, Y and Z to pay P10,000 each and W and Z can demand reimbursement
from X and Y.
D. X and Y to pay P40,000

42. A partner in a partnership who is not really a partner, not being a party to the partnership
agreement, but is made liable as a partner for the protection of innocent third persons is
known as
A. Secret partner
B. Dormant partner
C. Nominal partner or partner by estoppel
D. Answer not given

43. A and B are capitalist partners, with C as industrial partner. A and B contributed P15,000
each to the capital of the partnership. A contractual liability of P40,000 was incurred by
the
partnership in favor of X. The capital assets of P30,000 shall first be exhausted thereby
leaving an unsatisfied liability of P10,000. X can recover the amount from:
A. A and B only
B. A, B and C
C. A, B and C and C can recover for reimbursement from A and B
D. Answer not given

44. A, B and C are partners engaged in a retail business. Their contribution is P20,000 each.
D is
admitted as a new partner with a contribution of P8,000. At the time of his admission, the
partnership has an outstanding obligation to E in the amount of P80,000. In this case:
A. D is not liable to E for this obligation
B. D is liable to E for this obligation so that amounting to P68,000 will be exhausted
leaving a balance of P12,000. Only A, B and C shall be liable jointly or pro-rata,
out of their separate property.
C. D is liable to E for this obligation so that after the assets of the partnership will be
exhausted, leaving a balance of P12,000, all the partners shall be liable jointly or pro-
rata, out of their separate property.
D. Answer not given.

45. A, B and C are general partners in ABC Partnership. D is a debtor to the partnership in
the
amount of P15,000. A received from Debtor D the sum of P5,000 and issued a receipt
identifying the amount as his share. Then D became insolvent, B and C cannot collect the
 P10,000.
A. A cannot be compelled to share the P5,000 with B and C
B. B and C can charge the capital of A with their share of the P5,000
C. A can be compelled to share B and C the P5,000
D. B and C automatically sue D to collect the P10,000

46. M and O are partners of M & O Partnership. M is the managing partner. N owes M
P10,000
and M & O partnership P30,000. The obligations of N are both due. M collected from N
the
debt of N to M in the amount of P10,000 and issued a receipt in the name of M. To which
obligation will the P10,000 be applied?
A. The whole of the P10,000 be applied to debt of N to M
B. The P10,000 be applied to debt of N to M and to the partnership
C. P5,000 each of debt of N to M and to the partnership
D. P2,500 to debt of N to M and P7,500 debt of N to the partnership

47. A, B and C are partners in D-3 Partnership. On April 29,2010, partner C died. Not
knowing
that C died, on May 1, 2010, A contracted a liability to D who also do not know the death
of
C. The partnership debt is in the amount of P30,000, he can collect
A. P30,000 from A
B. P15,000 from A and P15,000 from B
C. P10,000 from estate of C; P10,000 from A ; P10,000 from B
D. P20,000 from A and P10,000 from B

48. This the order of preference in the liquidation of a general partnership:

A. Outside creditors; Partner as creditors; Partners capital; Partners profit
B. Partner as creditors; Outside creditors; Partners capital; Partners profit
C. Partners capital; Outside creditors; Partner as creditors; Partners profit
D. Outside creditors; Partner capital; Partners profit; Partners as creditors

49. R, S and T are partners. T is the industrial partner who in addition to his services, he also
contributed capital to the partnership. There is no stipulation as to sharing of profits and
losses. The partnership realized profits of P21,000. The share of T in the profits:
A. R and will determine T’s share I, in the profits
B. T’s share is P7,000
C. Pro-rata to his contributed capital
D. Nothing, because he is an industrial partner

50. W, X, Y and Z are partners. They contributed capital as follows: W, P50,000; X,

P30,000;
Y, P20,000 and Z, is an industrial partner, his services. The partnership’s obligation to
outsiders exceed the total net assets by P18,000. Who and by how much will the partners
be
 liable for the payment of the P18,000?
W X Y Z
A. P9,000 P5,400 P3,600 0
B. P4,500 P4,500 P4,500 P4,500
C. P6,000 P6,000 P6,000 P6,000
D. P4,500 P2,700 P1,800 P9,000

