Excel Professional Services Inc.

Management Firm of Professional Review and Training Center (PRTC)

Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Since 1977

Key Answers and Solution TEAM PRTC

FINAL PRE-BOARD EXAMINATION CPA Review April 29 & 30, 2023

MANAGEMENT SERVICES (MS)

1. D 21. D 41. D 61. A

2. C 22. B 42. D 62. D
3. D 23. C 43. C 63. C
4. A 24. B 44. A 64. D
5. C 25. D 45. A 65. D
6. A 26. D 46. A 66. B
7. A 27. B 47. B 67. D
8. A 28. B 48. D 68. D
9. A 29. C 49. C 69. A
10. B 30. C 50. D 70. A
11. C 31. D 51. A
12. B 32. C 52. D
13. A 33. A 53. C
14. B 34. D 54. C
15. D 35. D 55. A
16. A 36. C 56. D
17. A 37. A 57. B
18. D 38. A 58. C
19. D 39. A 59. C
20. C 40. B 60. B

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TEAM PRTC

AUDITING (AUD)

1. C 21. D 41. A 61. B

2. C 22. A 42. B 62. D
3. A 23. C 43. A 63. A
4. D 24. C 44. C 64. D
5. B 25. A 45. C 65. C
6. D 26. C 46. B 66. B
7. A 27. D 47. A 67. D
8. B 28. C 48. A 68. B
9. B 29. C 49. A 69. B
10. D 30. A 50. A 70. C
11. C 31. A 51. D
12. B 32. C 52. C
13. B 33. A 53. B
14. D 34. A 54. B
15. A 35. D 55. B
16. B 36. B 56. A
17. B 37. D 57. D
18. B 38. D 58. B
19. C 39. A 59. C
20. B 40. C 60. C

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TEAM PRTC

TAXATION (TAX)

1. B 21. B 41. A 61. D

2. C 22. B 42. A 62. C
3. D 23. B 43. A 63. C
4. C 24. B 44. B 64. C
5. A 25. C 45. B 65. D
6. C 26. A 46. B 66. A
7. B 27. D 47. A 67. B
8. C 28. A 48. A 68. B
9. C 29. A 49. C 69. C
10. D 30. B 50. A 70. C
11. B 31. B 51. C
12. D 32. A 52. A
13. D 33. B 53. A
14. C 34. C 54. C
15. C 35. C 55. D
16. C 36. D 56. B
17. C 37. C 57. B
18. C 38. D 58. B
19. D 39. C 59. C
20. C 40. B 60. A

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TEAM PRTC

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS (RFBT)

1. D 21. B 41. B 61. B 81. C

2. B 22. B 42. D 62. B 82. A
3. B 23. B 43. A 63. D 83. C
4. B 24. B 44. C 64. B 84. D
5. D 25. A 45. D 65. C 85. C
6. C 26. A 46. D 66. D 86. A
7. B 27. B 47. C 67. D 87. C
8. E 28. C 48. B 68. A 88. A
9. D 29. E 49. B 69. C 89. B
10. D 30. E 50. A 70. B 90. D
11. A 31. D 51. E 71. A 91. D
12. A 32. C 52. B 72. B 92. B
13. B 33. D 53. C 73. B 93. D
14. B 34. A 54. A 74. D 94. C
15. A 35. D 55. C 75. E 95. E
16. B 36. A 56. D 76. A 96. D
17. B 37. C 57. D 77. B 97. E
18. C 38. A 58. C 78. A 98. D
19. C 39. C 59. B 79. A 99. E
20. A 40. A 60. C 80. D 100. C

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TEAM PRTC

FINANCIAL ACCOUNTING AND REPORTING

1. D 21. C 41. B 61. C

2. B 22. C 42. A 62. A
3. C 23. B 43. A 63. B
4. A 24. A 44. B 64. B
5. A 25. D 45. A 65. D
6. D 26. D 46. B 66. B
7. C 27. C 47. A 67. B
8. B 28. A 48. D 68. D
9. C 29. D 49. D 69. B
10. A 30. A 50. A 70. D
11. C 31. B 51. D
12. A 32. D 52. D
13. D 33. A 53. B
14. C 34. D 54. A
15. A 35. D 55. B
16. A 36. A 56. A
17. D 37. B 57. A
18. C 38. C 58. C
19. A 39. C 59. D
20. A 40. D 60. A

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TEAM PRTC

ADVANCED FINANCIAL ACCOUNTING AND REPORTING (AFAR)

1. B 21. A 41. D 61. A

2. C 22. B 42. A 62. D
3. C 23. D 43. B 63. C
4. A 24. C 44. B 64. D
5. C 25. C 45. D 65. D
6. D 26. D 46. B 66. C
7. B 27. C 47. C 67. B
8. C 28. D 48. D 68. D
9. C 29. A 49. C 69. C
10. A 30. A 50. A 70. B
11. C 31. B 51. A
12. B 32. A 52. B
13. A 33. D 53. D
14. B 34. A 54. B
15. B 35. C 55. D
16. B 36. C 56. B
17. C 37. A 57. D
18. A 38. A 58. D
19. C 39. C 59. B
20. D 40. B 60. C

Thank you for participating in Team PRTC Nationwide Online Open Final Pre-Board Examination.

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0
Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao
Since 1977

MANAGEMENT SERVICES TRINIDAD

FINAL PRE-BOARD EXAMINATION – SUGGESTED ANSWERS AND SOLUTIONS MAY 2023

MC No. 1
Flexible budget for depreciation [258,000/12] 21,500

MC No. 2
Net profit margin [1+0.25] 1.25
Total assets turnover [1+0.40] 1.40
Total assets [1-0.10] 0.90
Total equity [1+0.40] 1.40

Using the Du-Pont Formula:

Return on equity = Net profit margin * Assets Turnover * Equity Multiplier
Return on equity = 1.25*1.40*[0.90/1.40]
Return on equity = 1.125

Change in ROE [1.125-1] 0.125 increase

MC No. 3
Actual fixed overhead 78,000
Less: Budgeted fixed overhead 80,000
Fixed overhead budget variance (2,000) favorable

Applied fixed overhead [(80,000/5,000)*6,000] 96,000

Actual fixed overhead 78,000

Less: Applied fixed overhead 96,000
Fixed overhead variance (18,000) Over-applied or favorable

MC No. 5
Opportunity costs per dozen [25*0.12] 3.00
Rent, insurance and taxes per dozen 0.50
Carrying costs per dozen 3.50

EOQ = √(2*AD*OC)/CC
EOQ = √(2*35,000*8)/3.50
EOQ = 400 dozens

EOQ in units [400*12] 4,800 tennis balls

Average inventory [4,800/2] 2,400 tennis balls

MC No. 6
Economic order quantity 4,800
Divide by: Daily usage [(35,000*12)/350] 1,200
Frequency of order Once every 4 days

MC No. 8
Year 1 [2,000*0.926] 1,852
Year 2 [2,000*0.857] 1,714
Year 3 [2,400*0.794] 1,906
Year 4 [2,600*0.735] 1,911
Present value of future cash flows 7,383
Less: Net investment 4,883 squeezed
Net present value 2,500

Net investment 4,883

Less: Cash flows
Year 1 2,000
Year 2 2,000 4,000
Remaining cash flow to be recovered in year 3 883

Fraction [883/2,400] 0.37

Payback period 2.37 years

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EXCEL PROFESSIONAL SERVICES, INC.

MC No. 9
No. of batches Average costs per batch Cumulative costs
1 120,000 120,000
2 96,000** 192,000*

*[120,000+72,000] 192,000

**[192,000/2] 96,000

Percentage of learning [96,000/120,000] 80%

MC No. 12
Assets - Liabilities = Equity
[2M+7M] - [1M+4M] = 4M

Non-current liabilities 4,000,000

Equity 4,000,000
Total 8,000,000

WACC = [KdAT*Wd] + [Kp*Wp] + [Ke*We]

WACC = [(5%*0.60)*(4M/8M)] + [15%*(4M/8M)]
WACC = 9%

MC No. 13
EVA = Net operating profit after taxes – [(Total assets – Current liabilities)*WACC]
EVA = [1,500,000*0.60] – [(9M – 1M)*9%]
EVA = 180,000

MC No. 16
Selling price 300
Less: Target costs 240 squeezed
Mark-up [300*0.20] 60

MC No. 17
Daily usage [84,000/300] 280
*Increase in lead time 2
Increase in safety stock 560

If the safety stock will increase, it is unlikely that the company will run out of stock. In that case the stockout costs will
decrease. Carrying more safety stock will mean that the company is holding more inventory, therefore, the carrying
costs will increase.

