RFBT Final Preboard 90 RFBT Final Preboard 90 PDF

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CPAR CPA Review School of the Philippines FINAL PRE-BOARD EXAMINATION Regulatory Framework for Business Transactions Instructions:

September 2021

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

1. A, B, C and D organized a general partnership with A and B as industrial partners and C and D as capitalist partners. C contributed Php 200,000 and D contributed Php 100,000 to the common fund. By a unanimous vote of the partners, A and B were appointed as managing partners without any specification of their respective powers and duties. Later, W applied for the position of secretary and Y applied for the position of accountant of the partnership. The hiring of W was decided upon by A and B but was opposed by C and D. The hiring of W was decided by A and D but was opposed by B and C. Who can be hired by the partnership? a.

Both W and Y

b. Neither W nor Y

c. Only W d. Only Y

2. A, upon request, loaned his passenger jeepney to B to enable B to bring his sick wife from Legaspi City to the PGH in Manila for treatment. On the way back to Legaspi, after leaving his wife at the hospital, people stopped the passenger jeepney. B stopped for them and allowed them to ride on board accepting payment from them just as in the case of ordinary passenger jeepney plying their route. As B was crossing Guinobatan, there was an onrush of lahar from Mount Mayon. The jeep that was loaned to him was destroyed. Which of the following is not correct? a. b. c. d.

The contract between A and B is called commodatum B is obliged to pay A for the use of the passenger jeepney B is liable for the loss of the jeepney A can recover from B the value of the jeepney and payment for the use of the jeepney

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

d. Simple loan

4. The following are examples of real contracts, except a. Commodatum

b. Mutuum c. Donation

d. Pledge

5. A, B and C are general partners in a merchandising firm. They contributed amounts to the capital and also agreed on equal distribution of whatever net profit is realized per fiscal period. After three years of operation, however, C conveys her whole interest in the partnership to D, without the knowledge and consent of A and B. Which of the following is not correct? a. b. c. d.

The partnership is dissolved. D cannot interfere or participate in the management or administration of the partnership business or affairs D shall receive the net profits to which C would have otherwise been entitled The conveyance by C of his whole interest in the partnership did not make D a partner

6. Which of the following obligations is not valid? a. If the debtor promises to pay as soon as she has the means to pay b. If the debtor will give his car if the creditor will pass the CPA Exam and if the creditor will fail, the creditor will have sexual intercourse with the debtor for one week. c. If the debtor will give his cow or will kill the friend of the creditor d. If the debtor will be the mistress of the creditor or if the debtor wants will give Php 1M to the creditor

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7. If a pregnant woman passenger of a bus were to suffer an abortion following a vehicular accident due to the gross negligence of the bus driver, she and her husband can claim as damages from the bus company for the death of their unborn child, except a. b. c. d.

Actual damages in the form of imdemnity for the loss of life of the unborn child Moral damages for mental anguish that attended the loss of the unborn child Exemplary damages since there is gross negligence Actual damages for the bodily injury she suffered from the loss of the fetus which is considered part of her internal organs.

8. A 16-year old high school student stabs his classmate who is his rival for a girl while they were going out of the classroom after their last class, under the law on quasi delict. Which of the following is not correct? I – The school, its administrators and teachers shall have substituted parental authority and responsibility over the minor child while under their supervision, instruction or custody. II – The persons identified by law to be liable may raise the defense that they exercised the proper diligence required under the circumstances, that is they observed the diligence of a good father of a family to prevent the damage. a. Both I and II

b. Neither I nor II

c. Only I

d. Only II

9. A made a negotiable promissory note payable to the order of B, a minor. Later, B indorsed the note to C, then C to D and D to E. Which of the following is correct? a. If E is aware that B is a minor, E cannot collect from A but can collect from D or E b. If E is a holder in due course, E can collect from A, and if A dishonors by non-payment, E can collect from B, C or D c. The indorsement by B to C did not make C a holder d. Regardless of whether E is a holder in due course or holder for value, E can collect from A 10. A made a negotiable promissory note payable to the order of B. Later, B made a blank indorsement to C and C delivered the note to D, who likewise delivered the note to E. E made a special indorsement to F and F made a qualified indorsement to G. Which of the following is correct? a. The indorsement made by E is not necessary because the instrument was converted to bearer, hence the indorsement made by G can be stricken out b.C and D are not liable because they negotiated the instrument by delivery c. If the instrument is dishonored by A, the present holder E cannot go after C and D d.B’s indorsement can be stricken out because B’s blank indorsement converted the instrument to bearer 11. Inadvertently, the SEC approved the Articles of Incorporation and issued a Certificate of Incorporation to Wholesome Corporation. Thereafter it was discovered that the incorporators have not completed the required period of residency in the Philippines. As a result, which of the following is not correct? a. The corporation shall be considered as a de-facto corporation b. The right to exercise corporate powers can be inquired into collaterally in any private suit to which the corporation maybe a party c. The corporation has no legal personality and the incorporators maybe held personally liable for damages d. The Solicitor General has the right to question or contest the validity of its corporate existence through a quo-warranto proceedings 12. Which of the following statements is not correct? a. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof b. The agent shall finish the business already begun on the death of the principal, should delay entail any danger c. The agent shall be bound to advance the necessary funds, except when the principal is insolvent d. In the execution of the agency, the agent shall act in accordance with the instruction of the principal

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13. The following are the effects of unlawful partnership, except a. b. c. d.

