CPA

CPA Review School of the Philippines

FINAL PRE BOARD EXAMINATION

Regulatory Framework for Business Transactions

1. As regards the corporate by- laws, which of gthe following is true?

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

Legal Basis: Section 47. Amendment to Bylaws. - A majority of the board of directors or
trustees, and the owners of at least a majority of the outstanding capital stock, or at least
a majority of the members of a nonstock corporation, at a regular or special meeting duly
called for the purpose, may amend or repeal the bylaws or adopt new bylaws.

2. A, B and C formed AB & Co., limited a partnership with A as a general partner B as limited
partner and C as an industrial partner. A and B contributed P 50,000 each. The partnership
failed and after disposing all its assets to pay partnership debts, there still remains a note
payable in the sum of P 15,000. Against whom can the creditor demand payment of the note of
P 15,000
a. Only A is liable to pay the P 15,000 indebtedness
b. A and B are liable to pay P 7,500 each
c. A and C liable to pay P 7,500 each
d. A, B and C are liable to pay P 5,000 each

3. A person cannot be admitted into the partnership without the consent of

a. All the partners
b. Majority of the partners
c. 2/3 of the partners
d. Partners representing the contolling interest

4. Will require stockholders 2/3 approval

a. Election of corporate office
b. Election of members of the board
c. Granting of authority to the board to amend the by-laws
d. Ammendment of by –laws

Legal Basis: Sec. 47. xxx The owner of two-thirds (2/3) of the outstanding capital stock or
two-third (2/3) of the members in a nonstock corporation mat delegate to the board of
directors or trustees the power to amend or repeal the bylaws or adopt new bylaws
5. A Japanese national and a Filipino national entered into a contract for services in Thailand. The
services will be rendered in Singapore. In case of breach, what law will govern?

a. Thailand Law b. Philippine Law c. Singapore Law d. Japanese Law

6. A owns a parcel of land which he sells to B with a 3-year redemption period. After the second
year, A dies leaving his children C, D and E as his heirs. Which of the following is not correct?
a. A can repurchase the whole thing, so anyone among C, D and E may repurchase the whole thing
b. C can redeem his 1/3 share, D his 1/3 share and E his 1/3 share if B does not require all of them
or any one of them to redeem the whole property
c. B may demand all of the co-heirs that they come to an agreement upon repurchase of the whole
thing sold
d. B cannot be compelled to consent to partial redemption

7. A sold his car to B payable in ten equal monthly installments and with a mortgage constituted on
the same property. For B’s failure to pay a month’s installment, which statement is correct?
a. A may foreclose the mortgage on B’s car but he has no longer the right to recover the balance
should it be sold for an amount lower than what he claims from B
b. A may seek the cancellation of the sale made to B
c. A may seek fulfillment of the obligation of B to pay the entire purchase price
d. A may seek the cancellation of the sale and later on foreclose the mortgage should he find it
impossible to collect from B

8. The vendor-de-retro shall be entitled to redeem the object of the sale within
a. Four years if no period is agreed upon
b. Thirty days from notice of intention to repurchase
c. Ten years if there is a period stipulated
d. The period agreed upon

9. A, B, C, D and E formed Dako Pa Roon Corporation and submitted their Articles of

Incorporation to the SEC. Inadvertently, through an oversight; the SEC approved the Articles and
issued a certificate of incorporation. Thereafter, it was discovered that they have not completed
their required period of residency in the Phillippines. As a result, which of the following is not
correct?
A. The corporation shall be considered as a de-facto corporation and shall be allowed to function as
a Corporation under the color of law
B. The right to exercise corporate powers, shall not be inquired into collaterally in any private suit
to which the corporation may be a party
C. The Solicitor General has the right to question or contest the validity of its corporate existence
through a quo-warranto proceedings
 D. In a suit filed against the corporation for breach of contract, the plaintiff can allege that the
corporation has no legal personality and therefore all incorporators shall be held personally liable
for damages

No collateral attack can be had as against the juridical personality granted to a corporation. Private
indiviaduals cannot put into question the existence of a corporation which was issue a certification by the
Securities and Exchange Commission.