MC No. 18
Variable production costs per unit [36-8] 28
Avoidable fixed overhead costs per unit [60,000/30,000] 2
Relevant costs per unit to make 30
Relevant costs per unit to buy 33
Savings (Loss) per unit (3)

MC No. 19
Costs to make [30,000*30] 900,000
Opportunity costs [Forgone rental] 190,000 squeezed
Total relevant costs to make 1,090,000
Total relevant costs to buy [30,000*33] 990,000
Savings (Loss) if purchased 100,000

MC No. 20
Desired profit before taxes [250,000*32%] 80,000
Fixed costs 122,500
Required total contribution margin 202,500
Divide by: Contribution margin ratio 42%
Required peso sales 482,143
Divide by: Selling price per unit 15
Required no. of units to sell 32,143

MC No. 22
VC/unit = 2,840,000 – 2,420,000
190,000 - 160,000
= 14

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EXCEL PROFESSIONAL SERVICES, INC.

Using costs at highest level of activity

Total variable costs [190,000*14] 2,660,000
Total fixed costs 180,000
Total costs 2,840,000

Total variable costs [205,000*14] 2,870,000

Total fixed costs 180,000
Total costs 3,050,000

MC No. 23
VC/unit = [2,840,000 – 30,000] – 2,420,000
190,000 - 160,000
= 13

Using costs at highest level of activity

Total variable costs [190,000*13] 2,470,000
Total fixed costs 370,000
Total costs 2,840,000

Total variable costs [175,000*13] 2,275,000

Total fixed costs [370,000-30,000] 340,000
Total costs 2,615,000

MC No. 24
Prior year
Sales 90,000
Less: Variable costs 50,000
Contribution margin 40,000
Less: Fixed costs 30,000
Net income 10,000

Current year
Contribution margin [(90,000*1.20)*(40T/90T)] 48,000
Less: Fixed costs 30,000
Net income 18,000

Percentage of increase in net income [(18,000-10,000)/10,000] 80%

MC No. 26
Daily purchases [547,800/55] 9,960
*No. of days in a year 365
Annual purchases 3,635,400
* 1.15
Purchases next year 4,180,710
Divide by: No. of days in a year 365
Daily purchases next year 11,454
*Days in payable 50
Budgeted trade payable at the end of next year 572,700

MC No. 27
Before
Required return = Risk-free rate + [Beta*(Market return-Risk free rate)]
Required return = 6% + [0.95*(16%-6%)]
Required return = 15.5%

After
Required return = Risk-free rate + [Beta*(Market return-Risk free rate)]
Required return = 6% + [1.05*(16%-6%)]
Required return = 16.5%

WACC = [ (KdAT*Wd) + (Kp*Wp) + (Ke*We)]

WACC = [ 7.5%%*0.30] + [16.5%*0.70]
WACC = 13.8%

It is to be noted that the weighted average costs of capital before implementing the change is 15.5% because there is
no debt and preference shares in the capital structure. After implementing the changes, the weighted average costs of
capital became 13.8%. It must be further emphasized that the goal is to minimize the weighted average costs of
capital. Thus, the change must be implemented in because the weighted average costs of capital decreased.

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EXCEL PROFESSIONAL SERVICES, INC.

MC No. 28
After tax savings [(40,000-29,000)*0.60] 6,600
After tax salvage value [9,000*0.60] 5,400
Recovery of working capital [7,000+5,000] 12,000
Expected net cash flow at the end of the 10th year 24,000

MC No. 29
After tax savings [80,000*0.60] 48,000
Depreciation tax shield [(250,000/5)*0.40] 20,000
Equal annual cash flows 68,000

Net investment 250,000

Divide by: Equal annual cash flows 68,000
Payback period 3.68 years

MC No. 30
Present value of future cash flows [7,400,000*0.4371] 3,234,540
Less: Net investment 3,500,000
Net present value (265,460)

MC No. 31
Using internal rate of return of 20%
Present value of future cash flows [9,950,000*0.4019] 4,000,000
Less: Net investment 4,000,000
Net present value -0-

The present value of the future cash flow is not exactly equal to 4,000,000. The very minimal difference is only due to
rounding off process. What is presented in the solution is equal to 4,000,000 in order to emphasize that under the
concept of internal rate of return, the net present value should be zero.

MC No. 32
Costs of sales 36,000,000
Divide by: Inventory turnover 9
Inventory before changes 4,000,000

Costs of sales 36,000,000

Divide by: Inventory turnover 12
Inventory after changes 3,000,000
Decrease in inventory [4,000,000-3,000,000] 1,000,000
*Interest rate 8%
Cost savings 80,000

MC No. 33
No. of lots Average hours per lot Total hours
1 800 800
2 720* 1,440**
4 648*** 2,592****

*[800*0.9] 720
**[720*2] 1,440
***[720*0.9] 648
****[648*4] 2,592

Total hours of four lots 2,592

Less: Total hours of the first lot 800
Hours for the next three lots [next twelve units] 1,792

MC No. 34
Net investment 450,000
Divide by: Payback period 3
Equal annual cash flows 150,000

After tax savings [190,000*0.60] 114,000

Depreciation tax shield [(450,000/5)*0.40] 36,000
Equal annual cash flows 150,000

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EXCEL PROFESSIONAL SERVICES, INC.

MC No. 35
Fixed costs 792,000
Divide by: Contribution margin per unit [20-10-(20*0.05)] 9
Breakeven point in units 88,000 units

MC No. 36
Sales 100% 20
Less: Variable costs [10+(20*0.10)] 60% 12
Contribution margin 40% 8

Desired profit before taxes [201,600/70%] 288,000

Fixed costs [792,000-160,000] 632,000
Required total contribution margin 920,000
Divide by: Contribution margin ratio 40%
Required peso sales 2,300,000

MC No. 37
Per unit assuming 1,000 units Ratio Total
Sales 1,000 100% 1,000,000
Less: Variable costs 600 60% 600,000
Contribution margin 400 40% 400,000
Less: Fixed costs 100,000
Net income 300,000

Selling price [1,000*1.20] 1,200 100%

Less: Variable costs per unit 600 50%
Contribution margin per unit 600 50%

Fixed costs [100,000*0.60] 60,000

Divide by: Contribution margin ratio 50%
Breakeven point in pesos 120,000

MC No. 39
Per hour based on 36,000 hrs. Total
Budgeted variable overhead 2 72,000
Budgeted fixed overhead 4.5 162,000
Budgeted total overhead 6.5 234,000

Budgeted fixed overhead 162,000

Less: Applied fixed overhead [31,500*4.5] 141,750
Fixed overhead volume variance 20,250 unfavorable

Total overhead 220,500

Less: Applied overhead [31,500*6.5] 204,750
Total overhead variance 15,750 unfavorable

Controllable variance (4,500) favorable

Volume variance 20,250 unfavorable
Total overhead variance 15,750 unfavorable

MC No. 41
Budgeted total overhead [48,000+80,000] 128,000
Divide by: Estimated direct labor hours 32,000
Direct labor costs per hour 4
*No. of hours 800
Estimated factory overhead 3,200
Direct materials 1,600
Direct labor 2,400
Estimated product costs 7,200

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EXCEL PROFESSIONAL SERVICES, INC.

MC No. 42
OH Cost Pool Budgeted OH costs Costs driver Activity rate Activities in Job 912 OH assigned
[A] [B] [C=A/B] [D] [E=C*D]
Direct materials 24,000 600 40 20 800
Machine set-up 1,950 65 30 5 150
Machine repair time 209 1 209 per unit 6 minutes* 418**
Inspection 1,620 27 60 2 120
Total 1,488

*[0.10*60] 6 minutes
**[2*209] 418
**If Job 912 requires 6 minutes, then that is equivalent to two units because 1 unit is equivalent to 3 minutes.

MC No. 44
Investment A:
Required return = Risk-free rate + [Beta*(Market return-Risk free rate)]
Required return = 6% + [1.40*(11%-6%)]
Required return = 13%

Investment B:
Required return = Risk-free rate + [Beta*(Market return-Risk free rate)]
Required return = 6% + [0.80*(11%-6%)]
Required return = 10%

Investment C:
Required return = Risk-free rate + [Beta*(Market return-Risk free rate)]
Required return = 6% + [1.50*(11%-6%)]
Required return = 13.5%

Expected return Required return Decision

Investment A 12% 13% Reject
Investment B 11% 10% Accept
Investment C 13% 13.5% Reject

MC No. 45
Security Expected return Amount invested Expected return on portfolio
Stock A 10% 1,000,000 1.4%
Stock B 15% 250,000 0.5%
Stock C 8% 3,000,000 3.3%
Stock D 12% 450,000 0.8%
Stock E 4% 2,500,000 1.4%
Total 7,200,000 7.4%

MC No. 48
Kp = d / [P-f]
Kp = 62.5*0.15 / [68.75*.925]
Kp = 14.74%

MC No. 49
Long-term debt 48,000 25%
Equity 144,000 75%
Total 192,000 100%

WACC = (KdAT * Wd) + (Kp * Wp) + (Ke * We)

WACC = [(8%*0.6)*0.25] + [18%*0.75]
WACC = 14.7%

MC No. 52
2023 2022
720,000
Sales 810,000 800,000
Less: Costs of sales 567,000 540,000 600,000
Gross profit 243,000 200,000

Costs at 2022 price [567,000/1.05] 540,000

Percentage of change in quantity [(540,000/600,000)-1] 10% decrease
Sales at 2022 price [800,000*0.9] 720,000

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EXCEL PROFESSIONAL SERVICES, INC.