51. Which of the following is a characteristic of partnership as a contract?

A. Formal
B. Innominate
C. Gratuitous
D. Preparatory

52. One who takes active part in the business, but is not known to be a partner by outside
parties
is:
A. Silent partner
B. Dormant partner
C. Nominal partner
D. Secret partner

53. Can the partners stipulate that the newly admitted partner shall not be held liable for the
obligations of the partnership arising before his admission? Which of the following
statement is not correct?
A. No, because the newly admitted partner should be deemed to have assumed all the
debts of the partnership upon his voluntary participation in the partnership.
B. No, because newly admitted partner is liable with respect to his capital contribution
which forms part of the partnership
C. No, because the third person are always protected by law.
D. No, because the subject of the stipulation is that the liability of the new partner
should not be satisfied out of the partnership property.

54. I. The arrival of the term of a partnership with a fixed term or period shall not
dissolve the
partnership if the partners continue with the business of the partnership but such
partnership may be terminated anytime dependent on the will of the continuing
partners.
II. The general rule is that the loss of the specific thing contributed to the partnership
when
only the use of the thing is contributed by the partner and such thing after its
transfer to
the partnership which used the same or sometime was subsequently lost, the
partnership
is not dissolved.

A. True; False
 B. True; True
C. False; False
D. False; True

55. May contribute money, property or industry to the common fund:

A. General partner
B. Industrial partner
C. Limited partner
D. Managing partner

56. A limited partner who takes active part in the management of the firm becomes:
A. A managing partner
B. Liable as a general partner
C. A general partner
D. A general partner and a limited partner at the same time

57. Which of the following statements is not correct?

A. A general partner in a limited partnership manages the business of the
partnership but cannot perform acts of ownership without the consent of the
limited partners
B. Valid contributions of a limited partner are money and property but not services.
C. Additional limited partners may be admitted into the limited partnership with the
consent of all the partners.
D. A person who is both a general partner and a limited partner is deemed a limited
partner only with respect to the return of his contribution.

58. A is the managing partner of A and Company. X is indebted to A for P20,000 and to the
partnership for P60,000. When both debts mature, X pays A P20,000 and the latter issues
a
receipt for his personal credit. The payment for P20,000 shall be applied:
A. ¼ in favor of A and ¾ in favor of the partnership
B. To the whole debt owing to A
C. ½ in favor of A and ½ in favor of the partnership
D. To the debt owing to the partnership

59. Which of the following is an essential element of partnership?

A. There must be a contribution of money, property, or industry to a common fund.
B. It must an association for profit with the intention to divide the profits among
themselves.
C. There must be a valid and voluntary agreement.
D. All of the above.

60. A and B are partners. On June 15, 2009 when the total obligation of the partnership
totaled
P80,000. C was admitted as new partner. At the time C’s admission, the partnership
creditors were M for P50,000 and N for P30,000. After June 15, the partnership borrowed
 from O P20,000 and P40,000 from P. On December 15, 2009, the partnership became
insolvent leaving an obligation totaling P140,000 and partnership assets amounting to
P30,000. The creditors are going after the separate properties of the partners to satisfy
their
remaining claims. How are the creditors’ claims satisfied?

Answer 1 - M and N can go after the separate properties of A and B but C’s separates
properties are not answerable to their claims.

Answer 2 – O and P can go after the separate properties of A, B and C.

A. Both answers are wrong

B. Answer 2 is wrong but answer 1 is correct
C. Both answers are correct
D. Answer 2 is correct but answer 1 is wrong

61. A and B are capitalist partners with C as industrial partner. A and B contributed P20,000
each to the capital of the partnership. A contractual liability of P50,000 was incurred by
the
partnership in favor of X. The assets of the partnership had been exhausted still leaving
an
unpaid liability of P10,000. X can recover the amount from:
A. A, B and C and C can recover by way of reimbursement from A and B unless
stipulated otherwise.
B. A and B only
C. C only
D. A, B and C and C has no right for reimbursement from A and B unless expressly
stipulated.