10. X is being charged for violation of Anti-Graft and Corrupt Practices because he is suspected of
having accumulated unexplained wealth. X maintains deposit accounts with ABC Bank. The
Ombudsman filed criminal cases against X before the Sandiganbayan. Can the Court issue
subpoenas against ABC Bank to produce all documents pertaining to all the deposit accounts of
X?
A. Yes, it is enough that the specific bank is identified.
B. No, because the issuance of the subpoena has no real legal basis.
C. Even without a subpoena, information about the deposit accounts of X can be submitted to the
Sandiganbayan because it will be used in a pending case.
D. Yes, because there is already a pending case and provided the subpoena must be specific as to
which account.

Legal basis: Philippine National Bank v. Gancayco [122 Phil. 503, 508 (1965)]: Cases of
unexplained wealth are similar to cases of bribery or dereliction of duty are execeptions to the rule
making bank deposits confidential. The policy as to one cannot be different from the policy as to the
other. This policy expresses the notion that a public office is a public trust and any person who
enters upon its discharge does so with the full knowledge that his life, so far as relevant to his duty,
is open to public scrutiny.

11. As a general rule, in assignment of credit, the assignor in good faith:

A. Warrants the existence of the credit at the time of assignment.
B. Warrants the legality of the credit at the time of assignment.
C. Warrants the solvency or the debtor at the time of assignment.
A. A and C C. B and C
B. A and B D. A, B and C

12. Gross inadequacy of the purchase price does not invalidate the contract of sale; unusually
inadequate purchase price in a sale with right of repurchase shall give rise to the presumption that
A. It a vitiated sale C. It is not a sale
B. It is an equitable mortgage D. It is an invalid sale

How many years must a single-line cooperative operate before it may transform into a multi-purpose
cooperative?
A. At least 1 year C. At least 3 years
B. At least 2 years D. At least 4 years
13. It is the highest policy-making body of the cooperative and shall exercise the powers of the
Cooperative as stated in the Cooperative Code.
A. Board of Directors C. Executive Committee
B. General Assembly D. Board of Members

14. . A depositor has three separate single bank accounts with P1M, P2M and P3M balance,
respectively, in the same bank, which is closed by BSP. How much is the maximum insured
amount by PDIC from these deposits?
A. P 500,000 B. P 1,000,000 C. P 1,500,000 D. P 6,000,000

15. What are the penalties for violation of R.A. 1405 a.k.a Bank Secrecy Law?
A. Fine of not more than P20,000.
B. Imprisonment of not more than five years.
C. Any of the above subject to the discretion of the judge.
D. Both imprisonment of not more than five years and fine of not more than P20,000.

16. The Anti-Money Laundering Act (AMLA) penalizes both money laundering and unlawful
activity. Which of the following statements relative to both offenses is false?
A. A person may be charged with and convicted of both the offense of money laundering and the
unlawful activity.
B. The offense of money laundering committed by public officers and private persons in conspiracy
of such public officers shall be under the jurisdiction of the Sandiganbayan.
C. Where a person is charged with both the offense of money laundering and the offense of
unlawful activity, the proceeding relating to the former shall be given precedence that the
proceeding relating to the latter.
D. An unlawful activity includes any act or omission or series of combination thereof involving or
having direct relation, among the others, to kidnapping for ransom, drug trafficking, plunder,
jueting, and maslao.

17. The Anti- Money Laundering Council (AMCL) may inquire into or examine bank accounts only
with an order of a competent court in cases involving:
A. Kidnapping for ransom C. Hijacking
B. Drug trafficking D. Jueting and muslao

18. Shall refer to an audit on the efficiency and effectiveness of the cooperative as a whole; its
management and officers; and its various responsibility centers as basis for improving individual
team or overall performance and for objectively informing the general membership on such
performance.
A. Regular audit C. Social audit
B. Annual audit D. Performance audit

19. It is a sum of money paid, or a thing delivered upon the making of a contract for the sale of
goods to bind the offer, the delivery and acceptance of which makes the final assent of both
parties to the contract.
A. Arras B. Deposit C. Discount D. Option money
20. What quorum is necessary for validity of meeting of General Assembly in ordinary cooperative?
A. At least 5% of all the members entitled to vote
B. At least 2/3 of all the members entitled vote
C. At least 25% of all the members entitled to-vote
D. At least majority of all the members entitled to vote