Effect on sales due to changes in selling price [810,000 - 720,000] 90,000

Effect on sales due to changes in quantity sold [720,000 - 800,000] (80,000)

MC No. 53
Assets to equity ratio = Assets / Equity
Equity = Assets / Assets to equity ratio
Equity = 6,000,000 / 1.5
Equity = 4,000,000

Earnings per share = Net income / No. of shares

No. of shares = Net income / Earnings per share
No. of shares = 250,000 / 0.5
No. of shares = 500,000

Book value per share = Equity / No. of shares

Book value per share = Equity / No. of shares
Book value per share = 4,000,000 / 500,000
Book value per share = 8

Price to earnings ratio = Price per share / Earnings per share

Price per share = Price to earnings ratio * Earnings per share
Price per share = 20 * 0.50
Price per share = 10

Market to book value ratio = Price per share / Book value per share
Market to book value ratio = 10 / 8
Market to book value ratio = 1.25

MC No. 55
Average incremental zippers purchased [(60,000-5,000)/2] 27,500
*Purchase price per zipper 60
Money tied up on zippers 1,650,000
*Opportunity cost rate 8%
Opportunity cost 132,000

MC No. 58
Change in net income or change in contribution margin 9,000
Divide by: Change in sales [216,000-180,000] 36,000
Contribution margin ratio 25%

Contribution margin [250,000*25%] 62,500

Less: Fixed costs 25,000
Net income 37,500

MC No. 60
It is to be noted that there is a strong inverse relationship between the sales of the cheapest product line and the
customer income level; that is, if the customer income level increases, the sales will decrease because customers
will tend to buy a more expensive product given the higher disposable income. If the relationship is inverse, then
the coefficient should be negative. Choice “A” cannot be answer because that is invalid relationship because the
correlation coefficient ranges from -1 to +1. Choice “B” should be the answer because it is the only remaining
negative figure which is valid. After all, -0.93 is something very close to the perfect inverse correlation which is 1.

MC No. 62
Excess capacity [10,000*20%] 2,000

Direct materials 100,000

Direct labor 80,000
Variable overhead 50,000
Variable selling expenses 30,000
Total variable costs 260,000
Divide by: Normal capacity 10,000
Variable costs per unit 26

Contribution margin from special order [2,500*(30-26-0.75)] 8,125

Less: Lost contribution margin from regular sales [(2,500-2,000)*(38-26)] 6,000
Effect on profit 2,125

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EXCEL PROFESSIONAL SERVICES, INC.

MC No. 63
Avoidable fixed costs [(120,000*3/12)*0.60] 18,000
Less: One time start-up costs 1,500
Net avoidable fixed costs 16,500
Divide by: Contribution margin per unit 5
Shut-down point in units 3,300

MC No. 65
Budgeted sales in units 10,000
Desired level of ending inventory 2,000
Total inventory needed 12,000
Less: Beginning inventory 800
Budgeted production 11,200

Direct labor costs in molding [11,200*1*20] 224,000

Direct labor costs in finishing [11,200*2*25] 560,000
Budgeted direct labor costs 784,000

MC No. 66
Formula price [3,600,000*1.2] 4,320,000
Premium
Costs leading to the target price [4,500,000/1.2] 3,750,000
Less: Actual costs 3,600,000
Difference 150,000
*Rate 50% 75,000
Price 4,395,000

MC No. 68
Percentage of increase every year [10M/200M] 5%
Cumulative percentage of increase in 4 years [5%*4] 20%
Current Fixed LTD, CS and
assets assets AP NP RE
Beginning of year 1 30,000,000 90,000,000 10,000,000 20,000,000 90,000,000
NI in 4 years 45,000,000
Div in 4 years 27,000,000
AFN in 4 years (14,000,000)
End of year 4 36,000,000 90,000,000 12,000,000 20,000,000 94,000,000
[30M*1.2] [10M*1.2]

Year 1 210,000,000
Year 2 220,000,000
Year 3 230,000,000
Year 4 240,000,000
Total sales in 4 years 900,000,000
*Profit margin 5%
NI in 4 years 45,000,000
Dividend in 4 years [45M*0.6] 27,000,000

MC No. 69
Fnp = Ftp + a(Atp - Ftp)
Forecast in day 2 = 15 + 0.4(15-15)
Forecast in day 2 = 15

Fnp = Ftp + a(Atp - Ftp)

Forecast in day 3 = 15 + 0.4(27-15)
Forecast in day 3 = 19.8

MC No. 70
Selling price 18
Less: Direct materials 5
Throughput contribution per unit 13
* Additional unit sales 8,000
Increase in throughput contribution 104,000

“Success consists of going from failure to failure without loss of enthusiasm.”

― Winston Churchill, former Prime Minister of the United Kingdom
😊 – end - 😊

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 Auditing

1. Which of the following should be considered by a CPA prior to acceptance of an audit engagement
of a non-listed entity?
I. The quality of the accounting records
II. The future plans for the company
A. I only
B. II only
C. Both I and II
D. Neither I nor II
ANS: C

Statement I is accurate. The CPA must evaluate a client's auditability by examining the sufficiency of
their accounting records. Poor quality accounting records lead to a scope limitation. While an auditor
may occasionally be able to work within such limitations, they would prefer to be aware of this before
agreeing to the engagement. Statement II is also accurate. It is essential for an auditor to understand a
company's future plans, as these may influence the decision to accept the engagement. Prior to
agreeing to an engagement, the auditor should ascertain the reason for the audit. For instance, is the
company planning to go public? Sometimes, a bank may require an audit to be conducted for the
purpose of renewing a client's loan or credit line.

2. What is the primary purpose of the "Panunumpa ng Propesyunal" for Certified Public Accountants in
the Philippines?
a. To pledge loyalty to a political party
b. To promote personal interests
c. To uphold and defend the Philippine Constitution, follow laws, and adhere to ethical and
professional standards
d. To establish a secret society among professionals

Answer: C) To uphold and defend the Philippine Constitution, follow laws, and adhere to ethical and
professional standards

Use the following information to answer next three (3) questions:

Steel Fabricator Ltd. is a medium-sized manufacturing company. The company has recently expanded its
operations and is now exporting products to multiple countries. The management team has approached
SSV Auditing Firm to conduct an audit of their financial statements for the year ended December 31,
2022. SSV Auditing Firm is evaluating whether to accept or continue the client relationship.

As the engagement partner, you are required to evaluate the proposed audit engagement in accordance
with PSA 210 (Revised), "Agreeing the Terms of Audit Engagements." You will assess the factors affecting
the decision to accept or continue the engagement and ensure that the preconditions for an audit are
present.

3. According to PSA 210, what is the main objective of establishing an understanding of the terms of
the audit engagement?
a. To ensure a common understanding of the responsibilities of management and the auditor.
b. To ensure a common understanding of the audit fee.
c. To ensure a common understanding of the audit scope.
d. To ensure a common understanding of the audit timeline.
Answer: A. To ensure a common understanding of the responsibilities of management and the auditor.

4. Which of the following is NOT one of the preconditions for an audit as per PSA 210?
a. The use of an acceptable financial reporting framework.
b. The ability to obtain sufficient appropriate audit evidence.
c. The client's agreement to provide the auditor with unrestricted access to all necessary records.
d. The auditor's evaluation of the financial health of the client's business.

Answer: D. The auditor's evaluation of the financial health of the client's business.

5. In case the preconditions for an audit are not met, what should the auditor do?
a. Accept the engagement and perform additional audit procedures.
b. Decline the engagement or discuss with management the need to change the financial reporting
framework.
c. Accept the engagement but limit the scope of the audit.
d. Accept the engagement and charge a higher audit fee.

Answer: B. Decline the engagement or discuss with management the need to change the financial
reporting framework.

6. Which of the following factors is NOT considered when assessing materiality during the planning
stage of an audit of financial statements?
a. Benchmark ratios
b. Prior year financial results
c. User needs and expectations
d. The client's payroll system

Answer: D. The client's payroll system

Explanation: Materiality is determined based on the needs of financial statement users, benchmarks,
and prior year financial results. The client's payroll system is not directly relevant to materiality
assessments.

7. Which of the following is the most appropriate course of action for an auditor when they identify
significant risks during the planning stage of the audit?
a. Perform more extensive audit procedures.
b. Communicate the risks to the audit committee.
c. Request management to rectify the risks.
d. Revise the overall audit strategy.

Answer: A. Perform more extensive audit procedures.

Explanation: When an auditor identifies significant risks, they need to design and perform more
extensive audit procedures to address those risks.