The contract is void ab initio and the partnership never existed in the eyes of the law The profits shall be confiscated in favor of the government The instruments, or tools and proceeds of the crime shall be forfeited in favor of the government The contributions of the partners shall be confiscated in favor of the government

14. S sold his piano to B for P200,000, payable in installment. A chattel mortgage was constituted on the piano. B defaulted in two installment payments. S demanded payment of the unpaid obligation amounting to P120,000 and a writ of attachment was issued and the piano was sold for P100,000. Can A still recover the deficiency? a. b. c. d.

Yes, even without stipulation Yes, only if stipulated that in case of foreclosure the buyer will pay any deficiency No, even if stipulated No, unless there is stipulation

15. In a partnership, the liability of the partners shall be joint and solidary I. Obligations in favor of partnership suppliers by virtue of sales contract II. Obligations in favor of a partnership client for return of deposits misappropriated by one of the partners III. Obligations in favor of a pedestrian hit by the delivery van driven by one of the partners in the course of partnership business a. I and III

b. II and III

c. I and II

d. I, II and III

16. A lost his cell phone while inside a restroom. It was found by B who diligently searched for the owner but to no avail. Later, the cell phone was purchased by C, a buyer in good faith. Subsequently A traced his cell phone while being used by C. In this case a. C acquires ownership over the cell phone b. A can recover the cell phone from C upon reimbursement of the purchase price c. C should return the cell phone to A if B will return the purchase price d. B’s title is void; hence C did not acquire a valid title over the cell phone 17. A sold to B a laptop computer covered by an invoice marked “on trial or satisfaction, 15 days”. On the 10 th day, B pledged the laptop computer at “Casa Agencia”. Unfortunately, everything in the pawnshop got lost due to robbery. In this case, a. B has no obligation to pay the price since ownership has not yet passed to him b. A cannot demand for payment of the price since he retains ownership c. Obligation to pay the price is demandable due to acceptance of the delivery d. No one is liable because the loss was due to a fortuitous event 18. A mortgaged his land to B to guarantee the debt of C. Despite repeated demands, C failed to pay B prompting the latter to foreclose the mortgage. However, the proceeds was not sufficient to settle the obligation of C to B. Can B go after A for the deficiency? a. Yes, A is a guarantor b. Yes, the mortgage is binding upon A c. No, only the land was offered as security d. No, the mortgage was not registered with the Registry of Deeds 19. Which of the following statements is false? a. Treasury shares revert to the unissued shares of the corporation and being in the treasury they don’t have the status of outstanding shares b. Shares issued without par value shall be deemed fully paid and non assessable and the holder of such shares shall not be liable to the corporation or its creditors in respect thereto c. Redeemable shares may be redeemed regardless of the existence of unrestricted retained earnings provided such redemption would not cause insolvency or inability of the corporation to meet its debts as they mature d. When par value shares are issued above par, the premium or excess is not to be considered as part of the legal capital 3

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

B P0 P0

C P0 P15,000

c. d.

A P10,000 P15,000

B P10,000 P15,000

C P10,000 P0

21. Which of the following statements is not correct? a. A stockholder is entitled to cast such number of votes as the number of shares outstanding entitled to vote in his name times the total number of directors to be elected b. Outstanding shares although with voting rights but have not been fully paid cannot be voted c. A stockholder may cumulate his vote for one candidate or may distribute them among as many candidates but he cannot cast more than the shares outstanding in his name times the number of directors to be elected d. Members of the board of directors are voted by stockholders by means of cumulative voting 22. A, B, C and D are partners contributing P20,000, P30,000, P50,000 and industry, respectively. The partnership failed so the partners decided to dissolve the partnership. At the same time of liquidation, the unpaid obligation amounted to P100,000 distributed as follows: To partnership creditor, Y Php 50,000 To partners A 30,000 B 20,000 If the remaining cash amounting to P10,000 was given to Y as partial payment. Which of the following is correct? a. b. c. d.

Y can collect P10,000 from the separate property of D As an industrial partner, D is not liable to Y A, B and C are liable to Y in proportion to their capital contribution A, B and C are liable to Y at P13,333 each

23. Using the above information, if Y succeeds in collecting the deficiency from the partners concerned, which of the following is not correct? a. b. c. d.

Only C will be liable to the other partners A and B will not make additional contribution D is entitled to get reimbursement from A, B and C C will pay P35,000 to his partners

24. A, B, C and D are partners in Y & Co., a limited partnership contributing P10,000, P20,000, P30,000 and P40,000, respectively. A, C and D are the general partners while B is the limited partner. The partnership failed and the partners decided to dissolve the partnership. At the time of liquidation, the unpaid obligation amounted to P100,000 distributed as follows: To partnership creditor Y To partners A B

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Php 50,000 30,000 20,000

If the remaining cash amounting to P20,000 was given to Y as partial payment, which of the following is correct? a. b. c. d.