62. Which of the following liabilities of the partnership shall rank first in the order of
payment?
A. Those owing to creditors other than partners
B. Those owing to partners in respect to profits
C. Those owing to partners in respect to capital
D. Those owing to partners other than for capital and profits

63. I. The contribution of a limited partner may be cash, property or service.

II. A limited partner who takes part in the management of the business of the
partnership is
not a general partner but he shall be liable as a general partner.

A. True; True
B. True; False
C. False; False
D. False; True
64. I. A person may be a general and a limited partner in the same partnership at the same
time.
II. A person admitted as a partner into an existing partnership is not liable for partnership
obligations existing before his admission.

A. True; True
B. True; False
C. False; False
D. False; True

65. I. A partner cannot assign his interest in the partnership to a third person without the
consent of the other partners.
II. A partner’s interest in the partnership is his personal property.

A. True; True
B. True; False
C. False; False
D. False; True

66. I. The creditor of each partner shall be preferred to those of the partnership as regards the
partner’s separate property.
II. An industrial partner is exempted from losses but not from partnership liabilities
A. True; True
B. True; False
C. False; False
D. False; True

67. I. An industrial partner with the consent of the other partners can engage in any business
for his own account.
II. An industrial partner is not a general partner.

A. True; True
B. True; False
C. False; False
D. False; True

68. I. A general partner not a managing partner can engage in a business different from the
business of the partnership for his own account without the consent of the other
partners.
II. A general partnership can be formed orally.

A. True; True
B. True; False
C. False; False
D. False; True
69. I. All the partners in a general partnership are considered managing partners if thee is no
stipulation as to who shall act as managing partner.
II. A partner is liable to the partnership for whatever property he agrees to contribute
without necessity of demand.

A. True; True
B. True; False
C. False; False
D. False; True

70. I. If the capital contribution of the partners amount to P3,000 or more the contract of
partnership must be in public a public document, otherwise the contract is void.
II. A contract of partnership is void, whenever immovable property is contributed thereto
if
an inventory of said property is not made, signed by the parties and attached to the
public
document.

A. True; True
B. True; False
C. False; False
D. False; True

71. I. Dissolution does not terminate the partnership.

II. Insanity of a general partner in a limited partnership dissolves the partnership.

A. True; True
B. True; False
C. False; False
D. False; True

72. I. A general partner in a limited partnership has all the rights, powers and liabilities as
though the partnership is not limited.
II. A general partner is personally liable for partnership obligations while a limited
partner is
not liable for partnership liabilities.

A. True; True
B. True; False
C. False; False
D. False; True

73. I. A limited partner is simply a contributor to the partnership.

II. A limited partner has a right to the return of his contribution upon the dissolution of
the
partnership.
 A. True; True
B. True; False
C. False; False
D. False; True

CORPORATION

1. The nationality of a corporation is determined by the law of its domicile or place of

principal business. The test is known as:
A. The control theory
B. The full absorption theory
C. The incorporation theory
D. The management theory

2. This is unincorporated business organization created by an instrument by which property

is to be held and managed by trustees for the benefit and profit of such person as may be
or become the holders of transferable certificates evidencing the beneficial interests in the
estate
A. Business Trust
B. Close Corporation
C. Condominium Corporation
D. Joint Stock Company

3. When preferred shares are issued by a corporation with a fixed annual interest on the face
thereof, the effect is:
A. The contract of subscription is between the corporation and the stockholder subsists
B. The stockholder is a plain investor who may rise or fall with the financial success
or failure of the corporation.
C. The stockholder is a creditor of the corporation
D. The shares of stock are negotiable instruments under the Negotiable Instruments Law

4. This class of shares are those issued for no consideration or inadequate consideration:
A. Bonus shares
B. Deferred shares or founders shares
C. Over issued shares
D. Watered shares

5. The power to deny pre-emptive right as a corporate power is classified as an:

A. Express power
B. Incidental power
C. Implied power
D. Discretionary power
6. The power to invest corporate funds in another corporation or business or for any other
purpose as a corporate power is classified as an:
A. Express power
B. Incidental power
C. Implied power
D. Discretionary power