8. When planning an audit, why is it important for the auditor to gain an understanding of the entity
and its environment?
a. To ensure compliance with relevant regulations.
b. To identify and assess the risks of material misstatement.
 c. To establish the terms of the engagement.
d. To assess the reliability of internal control systems.

Answer: B. To identify and assess the risks of material misstatement.

Explanation: Gaining an understanding of the entity and its environment helps the auditor identify and
assess the risks of material misstatement, which in turn allows them to design and perform appropriate
audit procedures.

9. Which of the following is NOT a direct impact of a significant change in an entity's industry on the
audit planning process?
a. Reassessment of audit risk
b. Adjustment of materiality levels
c. Identification of new areas of significant risk
d. Reevaluation of the engagement team's industry expertise

Answer: B. Adjustment of materiality levels

Explanation: While changes in an entity's industry may affect the audit planning process in several ways,
materiality levels are generally not directly affected by industry changes. Materiality is determined
based on the needs of financial statement users, benchmarks, and prior year financial results.

10. An auditor plans to rely on the work of an entity's internal auditors. Which of the following factors
should the auditor consider when evaluating the internal auditors' competence and objectivity?
a. The internal auditors' independence from management.
b. The internal auditors' educational background and certifications.
c. The internal auditors' access to necessary information.
d. All of the above.

Answer: D. All of the above.

Explanation: When an auditor plans to rely on the work of internal auditors, they need to assess their
competence and objectivity. This includes evaluating their independence from management,
educational background, certifications, and access to necessary information.

11. Which of the following is NOT a purpose of the independent auditor's report?
a. To express an opinion on the financial statements.
b. To describe the scope of the auditor's work.
c. To provide assurance on the effectiveness of internal controls.
d. To provide an overview of the responsibilities of both management and the auditor.

Answer: C. To provide assurance on the effectiveness of internal controls.

Explanation: The primary purpose of the independent auditor's report is to express an opinion on the
financial statements, describe the scope of the auditor's work, and provide an overview of the
responsibilities of both management and the auditor. It does not provide assurance on the effectiveness
of internal controls.

12. Which section of the independent auditor's report outlines the framework used to prepare the
financial statements?
a. Basis for Opinion
b. Management's Responsibility for the Financial Statements
 c. Auditor's Responsibilities for the Audit of the Financial Statements
d. Other Information

Answer: B. Management's Responsibility for the Financial Statements

Explanation: The "Management's Responsibility for the Financial Statements" section of the auditor's
report outlines the framework used to prepare the financial statements, emphasizing that management
is responsible for selecting and applying the appropriate financial reporting framework.

13. Which of the following circumstances would most likely result in an emphasis of matter paragraph
being included in the independent auditor's report?
a. A material misstatement in the financial statements.
b. A significant subsequent event.
c. A limitation in the scope of the audit.
d. A disagreement with management regarding accounting policies.

Answer: B. A significant subsequent event.

Explanation: An emphasis of matter paragraph is included in the auditor's report to draw attention to a
matter that is appropriately presented or disclosed in the financial statements but is of such importance
that it is fundamental to users' understanding of the financial statements, such as a significant
subsequent event.

14. Which of the following is NOT a typical responsibility of the auditor as described in the "Auditor's
Responsibilities for the Audit of the Financial Statements" section of the independent auditor's
report?
a. Identifying and assessing the risks of material misstatement.
b. Obtaining sufficient appropriate audit evidence.
c. Evaluating the appropriateness of accounting policies and estimates.
d. Preparing and presenting the financial statements.

Answer: D. Preparing and presenting the financial statements.

Explanation: Preparing and presenting the financial statements is a responsibility of management, not
the auditor. The "Auditor's Responsibilities for the Audit of the Financial Statements" section describes
the auditor's responsibilities for identifying and assessing risks, obtaining audit evidence, and evaluating
accounting policies and estimates.

15. The concept of reasonable assurance implies that an auditor

a. does not guarantee the accuracy of the financial statements.
b. is not accountable for the fairness of the financial statements.
c. is solely responsible for providing an opinion on the financial statements.
d. is in charge of identifying every misstatement.

Answer: A

Reasonable assurance refers to the level of certainty an auditor achieves when conducting an audit. It
implies that, although the auditor performs their duties diligently, they cannot guarantee the complete
accuracy of the financial statements. Auditors are responsible for expressing an opinion on the financial
statements based on the evidence gathered, but they are not guarantors of their correctness. This
concept acknowledges that there may be inherent limitations in the audit process, and it is not possible
to identify every misstatement or error.

16. The ________ always includes a list of the ________, and it usually includes sample sizes, items to
select, and the timing of the tests.
a. audit program; audit objectives
b. audit program; audit procedures
c. audit assertion; audit programs
d. audit assertion; audit objectives

Answer: B
The audit program always includes a list of the audit objectives, and it usually includes sample sizes,
items to select, and the timing of the tests.

17. A measure of how willing the auditor is to accept that the financial statements may be materially
misstated after the audit is completed and an unqualified opinion has been issued is the
a. inherent risk.
b. acceptable audit risk.
c. statistical risk.
d. financial risk.

Answer: B

18. The measurement of the auditor's assessment of the susceptibility of an assertion to material
misstatement, before considering the effectiveness of related internal controls is defined as
a. audit risk.
b. inherent risk.
c. sampling risk.
d. detection risk.

Answer: B

19. Which of the following is a correct relationship?

a. Acceptable audit risk and planned detection risk have an inverse relationship.
b. Control risk and planned detection risk have a direct relationship.
c. Planned detection risk and inherent risk have an inverse relationship.
d. All of the above are correct relationships.
Answer: C

20. When assessing fraud risk,

a. fraud risk is assessed only at the overall financial statement level.
b. the auditor's assessment of fraud risk should be ongoing throughout the audit.
c. if the auditor concludes that there is a risk of material misstatement due to fraud, auditing
standards require that the risks be treated as pervasive.
d. auditing standards require that the auditor presume there is a risk of fraud in the inventory
account.
Answer: B
21. Which of the following is not one of the three primary objectives of effective internal control?
a. reliability of financial reporting
b. efficiency and effectiveness of operations
c. compliance with laws and regulations
d. assurance of elimination of business risk

Answer: D

The primary objectives of effective internal control include reliability of financial reporting, efficiency
and effectiveness of operations including safeguarding of assets and compliance with laws and
regulations.

22. In performing the audit of internal control over financial reporting, the auditor emphasizes internal
control over classes of transactions because
a. the accuracy of accounting system outputs depends heavily on the accuracy of inputs and
processing.
b. the class of transaction is where most fraud schemes occur.
c. account balances are less important to the auditor then the changes in the account balances.
d. classes of transactions tests are the most efficient manner to compensate for inherent risk.

Answer: A

23. An internal control deficiency occurs when computer personnel

a. participate in computer software acquisition decisions.
b. design flowcharts and narratives for computerized systems.
c. originate changes in customer master files.
d. provide physical security over program files.

Answer: C

24. Which of the following represents a correct statement regarding internal control testing?
a. When auditors plan to use evidence about the operating effectiveness of internal control
contained in prior audits, auditing standards require tests of the controls' effectiveness at least
every other year.
b. The greater the risk, the less audit evidence the auditor should obtain that controls are
operating effectively.
c. The auditor uses control risk assessment and results of tests of controls to determine planned
detection risk and the related substantive tests for the financial statement audit.
d. Testing of internal controls can only be performed by the auditor at the end of the fiscal year.

Answer: C

25. When using the test data approach,

a. test data should include data that the client's system should accept or reject.
b. application programs tested by the auditor's test data must be different from those used by the
client throughout the year.
c. select data may remain in the client system after testing.
d. None of the above statements is correct.
Answer: A

26. Which of the following computer-assisted auditing techniques inserts an audit module in the client's
application system to identify specific types of transactions?
a. parallel simulation testing
b. test data approach
c. embedded audit module
d. generalized audit software testing

Answer: C

27. Which of the following is NOT an appropriate method for testing the operating effectiveness of
controls?
a. Inspection of documents and records.
b. Observation of the control being applied.
c. Inquiry of the individuals responsible for performing the control.
d. Calculation of key financial ratios.

Answer: D. Calculation of key financial ratios.

Explanation: Key financial ratios are not directly related to the operating effectiveness of controls.
Appropriate methods for testing controls include inspection of documents and records, observation of
the control being applied, and inquiry of the individuals responsible for performing the control.

28. When an auditor determines that a control is not operating effectively, which of the following is the
most appropriate course of action?
a. Increase the sample size for the test of controls.
b. Perform additional tests of controls.
c. Modify the planned substantive procedures.
d. Communicate the issue to the entity's audit committee.

Answer: C. Modify the planned substantive procedures.

Explanation: If a control is found to be ineffective, the auditor should modify their planned substantive
procedures to address the increased risk of material misstatement. This may involve increasing the
extent of substantive procedures or performing alternative procedures.

Use the following information to answer next four (4) questions.