Y can collect P7,500 each from the separate properties of the partners Y can collect P30,000 from A, or C or D but not from B B is not liable to Y because B is also a creditor of the partnership Y can collect P10,000 each from A, C and D

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25. M delivers a negotiable promissory note payable to P or order. Later, P makes a special indorsement to A and A delivers the note to B. Who is the holder? a. b. c. d.

B, because he is in possession of the note A, because he is the indorsee P, because he is the payee No one can be considered as holder

26. If par value shares are now treasury shares, the following rules are applicable, except one. The exception is a. They shall have no voting rights as long as they remain in the treasury b. They are not entitled to dividends c. They may again be disposed of for a reasonable price even below par d. They are not part of subscribed stock and not considered as outstanding shares 27. A issued a check dated April 2, 2020, in favor of B in payment of A’s obligation to B amounting to P100,000. B kept the check in his drawer and failed to encash it due to his busy schedule. On February 16, 2021, B presented the check to the drawee bank for payment. The bank refused to pay the check for failure of B to present the check within the reasonable time after its issue. In this case. a. A’s obligation to B is extinguished because the impairment of the check is due to B’s fault b. B can sue the bank because as drawee it is the party primarily liable c. A’s obligation to B is not extinguished because the failure of B to present the check for payment within a reasonable time did not cause any injury to A d. When B accepted the check when A tendered payment, A’s obligation is extinguished 28. Which of the following statements is correct? a. When a vacancy in the board arises, such vacancy maybe filled by the remaining directors provided they still constitute a quorum b. The officers of a non-stock corporation maybe elected directly by the members instead of by the board of trustees c. The number of trustees in a non-stock corporation maybe five (5) but not more than fifteen (15) d. A director individually and acting as such can bind the corporation because he is an agent of the corporation 29. A, husband and B, wife are legally separated. By order of the court, which decreed the legal separation, A is obliged to give a monthly support of P50,000 to B payable in advance within the first five days of the month. B owes A P50,000 by way of loan. On the other hand, A has not yet given B support of P50,000 for the preceding month and another P50,000 of the present month. All the debts are already due. Based on the foregoing, which of the following statements is incorrect? a. If B demands her support for the preceding month, A may set up compensation as regards the loan that B owes him b. If B demands her support for the current month, A may claim compensation as regards the loan that B owes him c. If A demands payment of the loan, B may set up compensation as regards her support for the preceding month that A owes her d. If A demands payment of the loan, B may set up compensation as regards her support for the current month that A owes her 30. On January 1, 2019, A bought a parcel of land from B who was insane. The deed of sale was duly acknowledged before a notary public. Six months after the sale, A realized that he needed a larger area on which to construct a commercial building. At about the same time, B who had been undergoing psychiatric treatment was declared of sound mind by his neurologist. Should a court action be filed today, which is correct? a. b. c. d.

A may successfully prosecute a court action to annul the contract on the ground of B’s insanity B may successfully prosecute a court action to annul the contract on the ground of his insanity Neither A nor B may successfully prosecute a court action to annul the contract A may successfully prosecute a court action to annul the contract on the ground of mistake as to the area of the parcel of land

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31. A delivered to B the following instrument: In payment of a gambling debt, A made a promissory notes which reads: “I promise to pay to B P10,000 Sgd. A.” B indorsed the note in blank before maturity and delivered it to C for value. When due, A refused to pay and C sued B. Could C recover from B? a. b. c. d.

No, C could not sue B because B did not write the name of C as indorsee No, the instrument is not negotiable and B is a mere assignor of credit Yes, provided C gives notice of dishonor to B otherwise B is discharged from liability Yes, the endorsement will be considered as an assignment, hence B will be liable as an assignor of the instrument

32. Using the preceding number, but the note is in payment of merchandise purchased by A from B and A failed to pay due to insolvency. Could C collect from B? a. No, C could not sue B because B did not write the name of C as indorsee b. No, the instrument is not negotiable and B is a mere assignor of credit c. Yes, provided C gives notice of dishonor to B otherwise B is discharged from liability d. Yes, the endorsement will be considered as an assignment, hence B will be liable as an assignor of credit 33. On April 1, 2021, A and B entered into a contract of partnership for the purpose of selling cows’ milk, with the former as capitalist partner and the latter as industrial partner. It was agreed that A shall contribute 1,000 cows to the common fund on May 2, 2021. Upon the arrival of the designated date, A failed to deliver the contribution he promised. As a result a. b. c. d.

B should make a demand upon A for the delivery of his contribution and its fruits to render A in default The contract of partnership becomes void because A failed to give his contribution to the common fund B can compel A to deliver his contribution and its fruits without the necessity of demand The contract of partnership was never perfected because there was no delivery of contributions by the partners

34. A holder is a holder in due course if he has taken the instrument complete and regular on its face and three of the following conditions, except a. That he became the holder of the instrument before it was dishonored and without notice th...