7. The power of conducting commercial contracts (to increase the business) and sponsoring
athletic contest for employees to keep them in good health or maintaining a hospital for
the employees is an example of:
A. Express power
B. Incidental power
C. Implied power
D. Discretionary power

8. To establish pension, retirement, and other plans for the benefits of its directors, trustees,
officers and employees is an example of:
A. Express power
B. Incidental power
C. Implied power
D. Discretionary power

9. A religious order is considered as a:

A. Corporation by prescription
B. Public corporation
C. Corporation sole
D. None of them.

10. Place of residence of a corporation shall be its:

A. Place of incorporation
B. Place of residence of majority of stockholders
C. Place where the principal office is established
D. None of them

11. This shall constitute a quorum for transaction of corporate business:

A. Majority of the members
B. Majority of the stockholders
C. Majority of the directors
D. All of them

12. Juridical personality of a corporation begins:

A. From the date of issuance of certificate of incorporation
B. By agreement of the parties
C. Acknowledgement before a Notary Public
D. None of them
13. Right which the existing stockholders of corporation cannot be deprived without the
consent is their right to subscribe or to purchase new stock issued by the corporation; or
unissued original stock, in proportion to their holdings before it can be offered to others:
A. Right of redemption
B. Pre-emptive right
C. Right to purchase
D. None of them

14. A private corporation organized under the corporation law commences to have corporate
existence and juridical personality and is deemed incorporated from:
A. The date when the articles of incorporation is signed by the incorporators
B. When the articles of incorporation and by laws are presented and received by the
Securities and Exchange Commission and the filing fee is paid
C. From the date the SEC issues a certificate of incorporation under its official seal
D. When the Articles of Incorporation is notarized by a Notary Public

15. The following are the qualifications of incorporators . Choose the exemption:
A. Majority of whom must be Filipinos
B. Majority of whom are residents of the Philippines
C. All are of legal age
D. Natural persons, not less than five but not more than 15.

16. These are the shares of stock which have been issued and fully paid for, but subsequently
reacquired by the issuing corporation:
A. Redeemable shares
B. Treasury shares
C. Founder’s share
D. None of the three

17. In the amendment of the Articles of Incorporation of a stock corporation, the following is
necessary:
A. Amendment by the majority vote of the Board of Directors plus a vote or written
assent of the stockholders representing at lest 2/3 of the outstanding capital
stock.
B. Amendment by a vote of 2/3 of the stockholders
C. Amendment by the majority vote of the Board of Directors
D. None of the three

18. Corporation governed by special laws, aside from the requirements specified under the
corporation laws, in order that their articles of incorporation may be approved or
accepted, must present before the Security and Exchange Commission:
 A. A favorable recommendation from the Ministry of Finance
B. A copy of previous income tax return and a statement of assets, liabilities and net
worth
C. A favorable recommendation of the appropriate government agency to the effect
that such articles or amendment is in accordance with law.
D. An undertaking to change the name of the corporation if found that there is already
registered with the SEC a name or a name similar to the name of this corporation

19. The following are some of the requisites of a de facto corporation. Choose the exception:
A. Valid law under which it is incorporated
B. Attempt to incorporate
C. Assumption of corporation power
D. None of the above

20. The following are the qualifications of director in a corporation. Choose the exemption:
A. Majority of the directors must be Filipino citizens
B. He must own at least one share of the stock in his name
C. Majority of the corporate directors must be residents of the Philippines
D. He must not have convicted by final judgment of an offense carrying an
imprisonment exceeding 6 years or an offense constituting a violation of the
Corporation Code

21. The secretary of a stock corporation shall be:

A. A director of the corporation
B. An incorporator of the corporation
C. A resident and citizen of the Philippines
D. Of legal age and citizen of the Philippines

22. Directors or trustees who willfully and knowingly vote or assent to patently unlawful act
of the corporation or who are guilty of gross negligence or had faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict with
their duty shall be liable:
A. As trustee for the corporation
B. Criminally for violation of the corporation code
C. Jointly and severally for the damages suffered by the corporation
D. None of the above