Ligaya Manufacturing Company is a medium-sized entity that produces electronic components. The
company has a complex production process that relies heavily on technology and automation. You are
the engagement partner of SDT Audit Firm, responsible for conducting the audit of Ligaya
Manufacturing Company's financial statements for the year ended December 31, 2022.

During the planning phase of the audit, you identify a significant risk related to inventory valuation due
to the rapid technological changes in the industry and the company's complex production process.
Additionally, you learn that the company recently implemented a new inventory management system.
You are required to evaluate the audit risks, design and perform appropriate audit procedures, and
consider the implications of your findings on the auditor's report.

29. Which of the following is the most appropriate audit procedure to address the risk of material
misstatement related to inventory valuation?
a. Conduct inquiries with management about the new inventory management system.
b. Perform a physical count of the inventory items on hand.
c. Evaluate the appropriateness of the company's inventory valuation methods.
d. Review the company's sales and purchase contracts.

Answer: C. Evaluate the appropriateness of the company's inventory valuation methods.

Explanation: Given the significant risk related to inventory valuation, the auditor should evaluate the
appropriateness of the company's inventory valuation methods to ensure they are consistent with the
applicable financial reporting framework.

30. Upon finding discrepancies in the inventory count, which of the following actions should the auditor
take?
a. Communicate the discrepancies to management and request an explanation.
b. Adjust the audit opinion based on the discrepancies.
c. Request that management conduct a new inventory count.
d. Perform additional substantive procedures on other account balances.

Answer: A. Communicate the discrepancies to management and request an explanation.

Explanation: When the auditor finds discrepancies in the inventory count, they should communicate the
discrepancies to management and request an explanation. This will help the auditor understand the
cause of the discrepancies and determine the appropriate response.

31. After obtaining satisfactory explanations from management for the inventory discrepancies, what is
the next step the auditor should take?
a. Document the explanations and perform additional audit procedures to corroborate
management's explanations.
b. Adjust the audit opinion based on management's explanations.
c. Request that management adjust the financial statements.
d. Conclude that the inventory valuation is appropriate and move on to other audit areas.

Answer: A. Document the explanations and perform additional audit procedures to corroborate
management's explanations.
Explanation: The auditor should document management's explanations for the inventory discrepancies
and perform additional audit procedures to corroborate those explanations. This ensures that the
auditor obtains sufficient appropriate audit evidence to support their conclusions.

32. If the auditor concludes that the inventory valuation is materially misstated and management
refuses to make the necessary adjustments, which of the following modifications to the auditor's
report is most appropriate?
a. An emphasis of matter paragraph.
b. An unqualified opinion with going concern paragraph.
c. An adverse opinion.
d. A disclaimer of opinion.
Answer: C. An adverse opinion.
Explanation: If the auditor concludes that the inventory valuation is materially misstated and
management refuses to make the necessary adjustments, the auditor should issue an adverse opinion.
An adverse opinion indicates that the financial statements are not presented fairly, in all material
respects, in accordance with the applicable financial reporting framework. This is because the inventory
valuation misstatement significantly affects the overall presentation of the financial statements.

33. Which one the following procedures performed for the billing function provides evidence for the
completeness assertion?
a. making sure that all shipments have been billed
b. making sure that no shipment has been billed more than twice
c. making sure that each shipment is billed at the correct amount
d. making sure that each shipment is billed to the proper customer
Answer: A

34. Which of the following audit procedures would be the most effective in identifying unrecorded
liabilities?
a. Reviewing subsequent cash disbursements
b. Confirming accounts payable balances with vendors
c. Reviewing purchase orders issued near year-end
d. Analytical procedures comparing accounts payable to prior periods

Answer: A. Reviewing subsequent cash disbursements

Explanation: Reviewing subsequent cash disbursements is an effective audit procedure for identifying
unrecorded liabilities, as it provides evidence of liabilities that existed at the balance sheet date but
were not recorded until they were paid in the subsequent period.

35. Which of the following statements is most correct?

a. A sample of all items of a population will eliminate sampling risk, but increase nonsampling risk.
b. The use of an appropriate sample selection technique ensures a representative sample.
c. The auditor's failure to recognize an exception is a significant cause of sampling risk.
d. The use of inappropriate audit procedures is a significant cause of nonsampling risk.

Answer: D

36. Auditors will generally send a standard inquiry to the client's attorney letter to
a. only those attorneys who have devoted substantial time to client matters during the year.
b. every attorney that the client has been involved with in the current or preceding year, plus any
attorney the client engages on occasion.
c. every attorney whose legal fees for the year exceed a materiality threshold.
d. only the attorney who represents the client in proceeding where the client is defendant.
Answer: B

37. At the completion of the audit, management is asked to make a written statement that it is not
aware of any undisclosed contingent liabilities. This statement would appear in the
a. management letter.
b. letter of inquiry.
 c. letters testamentary.
d. management letter of representation.

Answer: D

38. Which of the following is a prescribed set of moral principles or values?

a. codes of business ethics for professional groups
b. laws and regulations
c. codes of conduct within an organization
d. all of the above
Answer: D

39. The distribution of which of the following types of reports is unrestricted?

a. examinations and reviews
b. reviews and agreed-upon procedures
c. examinations and agreed-upon procedures
d. examinations, reviews, and agreed-upon procedures

Answer: A

40. According to RA 9298, which of the following qualifications is NOT required for a candidate to be
eligible to take the Certified Public Accountant (CPA) Licensure Examination?
a. Must be a Filipino citizen
b. Must be a holder of a Bachelor's degree in Accountancy
c. Must have at least 18 months of work experience in the field of accountancy
d. Must be of good moral character

Answer: C.
 Excel_Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Final Preboard Examination on Auditing Problems

April 29, 2023
Suggested answers/solutions by OCAMPO/OCAMPO

PROBLEM NO. 1 - Quinanola Corp.

Question No. 41 - A
Proceeds - 2021 share issuance 1,600,000
Proceeds - 2022 share issuance 18,000
Par value of shares issued [(200,000 + 2,000) x P5] (1,010,000)
Share issue costs - 2021 share issuance (15,000)
Share premium, 12/31/23 593,000

Question No. 42 - B
2021 2022 2023
Unadjusted profit (loss) (175,000) 220,000 410,000
Depreciation (15,000) (17,000) (23,000)
Various (20,000) (25,000) (5,000)
Land write-up (100,000)
Adjusted profit (loss) (210,000) 78,000 382,000

Accumulated profit or loss, 12/31/23 250,000

Loss on re-issuance of TS [P27,000 - (5,000 x P7)] (8,000)
Retained earnings, 12/31/23 242,000

Question No. 43 - A
Share capital [(200,000 + 2,000) x P5] 1,010,000
Share premium (see no. 41) 593,000
Retained earnings (see no. 42) 242,000
Treasury shares [(10,000 - 5,000) x P7] (35,000)
Total equity 1,810,000

Question No. 44 - C
Question No. 45 - C

PROBLEM NO. 2 - Padilla Corp.

Question No. 46 - B
Cost of equipment (Cash price) 2,370,000

Question No. 47 - A
Question No. 48 - A
Date Payment Int. (10%) Principal C.A.
1/1/22 2,070,000
12/31/22 388,020 207,000 181,020 1,888,980
12/31/23 388,020 188,898 199,122 1,689,858

Question No. 49 - A
Question No. 50 - A

PROBLEM NO. 3 - Baysa Corp.

Question No. 51 - D
PVF at 12% PV, 1/1/20
Principal 10,000,000 0.5674 5,674,000
Interest 1,000,000 3.6048 3,604,800
9,278,800

Original amortization schedule:

EI (12%) NI (10%) Disc. Amort. Gross CA
1/1/20 9,278,800
12/31/20 1,113,456 1,000,000 113,456 9,392,256
12/31/21 1,127,071 1,000,000 127,071 9,519,327
12/31/22 1,142,319 1,000,000 142,319 9,661,646
12/31/23 1,159,398 1,000,000 159,398 9,821,044
12/31/24 1,178,956 1,000,000 178,956 10,000,000

PV, 1/1/20 9,278,800

Discount amortization, 1/1 to 4/1 (P113,456 x 3/12) 28,364
PV, 4/1/20 (Purchase price) 9,307,164
Accrued interest (P10,000,000 x 10% x 3/12) 250,000
Total amount paid 9,557,164

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Question No. 52 - C
Gross carrying amount, 12/31/20 (see amortization schedule) 9,392,256
Loss allowance, 12/31/20 (47,000)
Amortized cost, 12/31/20 9,345,256

Question No. 53 - B
Gross carrying amount, 12/31/22 (see amortization schedule) 9,661,646
PV of ECF (P10,000,000 x 0.7972) (7,972,000)
Required loss allowance, 12/31/22 1,689,646
Recorded loss allowance (95,200)
Increase (decrease) in loss allowance 1,594,446

Question No. 54 - B
Interest income - 2023 (P7,972,000 x 12%) 956,640

Journal entry
Debt investment - AC 159,398 *
Allowance for ECL 797,242 **
Interest income 956,640

* Refer to the original amortization schedule; this represents the increase in present value
of original contractual cash flows.
** Decrease in loss allowance due to passage of time, which is recognized as interest income.