21. As a general rule, what is the maximum surplus profits that can be retained by a stock
corporation?
A. 50% of paid up capital
B. 100% of paid up capital
C. 50% of authorized capital stock
D. 100% of authorized capital stock

22. What is the required vote for the merger of two or more cooperatives into a single cooperative?
A. At least 25% of all members with voting rights
B. At least ¾ of all the members with voting rights
C. At least 2/3 of all the members with voting rights
D. At least majority of all the members with voting rights

23. It refers to the right of the stockholder to demand the fair market value of his stocks in case he
dissents in particular corporate acts provided by the Corporate Code.
A. Protective right C. Appraisal right
B. Pre-emptive right D. Right of first refusal

24. What is the maximum par value of a share in a cooperative?

A. P 5 B. P 10 C. P 100 D. P 1,000

25. A cooperative is intended to be established with authorized capital stock of P100,000 and actual
subscribed capital stock of P40,000. What is the minimum paid up capital of this proposed
cooperative?
A. P5,000 B. P10,000 C. P15,000 D. P25,000

26. What is the amount of covered transaction in so far as jewelry dealers are concerned for purposes
of reporting to Anti-Money Laundering Council?
A. A transaction exceeding P 100,000
B. A transaction exceeding P 500,000
C. A transaction exceeding P 1,000,000
D. A transaction exceeding P 5,000,000

27. Shares of stock as distinguished from certificate of stock

A. It is evidence of right or interest
B. It cannot be issued if the subscription is not fully paid.
C. It refers to the right over corporate management, profit and surplus
D. It is a tangible personal property
28. Case No. 1 – Pedro, the President of XYZ Corporation, was promised of an increase in salary. To
facilitate the payment of the promised increase, he prepared a board resolution and had it signed
individually by a majority of the members of the Board of Directors. The treasurer of the
corporation refused to pay the increase in salary stating that the resolution is not valid. Is the
contention of the treasurer correct?
Case No. 2 – Jose agreed to sell for a 10% commission the land of Maria worth P500,000.
Accordingly, Jose looked for a buyer and found Pedro whom he introduced to Maria. Maria
however told Jose and Pedro that she is no longer selling her land. Subsequently, Maria sold the
land to Pedro for P500,000, without the knowledge of Jose. Jose upon learning of the sale, asked
Maria for his commission. Is Jose entitled to the commission?
A. YES; YES C. YES; NO
B. NO; NO D. NO; YES

29. Which of the following companies is exempted by Anti-Money Laundering Law from reporting
reportable and suspicious transactions to Anti-Money Laundering Council?
A. Casino
B. Holding companies
C. Remittance companies
D. Auditing firm rendering assurance engagement

30. Under Unclaimed Balances Law, what is the minimum period of dormancy of the deposit in a
bank to be considered unclaimed balances?
A. At least 1 year C. At least 5 years
B. At least 3 years D. At least 10 years

31. Which of the following may be protected by patent registration?

A. Aesthetic creations
B. Microbiological process
C. Programs for computers
D. Methods for treatments of the human body

32. I. Covered institutions under the Anti Money Laundering Law shall establish and record the true
identity of its clients based on official documents.
II. All records of all transactions of covered institutions shall be maintained and safely stored for
five (5) years from the date of transactions.
A. Only I is true
B. Only II is true
C. Both are true
D. Both are false

33. T, an associate attorney in XYZ Law Office, wrote a newspaper publisher a letter disputing a
columnist’s claim about an incident in the attorney’s family. T used the law firm’s letterhead and
its computer in preparing the letter. T also requested the firm’s messenger to deliver the letter to
the publisher. Who owns the copyright to the letter?
A. T, since he is the original creator of the contents of the letter.
B. Both T and the publisher, one wrote the letter to the other who has possession of it.
C. The law office since T was an employee and he wrote it on the firm’s letterhead.
D. The publisher to whom the letter was sent.
 34. X is the registered trademark owner of “CROCS” which he uses on his shoes. Y came up with
his own “CROCS” mark, which he then used for his “CROCS” clothes. X now sued Y for
trademark infringement but Y argues that his product are clothes, hence, there is no infringement.
Is Y correct?
A. No, since the owner of a well-known mark registered in the Philippines has rights that extends
even to dissimilar kinds of goods.
B. Yes, since the right of the owner of a well-known mark registered in the Philippines does not
extend to goods which are not of the same kind.
C. Yes, as B was in bad faith in coming up with his own “CROCS” mark.
D. No, since unlike T, he did not register his own “CROCS” mark for his product.