23. The following are methods of dissolving a corporation:

A. Expiration of the term
B. Failure to organize and commence business within two (2) years from date of
issuance of certificate of incorporation
C. Shortening of the corporate term
D. All of the above
24. Three of the following enumeration are not authorized to issue no par value shares of
stock. Which is the exception?
A. Insurance companies
 B. Industrial companies
C. Public utilities
D. Trust companies

25. Any stockholder of a corporation shall have the right to dissent and demand payment of
the fair value of his share/s in three of the following corporate acts. Which is the
exception?
A. In case of any amendment to the articles of incorporation which has the effect of
changing or restricting the rights of any stockholder or class of shares.
B. In case of merger or consolidation
C. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all
or substantially all of the corporate assets and property of the corporation.
D. In case of incurring, creating or increasing bonded indebtedness

26. The authorized capital stock of a proposed corporation is P100,000 divided into 1,000
shares with a par value of P100.00 each. The minimum amount of subscription that must
be paid is:
A. P8,750 or 87.5 shares C. P5,000 or 50 shares
B. P6,250 or 62.5 shares D. P7,500 or 75 shares

27. In the matter of management of the business affairs of a corporation, this is supreme:
A. Majority of the stockholders
B. 2/3 of the stockholders
C. Board of Directors
D. President of the corporation

28. This is the equitable right of stockholders to subscribe to newly issued shares of the
corporation in proportion to their present shares in order to maintain their equity in the
corporation.
A. Right of redemption
B. Concept of corporation entity
C. Right to sue and be sued
D. Pre-emptive right

29. This is a written acknowledgement of an interest of a stockholder in the corporation.

A. Proxy C. Certificate of Stock
B. Share of stock D. Capital Stock

30. These are the persons who sign the Articles of Incorporation, who may or may not be
subscribers of shares
A. Incorporators C. Directors
B. Trustees D. Promoters

31. Choose the minimum requirement of the Corporation Law to corporate formation:

Authorized Capital Subscribed Capital Paid-In Capital

 A. P100,000 P20,000 P5,000
B. 100,000 20,000 4,000
C. 100,000 25,000 5,000
D. 100,000 25,000 6,250

32. They provide and regulate the internal matters of the corporation, such as calling the
Board of Directors and Stockholders meetings.
A. Board of Directors C. By-laws
B. Majority of Stockholders D. Articles of Incorporation

33. This is an authority to vote in a corporation stockholders meeting.

A. Proxy C. Certificate of stock
B. By-laws D. Share of stock

34. A gratuitous reissue of Treasury shares will result in:

A. Capital surplus C. Watered stock
B. Additional profit D. Stock dividend

35. Three (3) of the following are similarities between a partnership and a corporation.
Which is not?
A. The individuals composing both have title voice in the conduct of the business
B. Both have juridical personality separate and distinct from that of the individuals
composing them
C. Like a partnership, a corporation can act only through agents
D. Both are organizations composed of an aggregate if individuals

36. One of the following is the limitation on proxies. Which is?

A. Proxy acquires legal title to the shares of the stock
B. A proxy votes even in the presence of the stockholder
C. The proxy is voted only for the meeting for which it was intended
D. A proxy is revocable at any time

37. The number of the Board of Trustees in a non-stock corporation:

A. Shall not be less than five but not more than eleven
B. May be more than fifteen upon its organization
C. May be less than five upon its organization
D. Shall not be less than five but not more than fifteen

38. One of the following is a ground for the suspension or revocation of the certificate of
incorporation by the Securities and Exchange Commission.
A. If the corporation has commenced its business transactions and afterwards
ceased operation continuously for a period of at least five (5) years
B. If the corporation fails to commence and start to operate and the failure is due to
causes beyond the control of the Corporation
 C. If the corporation does not formally commence its business transaction and
subsequently become continuously inoperative for a period of two (2) years

39. Right of the corporation to continue as a juridical entity for the term stated in the articles
of incorporation despite the death of any stockholder.
A. Juridical personality C. Right of succession
B. Pre-emptive right D. Right of existence