Question No. 55 - B
Required loss allowance, 12/31/23 98,200
Less recorded loss allowance, 12/31/23 (P1,689,646 - P797,242) 892,404 ***
Increase (decrease) in loss allowance (794,204)

*** This is the difference between the PV of contractual cash flows and PV of expected cash flows
before reversal of impairment.

Gross carrying amount, 12/31/23 (see amortization schedule) 9,821,044

Amortized cost, 12/31/23 (see revised amortization schedule) (8,928,640)
892,404

Revised amortization schedule:

EI (12%) NI (10%) Disc. Amort. Amort. Cost
12/31/22 7,972,000
12/31/23 956,640 - 956,640 8,928,640
12/31/24 1,071,360 - 1,071,360 10,000,000

Journal entry
Allowance for ECL 794,204
Impairment gain 794,204

PROBLEM NO. 4 - Ciudadano Corp.

Cash AR Inventory AP Sales
Unadjusted 2,000,000 6,000,000 10,000,000 4,000,000 50,000,000
a - Undelivered check 300,000 300,000
b - PDC issued 250,000 250,000
c - AP with debit balance 60,000
d - Unrecorded purchase returns (80,000)
e - Unrecorded purchases 20,000
f - DAIF check (30,000) 30,000
g - PDC received (90,000) 90,000
h.1 (100,000)
h.2 - OK
h.3 - OK
h.4 (200,000) (200,000)
h.5 (500,000) 280,000 (500,000)
h.6 300,000 300,000
h.7 - OK
h.8 600,000 (475,000) 600,000
2,430,000 6,320,000 9,705,000 4,550,000 50,200,000
(56-A) (57-D) (58-B) (59-C) (60-C)

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PROBLEM NO. 5 - Baby Em Corporation
C&CE T&OR Inventories PPE Intangibles
Unadjusted balances 2,100,000 4,200,000 5,300,000 7,910,000 2,280,000
Add (deduct) adjustments:
Cash & cash equivalents
Item 1 (90,000) 90,000
Item 2 (360,000) 360,000
Item 3 - OK
Item 4 (33,000)
Item 5 - OK
Item 6 (100,000)
Item 7 (65,000) 65,000
Item 8 (20,000) 20,000
Inventories
Item 1 (52,000)
Item 2 (36,000)
Item 3 - OK
Item 4 104,400 (87,000)
Item 5 - OK
Item 6 (12,000)
Property, plant and equipment
Land held for a currently undetermined future use (1,200,000)
Intangible assets
Costs of training employees (280,000)
Research and development costs (880,000)
Organization costs (310,000)
Adjusted balances 1,432,000 4,479,400 5,113,000 6,710,000 1,170,000
(61-B) (62-D) (63-A) (64-D) (65-C)

PROBLEM NO. 6 - Dimaculangan Corp.

Question No. 66 - B
Cash (P571,000-P400,000) 171,000
Accounts receivable, net 480,000
Notes receivable 162,300
Inventories 645,100
Prepaid expenses 47,400
Total current assets 1,505,800

Question No. 67 - D
Accounts payable 510,000
Income tax payable 145,000
Wages payable 275,000
Interest payable (P750,000 x 8% x 8/12) 40,000
Dividends payable 200,000
Unearned revenue 489,500
Total current liabilities 1,659,500

Question No. 68 - B
Notes payable (due 2024) 157,400
Bonds payable 750,000
Discount on bonds payable [(P49,500 - (P49,500/5 *8/12)] (42,900)
Total non-current liabilities 864,500

Question No. 69 - B
Share capital 1,840,000
Share premium reserve 150,000
Retained earnings, as adjusted
Unadjusted 2,810,600
Accrued wages (275,000)
Interest payable (P750,000 x 8% x 8/12) (40,000)
Amortization of discount (P49,500/5 *8/12) (6,600) 2,489,000
Total equity 4,479,000

Question No. 70 - C

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 TAXATION SUGGESTED SOLUTION
Use the tax tables if necessary:

SCHEDULE OF EXPANDED WITHHOLDING TAX (EWT)

Income Payment EWT Income Payment EWT
Professional/Management/Consultancy fees Gross receipts 3M or Purchase of goods or properties by Top 1% - goods
(Individual) below - 5% Withholding Agents (TWA) - 2% - service
Gross receipts over 3M or
VAT-reg – 10%
Professional/Management/Consultancy fees Gross receipts 720,000 or Partners in general professional 720,000 or less -
(Non-Individual) below - 10% partnerships (drawings, advances, 10%
Gross receipts over sharings, allowances, etc.) Above 720,000 –
720,000 – 15% 15%
Contractors/subcontractors (security, janitorial, 2% Commission (if not employee) 10%
etc.)
Director’s fees (if not employee) 10% or 15% (720,000 Income distributed to beneficiaries of 15%
threshold) estates/trusts
Rental 5%

GRADUATED TAX TABLE UNDER TRAIN LAW (January 1, 2018 to December 31, 2022)
Over But not over The tax shall be Plus Of excess over
250,000 0 0 -
250,000 400,000 0 20% 250,000
400,000 800,000 30,000 25% 400,000
800,000 2,000,000 130,000 30% 800,000
2,000,000 8,000,000 490,000 32% 2,000,000
8,000,000 2,410,000 35% 8,000,000

GRADUATED TAX TABLE UNDER TRAIN LAW (January 1, 2023 and onwards)
Over But not over The tax shall be Plus Of excess over
0 250,000 0 0 -
250,000 400,000 0 15% 250,000
400,000 800,000 22,500 20% 400,000
800,000 2,000,000 102,500 25% 800,000
2,000,000 8,000,000 402,500 30% 2,000,000
8,000,000 - 2,202,500 35% 8,000,000

DOCUMENTARY STAMP TAX TABLE

PART I - THEORIES
 1. The BIR issued information materials to guide taxpayers on how to file their 2022 Annual Income Tax
Returns. This is in consonance with:
a. Equity in Taxation
b. Administrative Feasibility
c. Principles of Sound Tax System
d. Uniformity in Taxation
Explanation: Convenience on the part of the taxpayer

2. Which is FALSE? Under the CREATE law,

I. Registered Export Enterprises, if opted enhanced deductions, can claim up to ten (10) years.
II. Domestic Market Enterprises, if opted enhanced deductions, can claim up to five (5) years.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Explanation: Both are true

3. S1 – Purchases made by solo parents are subject to 10% discount.

S2 – Purchases made by solo parents are VAT-exempt.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Explanation: Only qualified goods and service are subject to discount and VAT exemption.

4. Which is FALSE?
S1 – The Commissioner of Internal Revenue has four Deputy Commissioners.
S2 – The Commissioner of Customs has six Deputy Commissioners
S3 – The PEZA Board has twelve members.
S4 – The Bases Conversion and Development Authority has eight members.
a. S1
b. S2
c. S3
d. S4
Explanation: Thirteen members

5. Which is FALSE in BIR registration?

S1 – Employees are required to be registered before employment.
S2 – Sole proprietors are required to be registered before commencement of business.
S3 – Corporations are required to be registered before payment of tax.
S4 – Partnerships are required to be registered before or upon filing of applicable tax return, statement
or declaration.
a. S1
b. S2
c. S3
d. S4
Explanation: S1 – Within ten days from date of employment

6. The deadline of January 31 applies to the following, except:

a. 4th Quarter Remittance Return of Creditable Income Tax Withheld (Expanded)
b. Annual Registration Fee
c. Monthly Remittance Return on Creditable Income Tax Withheld (Compensation) for the month
of December
d. Local Professional Tax
Explanation: January 15

7. Printing of official receipts and/or sales invoices must be preceded by:

a. Application of Permit to Use and Print Receipts and Invoices
 b. Approval of Authority to Print Receipts
c. Approval of books of accounts
d. Registration of Computerized loose-leaf
Explanation: ATP approval is required before printing

8. It is the principal evidence of sale of goods.

S1 - Delivery receipt and/or Collection Receipt
S2 - Official Receipt
S3 - Order Slip; Purchase Order
S4 - Sales Invoice (Cash or Charge)
S5 - Statement of Account
a. S2 only
b. S2 or S4 only
c. S4 only
d. Any of the above
Explanation: S4 is correct. S2 is for sale of service. S1, S3 and S5 are supplementary receipts.

9. Which is most accurate about retention of books of accounts?

S1 - Hard Copies may be kept within the first five (5) years reckoned from the day following the deadline in filing
a return, or if filed after the deadline, from the date of the filing of the return, for the taxable year when the last
entry was made in the books of accounts.
S2 - After five (5) years, electronic copy of the hardcopy (paper) of the books of accounts, subsidiary books and
other accounting records in an electronic storage system may be kept.
S3 - For Independent CPA, the responsibility to maintain and preserve electronic copies of the audited and
certified financial statements including the audit working papers for a period of ten (10) years from the due
date of filing the annual income tax return or the actual date of filing thereof, whichever comes later.
a. S1 only
b. S1 and S2 only
c. All of the above are true
d. All of the statements are false
Explanation: All statements are true.