35. Under the Anti-Money Laundering Act, a depositor’s bank account may be frozen
A. by the bank when the account is the subject of a suspicious or covered transaction report
B. by the Anti-Money Laundering Council (AMLC) when the account belongs to a person already
convicted of money laundering
C. by the Regional Trial Court, upon ex parte motion by the AMLC, in a criminal prosecution for
money laundering pending before it
D. by the Court of Appeals motuproprio in an appeal from a judgment of conviction of a criminal
charge for money laundering

36. A owns a parcel of land which he sells to B with a 3-year redemption period. After the second year, A
dies leaving his children C, D and E as his heirs. Which of the following is not correct?
e. A can repurchase the whole thing, so anyone among C, D and E may repurchase the whole thing
f. C can redeem his 1/3 share, D his 1/3 share and E his 1/3 share if B does not require all of them
or any one of them to redeem the whole property
g. B may demand all of the co-heirs that they come to an agreement upon repurchase of the whole
thing sold
h. B cannot be compelled to consent to partial redemption

37. The vendor-de-retro shall be entitled to redeem the object of the sale within
e. Four years if no period is agreed upon
f. Thirty days from notice of intention to repurchase
g. Ten years if there is a period stipulated
h. The period agreed upon

38. Three of the following are not authorized to issue no-par value shares. Which one is the
exception?
a. Industrial companies
b. Insurance companies
c. Trust companies
d. Public utilities
39. In a pledge created by operation of law, after payment of the debt and expenses, the remainder of
the price of the sale in auction shall be delivered to the obligor, pledgor being entitled to the
excess.
II. If a credit which has been pledged becomes due before it is redeemed, the pledge may collect and
receive the amount due and apply the same to the payment of his claim with the excess going to the
pledgor.
a. Both statements are false.
b. Both are true.
c. First is false, second is true.
d. First is true, second is false.

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

41. A gratuitous reissue of treasury shares will result in:

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

42. Majority of the following must be residents of the Philippines, except:

a. Members of the board of directors
b. Members of the board of trustees.
c. Incorporators
d. Officers

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

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

44. The nationality of the corporation determined by the nationality of the stockholders in control of
the same is called:
a. Domicile test
b. Incorporation test
c. Management test
d. Control test

45. The following statements pertains to a voting trusteem, except

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

46.When by law are adopted and filed prior to incorporation, which of the following is correct?
a. Appoved and signed by all the incorporators
b. Approved by the stockholders representing at least 2/3 fo the outstanding capital stock
c. Approved by the stockholders representing at least a majority of the outstanding capital
stock
d. Approved and signed by at least 2/3 of the incorporators

47. When by laws are adopted and filed after the incorporation, which of the following s correct?
a. Submitted within one (1) month after the filling of the Aritcle of Incorporation with the
SEC
b. Apporved and signed by at least a majority of the incorporators
c. Apporved by the stockholders representing at least 2/3 fo the outstanding capital stock
d. Approved by the stockholdders representing at least a majority of the outstanding
stock

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

49. The members of the board of direction maybe given compensation by any of the following acts,
except
a. If approved by the vote of the stockholders representing majority og the outstanding
capital stock
b. If provided in the by-laws
c. If approved by the board of directors if the salary given is not more than ten
percent (10%) of the net income before income before income tax during the
preceding year
d. If apporeved by the boards of directors giving them a reasonable per deim

50. The ratification of director’s or trustee’s contract with the corporation requires the vote of
a. Majority of outstanding capital stock of voting shares of majority of the members
entitled to vote
b. 2/3 of outstanding capital stock of voting shares or 2/3 of the members entitled to
vote
c. Majority of outstanding capital stocks of voting and non-voting shares or majority of all
the members
d. 2/3 of outstanding capital stock of voting and non-voting shares or 2/3 of all members

51. Subscription as distinguished from purchased of stock

a. Maybe made before or after the incorporation
b. Governed by the Staute of Frauds if the price is at least P 500.00
c. Can vote only on the shares he has paid
d. Does not become a shareholder unitl he has paid the purchased price