40. Original signatories in the articles of incorporation are called:

A. Corporators C. Stockholders
B. Promoters D. Incorporators

41. They regulate different internal matters of the corporation such as calling and defining
the conduct of the meeting of stockholders and directors.
A. Board of directors C. Articles of incorporation
B. By-laws D. Proxy

42. The document conferring authority to vote stock in a corporate meeting:

A. Power of attorney C. Capital stock
B. Shares of stock D. Proxy

43. The minimum requirement of Corporation Law to corporate formation.

Authorized Subscribed Capital Paid in Capital

A. P500,000 P100,000 P25,000
B. 500,000 125,000 31,250
C. 500,000 100,000 20,000
D. 500,000 125,000 25,000

44. Three (3) of the following are attributes of a corporation. Which is the exception?
A. An artificial being
B. Has the right of succession
C. Has powers, attributes and properties expressly authorized by law or incident to its
existence
D. Created by agreement of the incorporators

45. Three of the following are qualifications of the Board of Directors. Which is the
exception?
A. He must own at least one (1) share of the capital stock
B. At least majority of them are citizens of the Philippines
C. The shares owned must be recorded in the books of the corporation.
D. He must continuously own at least one )1) share of the stock of the corporation
46. The voting requirement to increase or decrease capital stock
A. Majority vote of the board of directors and consented by the stockholders
representing two-thirds (2/3) of the outstanding capital stock
B. Two-thirds (2/3) vote of the board of directors with the consent of majority of
outstanding capital stock
C. Majority vote of the board of directors and with consent if majority of the outstanding
capital stock
D. Majority vote of the board of directors and three-fourths (3/4) vote of the outstanding
capital stock

47. A dividend payable partly in cash and partly in stocks, as to class of dividend, is a :
A. Optional dividend C. Liquidation dividend
B. Property dividend D. Composite dividend

48. Bonds which are not secured by any specific mortgage lien of pledge or corporate
property but by the general corporation are:
A. Guaranteed bonds C. Income bonds
B. Debenture bonds D. Redeemable bonds

49. These are the rules and guidelines adopted by the stockholders of a corporation for the
internal government.
A. Rules and regulations C. Minutes of the meetings
B. Articles of Incorporation D. By-law

50. Which of these conditions comply with the minimum requirement of the law to corporate
formation?

Authorized Capital Subscribed Capital Paid In Capital

A. P100,000 P25,000 P12,500
B. 64,000 16,000 4,000
C. 200,000 50,000 10,000
D. 200,000 40,000 10,000

51. A distribution by a corporation of shares held by it in another corporation is:

A. Stock dividend
B. Sales of capital asset
C. Property dividend of actual distribution of corporate assets
D. Sale of treasury stock

52. Corporations organized by private persons performing public function and for profit to
private parties are:
 A. Public corporations
B. Government controlled corporation
C. Quasi-public corporation
D. Private corporation

53. This is a document of a corporation acknowledging the interest of a stockholder in the

corporation’s assets.
A. Certificate of stock C. Share of stock
B. Capital stock D. Stockholder’s equity

54. In a corporation, any two (2) or more positions may be hels concurrently by the same
person, except that no one (1) person shall act as:
A. Chairman of the Board and President
B. Secretary and Treasurer
C. President and Secretary
D. Treasurer and Director

55. A corporation may invest its funds in any other corporation of business or any purpose
other than the primary purpose for which it was organized, only if:
A. There is majority vote of the Board of Directors and ratified by the stockholders
representing 2/3 of the outstanding capital stock
B. It is reasonably necessary to accomplish its secondary purpose, the approval of the
stockholders not necessary
C. There is a majority vote of the Board of Directors
D. There is majority vote of the outstanding capital stock

56. The following are advantages of no-par value share of stock. Which is the exception?
A. No-par value share allow flexibility in price
B. The stockholders of no-par value shares are relieved of personal liability for unpaid
stock subscription
C. It allows the issue of stock in exchange of property
D. No-par value shares afford a possible remedy or relief from the evil of over-
capitalization and stock watering