10. Which is FALSE? The audit by independent CPA of INDIVIDUAL taxpayer’s books of accounts is
a. Not required if his gross sales, earnings, receipts or output do not exceed Php 3,000,000.
b. Not required if he opted 8% preferential taxation
c. Not required if he opted for Optional Standard Deduction
d. Required if gross sales, earnings, receipts or output is Php 3,000,000 or more.
Explanation: Exceed Php 3,000,000.00

11. The best proof of successful e-FPS return filing is the

a. Duly filed return
b. Filing Reference Number
c. Screenshot of successful filing
d. Tax Return Confirmation Receipt
Explanation: Filing Reference Number

12. The best proof of successful e-BIR Form online return filing is the
a. Duly filed return
b. Filing Reference Number
c. Screenshot of successful filing
d. Tax Return Confirmation Receipt
Explanation: BIR email of Tax Return Confirmation Receipt

13. Which is TRUE?

S1 – A taxpayer exempt from paying tax is also exempt from filing the applicable return.
S2 – If deadline of filing of return falls on weekdays, the deadline of filing is the next working day.
a. Only S1 is true
b. Only S2 is true
 c. Both are true
d. Both are false
Explanation: Exemption from taxation does not follow exemption from filing of return. A taxpayer is only exempt
from filing if the expressly provides for its exemption.

14. Which is FALSE in BMBE? To be considered barangay-based,

S1 - its business operations are confined within the territorial jurisdiction of the municipality or LGU in which its
principal place of business is located.
S2 - its principal activity consists in the application/use of a particular skill peculiar to the locality.
S3 - the majority of its employees must be residents of the barangay where the BMBE is located.
S4 - the raw materials must be predominantly sourced from the area where the BMBE is located.
a. S1
b. S2
c. S3
d. S4
Explanation: Same municipality not same barangay

15. S1 - Export enterprises under CREATE Law are entitled ITH of 4 to 7 years depending on location and
industry priorities and followed by SCIT or enhanced deductions for ten (10) years.
S2 - Domestic market enterprises under CREATE Law are entitled to ITH of 4 to 7 years followed by
enhanced deductions for five (5) years.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both are false
Explanation: Both are true

16. S1 - Business establishments are required to give the statutory discount regardless of who is the source
of payment or mode of payment, provided that the goods and services are for the exclusive use of the
Senior Citizen or Person with Disability.
S2 - lf the purchaser is children with disability, the parents have the full authority to purchase the product
for their child and must only present the PWD lD as required.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both false

17. S1 - The senior citizen or Person with Disability can authorize any person of his/her choosing through an
authorization letter duly signed by the senior citizen/person with disability to purchase qualified goods.
S2 - In case of failure to present Senior Citizen or PWD ID at the time of the purchase of the goods and
services, the business establishment or the third-party service provider has the right to refuse to release
the goods to the authorized representative.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both false

18. S1 - Donations made by husbands and wife out of their common property is deemed made by each; hence,
both shall prepare separate Donor’s Tax Return and claim separate deductions.
S2 - If what was donated is a conjugal or community property, only the person who signed the Deed is
subject to donor’s tax without prejudice to the right of the other spouse to question the validity of the
donation without her consent.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both false
 19. S1 – Goods on hand of taxpayers who will transition from non-VAT to VAT is subject to 12% VAT due to
deemed sale transaction.
S2 - Taxpayers who will change registration from VAT to non-VAT is entitled to transitional input tax.
a. Only S1 is true
b. Only S2 is true
c. Both are true
d. Both false
Explanation: S1- entitled to transitional input tax. S2 – deemed sale of goods on hand are subject to 12%

20. ABC Corp., a domestic corporation, applied for a Tax Treaty Relief on its transactions with XYZ Corp., a
non-resident foreign corporation. Which is TRUE?
a. In applying for treaty relief, the BIR cannot determine whether the subject transaction is subject
to other internal revenue taxes
b. In case of denial, the remedy is appeal to the Court of Tax Appeals
c. The Competent Authority in the Philippines is the Commissioner of Internal Revenue
d. Venue of application is at the Office of the Commissioner
Explanation: The BIR can determine exposure to other internal revenue taxes; The remedy in case of denial is to
appeal to the Secretary of Department of Finance; The venue of application is with the International Tax Affairs
Division

21. Which is FALSE in real property tax (RPT) under Local Government Code?
S1 – The maximum tax discount for advanced prompt payment of real property tax is 20%.
S2 – The interest rate is 2% per month and is imposable until delinquent tax is fully paid
S3 – The RPT accrues on the first day of January and from that date it shall constitute a lien on the property
which shall be superior to any other lien, mortgage, or encumbrance of any kind whatsoever, and shall be
extinguished only upon the payment of the delinquent tax.
S4 – Collection of RPT is the responsibility of the city or municipal treasurer.
a. S1
b. S2
c. S3
d. S4
Explanation: Maximum of 36 months.

22. Which is TRUE under the National Internal Revenue Code of 1997, as amended regarding prescription?

Assessment Collection
General Rule In case of Fraud or General Rule In case of Fraud or
Falsity Falsity
a 3 years 10 years 5 years 5 years
b. 3 years 10 years 3 years 5 years
c. 10 years 3 years 5 years 10 years
d. 3 years 10 years 3 years 3 years

23. The penalty for attempt to evade or defeat tax is:

Fine Imprisonment
Minimum Maximum Minimum Maximum
a 100,000.00 5,000,000.00 2 years 5 years
b. 500,000.00 10,000,000.00 6 years 10 years
c. 1,000,000.00 20,000,000.00 8 years 15 years
d. 5,000,000.00 50,000,000.00 10 years 20 years

24. Which is TRUE in taxation of individual taxpayers?

S1 – 8% preferential tax does not apply to compensation income earners.
S2 – Non-VAT individuals engaged in trade and at the same time who practices their profession can opt to be
taxed at 8%.
S3 – Mixed income earners have the option to be taxed either at 8% or graduated tax rates
a. S1
 b. S2
c. S1 and S2
d. All are true
Explanation:
S1 – False because 8% applies to mixed income earners.
S2 – True
S3 – False. 8% applies only on business income.

25. Which is FALSE? In crimes and offenses under the Tax Code, as amended:
a. If the offender is not a citizen of the Philippines, he shall be deported immediately after serving
the sentence without further proceedings for deportation
b. If he is a public officer or employee, the maximum penalty prescribed for the offense shall be
imposed and, in addition, he shall be dismissed from the public service and perpetually disqualified
from holding any public office, to vote and to participate in any election
c. If the offender is a Certified Public Accountant, his certificate as a Certified Public Accountant shall
be automatically revoked or cancelled
d. In the case of associations, partnerships or corporations, the penalty shall be imposed on the
partner, president, general manager, branch manager, treasurer, officer-in-charge, and the
employees responsible for the violation
Explanation: Conviction is necessary

26. Which is FALSE in estate taxation of bank deposits?

S1 – At the option of the executor, administrator or heirs, bank deposits of decedents may be subjected to 6%
final tax at any time from decedent’s death.
S2 – If the bank deposits were subjected to final tax, the deposits shall no longer form part of the gross estate of
the decedent.
S3 – In case of joint deposits, only that share or interest of decedent is subject to either final tax or estate tax.
S4 - In all cases, the final tax withheld shall not be refunded but may be credited from the tax due in instances
where the bank deposit account subjected to final tax has been actually included in the gross estate declared in
the estate tax return of the decedent.
a. S1
b. S2
c. S3
d. S4
Explanation: S1 – False within one (1) year from decedent’s death.

27. The authority granted to internal revenue officers to distraint personal property of whatever character
and to levy upon the real property and interest in or rights to real property of a delinquent taxpayer:
a. e-Letter of Authority
b. Mission Order
c. Notice of Levy or Encumbrance
d. Warrant of Distraint and/or Levy (WDL)

28. Nicanor, as the Accountant of ABC Corp., prepared and filed the Company’s 2020 Annual Income Tax
Return (AITR) on April 17, 2023. After filing, he realized the following:
• In #1 (see return below) – Indicated fiscal instead of calendar.
• In #2 (see return below) – Indicated 12/2021 instead of 12/2022

What is Nicanor’s remedy?

a. Amend the return by filing a new one and indicate the correct information and mark YES to the
question in item #3 of the return
 b. Amend the return by filing a new one and indicate the correct information and mark NO to the
question in item #3 of the return
c. Revise the data upon retrieval of the BIR of the return
d. Submit proof and request the BIR to correct the return
Explanation: Amendment of the return is the remedy

29. It means the national territory of the Philippines outside of the proclaimed boundaries of the ECOZONES
except those areas specifically declared by other laws and/or presidential proclamations to have the
status of special economic zones and / or free ports.
a. Customs territory
b. Domestic jurisdiction
c. Philippine area of responsibility
d. Philippine territory
Explanation: Express definition in PEZA law

30. All of the following are true, except:

a. Preliminary Assessment Notice is only a proposed assessment
b. The discrepancy/discrepancies in Notice of Discrepancy is/are considered deficiency tax/taxes
c. The Formal Letter of Demand/Final Assessment Notice is the notice of assessment
d. The issuance of collection letter is considered a final decision on disputed assessment
Explanation: Not yet a deficiency tax that is why it’s called discrepancy.