57. The right to vote at meetings, the right to receive dividends and the right to receive copies
of financial statements is known as:
A. Right of existence C. Pre-emptive right
B. Directors right D. Stockholder’s right

58. The Garcia Realty Development Corporation has a capital stock of P1,000,000 divided
into 10,000 shares with a par value of p100 each. 5,000 shares are ordinary share and
5,000 shares are 10% preference share. In 2008 there was no declared dividends but in
2009 dividends in the amount of P200,000 were declared. The holders of the preference
share are entitled to receive:
A. P50,000 if cumulative, non-participating
B. P125,000 in non-cumulative, participating
 C. P125,000 if cumulative, participating
D. P100,000 if non-cumulative, non-participating

59. Persons who compose the corporation whether as stockholder in a stock corporation or
member in a non-stock corporation, are called:
A. Incorporators C. Promoters
B. Subscribers D. Corporators

60. In three of the following, these persons qualify to be incorporators. Which is the
exception?
A. Must have paid at least 25% of their subscription
B. Natural persons not less than five, not more than 15
C. Majority are residents of the Philippines
D. Need not be citizens of the Philippines

61. Dividends are declared and paid out of the

A. Paid-up capital
B. Capital stock
C. Net income of the current year
D. Unrestricted retained earnings

62. The following defect will preclude the creation of even a de facto corporation:
A. The name of the corporation closely resembles that of a pre-existing corporation that
it will tend to deceive the public
B. The incorporators or a certain number of them are not residents of the Philippines
C. Lack of certificate of incorporation from the Securities and Exchange
Commission
D. Answer not given

63. The distinction between a proxy and a voting trust is that in a voting trust:
A. The trust has a legal title to the shares of the transferring stockholder
B. Unless coupled with interest, is revocable at any time
C. Is not limited to any particular meeting
D. Answer not given

64. The distinction between subscription of shares from purchase of shares is that in
subscription of shares:
A. It is an independent agreement between the individual and the corporation to buy
shares of stock from it at a stipulated price
B. It takes place before or after incorporation and is generally paid in installment
or upon call.
C. In case of insolvency of the corporation, the subscription price cannot be enforced on
the theory that the corporation can no longer perform its obligation to deliver the
certificate of stock
D. Answer not given
65. A corporation created in strict or substantial conformity with the statutory requirements
for incorporation and whose right to exist as a corporation cannot be successfully
attacked even in a direct proceeding for that purpose by the State is known as:
A. De jure corporation C. De facto corporation
B. Corporation by estoppels D. Answer not given

66. One of the characteristics of treasury shares is that:

A. They have the status of outstanding shares
B. They may not be reissued or sold again
C. They participate neither in dividends nor in the meetings of the corporation as
voting stocks
D. Answer not given

67. Which of the following will not qualify as incorporator of a corporation?

A. A minor who is emancipated by voluntary concession or marriage
B. A married woman without the consent of her husband where the property involved in
the act of incorporation is paraphernal
C. A corporation
D. Answer not given

68. The articles of incorporation is required to state the names, nationalities and residences of
persons who act as directors or trustees are duly elected and qualified. This requirement
is intended to provide a basis by which the Securities and Exchange Commission could
determine whether the Articles of Incorporation has complied with the requirement that:
A. At least a majority of the directors or trustees are residents of the Philippines
B. All the directors or trustees are residents of the Philippines
C. 2/3 of the directors or trustees are residents of the Philippines
D. Answer not given

69. The power to revoke corporate franchise for causes specified by law is vested only in the:
A. President of the Republic of the Philippines
B. Securities and Exchange Commission
C. Court of component jurisdiction
D. Answer not given

70. Corporate dissolution may take place by voluntary inaction which will in the cessation of
its corporate powers and the corporation shall be deemed dissolved. Such dissolution may
result from:
A. Inaction by the corporation through its failure to formally organize and
commence with the transaction of its businesses or the construction of its works
within two years from the date of its incorporation
 B. Failure of the corporation to submit the annual reports required by the Securities and
Exchange Commission for a period of five years
C. Merger or consolidation with respect to absorbed corporation
D. Answer not given

71. Watered stocks are shares of stock issued by a corporation for a consideration in any
form other than cash valued in excess of its fair value. In this regard:
A. The issue by itself is void
B. The agreement that it shall be paid less than its par or issued value is illegal and
void and can not be enforced
C. The subscriber and purchaser shall not be liable for the full par value of the shares
D. Answer not given

72. The voting proportion required to enable a corporation to invest its funds in any other
corporation on business of for any purpose other than its primary purpose:
A. 2/3 vote of the board of directors and ratified by majority of the outstanding capital
stock
B. Majority vote of the board of directors and ratified by majority of the stockholders
C. Majority of the board of directors and ratifies by 2/3 of the outstanding stockholders
D. Majority of the board of directors and ratified by 2/3 of the outstanding capital
stock

73. An officer of a corporation may hold two or more positions in the corporation but not as:
A. Chairman of the Board and President
B. President and Treasurer
C. Secretary and Treasurer
D. Vice President and Secretary

74. The right of a corporation to exist as juridical person during its term as stated in its
Articles of Incorporation despite the death of any of its stockholders is:
A. Right of existence C. Right of succession
B. Right of redemption D. Pre-emptive right

75. The interest or right of the owner in the corporation’s profits or in the net assets of the
corporation on dissolution is:
A. Dividend C. Certificate of stock
B. Share of stock D. Capital

76. Requirement to effect the amendment of by-laws of a corporation.

A. Majority vote of the board of Directors
B. Vote of 2/3 of the outstanding capital stock
C. Majority vote of the Board of Directors and majority vote of the outstanding
capital stock
D. Majority vote of the outstanding capital stock
77. The nationality of the corporation is determined by the place of the controlling
stockholders. This test is:
A. Control test C. Incorporation test
B. Domicile test D. Capitalalization test

78. The following person can not be incorporator of a corporation.

A. A resident alien
B. A married woman without the consent of the husband even if the payment of her
shares is her paraphernal property
C. A subscriber on the share of the corporation who pays less than 25% of his
subscription
D. A corporation organized under the laws of the Philippines

79. One of the following is not required and does not form part of the three-fold duty of
directors of a corporation. Which one?
A. Duty of diligence C. Duty of obedience
B. Duty of loyalty D. Duty of efficiency

80. These do not form part of the outstanding capital stock:

A. Bonus shares C. Founder’s shares
B. Treasury shares D. Redeemable shares

81. One of the following does not require stockholder’s approval:

A. Merger or consolidation
B. Change of corporate name
C. Investment of corporate funds for a purpose outside of the main purpose of the
corporation.
D. Declaration of cash dividend

82. Under this test, a corporation is a national of the country pursuant to whose laws it is
incorporated:
A. Nationality test C. Control test
B. Capitalization test D. Incorporation test

83. Which of the following statements is not correct?

A. In the delinquency sale at public auction, the highest bidder is one who offers to
pay the full amount of the balance of the subscription plus interest and expenses
of the sale for the highest number of shares.
B. The sale of delinquent stock at public auction can be stopped if the Board of Directors
stops the sale for valid reason.
C. Payment of unpaid subscription may not be enforced by applying cash dividends to
delinquent stockholders.
D. The Board of Directors shall order, by resolution, the sale of delinquent stock
specifying the amount due plus accrued interest, the place, time and date of the sale
84. A stockholder who does not approve the action taken by the Board of Directors in
proposing to amend the Articles of Incorporation is allowed to withdraw from the
corporation in one of the following instances:
A. Merger or consolidation
B. Investment of corporate funds in another corporation
C. Creating, incurring, increasing or decreasing any bonded indebtedness
D. Shortening or prolonging corporate existence

85. I. Membership in a non-stock corporation and all rights arising therefrom cannot be
transferred even if provided in the articles of incorporation or by laws because
membership and the rights arising therefrom are personal and non-transferable.

II. Treasury stocks sold for less than par or issued value are considered “watered stock”
and as
such are prohibited by law. Which is correct?

A. True; False
B. Both statements are false
C. False; True
D. Both statements are true.