31. The antecedent facts of ABC Corp.’s TY2011 tax case are as follows:
November 12, 2012 Service of Letter of Authority dated October 30, 2012
November 9, 2013 Issuance of Notice of Discrepancy / Notice of Informal Conference
November 28, 2014 Issuance of Preliminary Assessment Notice (PAN)
December 15, 2014 Reply to the PAN
December 16, 2014 Issuance of Formal Letter of Demand (FLD)
Note: ABC Corp. failed to file a valid protest to the FLD
March 3, 2015 Issuance of Final Decision on Disputed Assessment (FDDA)
March 30, 2015 ABC Corp, filed its request for reconsideration
February 4, 2020 Denial of request for reconsideration by Commissioner
March 22, 2020 Issuance of Warrant of Distraint and/or Levy (WDL)
June 30, 2020 Filing of petition for review with the Court of Tax Appeals
Which is TRUE?
a. The assessment has prescribed
b. The collection has prescribed
c. The assessment and collection have prescribed
d. The assessment and collection are valid
Explanation: Period of collection is five years from issuance of FLD. Since, the WDL was issued beyond the 5-year
period, the collection has prescribed. Assessment was issued within the prescriptive period.

32. Which is FALSE? The taxpayer:

a. Must reply to the Preliminary Assessment Notice within fifteen days from receipt of the PAN
b. Must protest the Formal Letter of Demand/Final Assessment Notice within thirty days from receipt
of the FLD/FAN
c. Must appeal the Final Decision on Disputed Assessment within thirty days from receipt of the
FDDA
d. None of the statements is false
Explanation: Reply to the PAN is not mandatory

33. Which is FALSE?

a. The Final Decision on Disputed Assessment must contain that it is a final decision
b. The Final Decision on Disputed Assessment must state the details of the assessment and must
contain factual and/or legal basis otherwise the assessment is void
c. The Formal Letter of Demand/Final Assessment Notice state the details of the assessment and
must contain factual and/or legal basis otherwise the assessment is void
 d. The Preliminary Assessment Notice must state the details of the assessment and must contain
factual and/or legal basis otherwise the PAN is void
Explanation: If the FDDA lacks factual and/or legal basis, only the DECISION is void and not the assessment

34. Which is FALSE? For ordinary prescription to not set in, the BIR must issue the assessment on:
a. For the 2020 1st Quarter Expanded Withholding Tax return - on or before April 30, 2023
b. For the 2020 1st Quarter Final Withholding Tax return - on or before April 30, 2023
c. For the 2020 1st Quarter Income Tax Return – for individuals on or before May 15, 2023
d. For the 2020 1st Quarter VAT return - on or before April 25, 2023
Explanation: Assessment on income tax is annual

35. Which is FALSE?

a. Beginning 2023, the filing of VAT return is quarterly only
b. Input tax on purchase of capital goods (depreciable) exceeding Php 1,000,000.00 is creditable
against output tax
c. Input tax on purchase of capital goods (depreciable) exceeding Php 1,000,000.00 is deferred over
the useful life of the asset or maximum of sixty months
d. The remedy in case of denial of VAT refunds is to appeal to the Court of Tax Appeals
Explanation: Amortization of input tax on purchase of capital goods exceeding Php 1 million is only until December
31, 2021

PART II - PROBLEMS

Comprehensive Problem
ABC Corp. a regional operating headquarter of ABC World Group based in Australia shared the following financial
information:
2022 2023
Gross receipts 100,000,000.00 120,000,000.00
Cost of Services 80,000,000.00 90,000,000.00
Gross Income 20,000,000.00 30,000,000.00
Allowable Deductions 19,500,000.00 25,000,000.00
Net Taxable Income 500,000.00 5,000,000.00

Other information:
2022 2023
Assets 80,000,000.00 95,000,000.00
Liabilities 30,000,000.00 40,000,000.00
Stockholders’ Equity 50,000,000.00 55,000,000.00

36. How much is the income tax payable in its 2022 AITR?
a. Php 0 (ROHQ is exempt from taxation)
b. Php 50,000.00
c. Php 125,000.00
d. Php 200,000.00
Solution:
Gross receipts 100,000,000.00
Cost of Services 80,000,000.00
Gross Income 20,000,000.00
Allowable Deductions 19,500,000.00
Net Taxable Income 500,000.00
RCIT 125,000.00
MCIT (20M x 1%) 200,000.00
Higher 200,000.00

37. How much is the income tax payable in the 2023 AITR?
a. Php 0 (ROHQ is exempt from taxation)
b. Php 1,000,000.00
 c. Php 1,175,000.00
d. Php 1,250,000.00
Solution:
2022 2023
Gross receipts 100,000,000.00 120,000,000.00
Cost of Services 80,000,000.00 90,000,000.00
Gross Income 20,000,000.00 30,000,000.00
Allowable Deductions 19,500,000.00 25,000,000.00
Net Taxable Income 500,000.00 5,000,000.00
RCIT 125,000.00 1,250,000.00
MCIT (20M x 1%) 200,000.00 6mos. 150,000
6 mos. 300,000
450,000.00
Higher 200,000.00 1,250,000.00

Excess MCIT 75,000 75,000.00

Payable 1,175,000.00

38. How much is the output tax in 2022?

a. Php 0 as ROHQ’s transactions are subject to zero-rate
b. Php 0 as the ROHQ’s transactions are exempt from VAT
c. Php 1,000,000.00 as ROHQ’s transactions are subject to 1% percentage tax
d. Php 12,000,000.00
Explanation: ROHQ’s operate in the Philippines and thus its transactions are generally subject to 12% rate. There
is nothing in the problem that indicates it exported its sales hence 0-rate will not apply. Only Regional Area
Headquarters are VAT-exempt.

Comprehensive Problem
The following can be found in ABC Corp.’s (domestic corporation) 2022 financial records:
Quarterly Income Statement:
Quarters 1st 2nd 3rd 4th
Gross sales 5,000,000 4,000,000 3,000,000 6,000,000
Cost of sales 4,000,000 3,000,000 2,000,000 4,000,000
(purchase of
goods)
Gross income 1,000,000 1,000,000 1,000,000 2,000,000
Deductions 500,000 200,000 1,100,000 500,000
Taxable income 500,000 800,000 (100,000) 1,500,000
(loss)

The duly filed Quarterly VAT returns disclosed the following:

Quarters 1st 2nd 3rd 4th
VATable sales 2,000,000 3,000,000 3,000,000 5,000,000
Output tax 120,000 360,000 360,000 600,000

Purchases with
VAT:
Goods 4,000,000 3,000,000 2,000,000 4,000,000
Service 200,000 100,000 200,000 200,000
Input tax 504,000 372,000 264,000 504,000

VAT paid 0 0 96,000 96,000

 In addition to the above, a review of the Balance Sheet Accounts (Statement of Financial Position) showed
the balances of Asset and Liability in the amounts of Php 10,000,000 and Php 6,000,000, respectively.

39. How much is the income tax payable for the 1st Quarter Income Tax Return?
a. Php 10,000.00
b. Php 20,000.00
c. Php 100,000.00
d. Php 125,000.00
40. How much is the income tax payable for the 2nd Quarter Income Tax Return?
a. Php 20,000.00
b. Php 160,000.00
c. Php 200,000.00
d. Php 260,000.00
41. How much is the income tax payable (overpayment) for the 3rd Quarter Income Tax Return?
a. (Php 20,000.00)
b. Php 0
c. Php 10,000.00
d. Php 30,000.00
42. How much is the income tax payable for the 4th Quarter Income Tax Return?
a. Php 0
b. Php 20,000.00
c. Php 150,000.00
d. Php 300,000.00
Explanation: No 4th quarter filing
43. How much is the income tax payable (overpayment) in its Annual ITR?
a. Php 280,000.00
b. Php 330,000.00
c. Php 540,000.00
d. Php 675,000.00
Solution:
Quarters 1st 2nd 3rd 4th Annual
Gross sales 5,000,000 4,000,000 3,000,000 6,000,000 18,000,000
Cost of sales 4,000,000 3,000,000 2,000,000 4,000,000 13,000,000
Gross income 1,000,000 1,000,000 1,000,000 2,000,000 5,000,000
Deductions 500,000 200,000 1,100,000 500,000 2,300,000
Taxable income 500,000 800,000 (100,000) 1,500,000 2,700,000
(loss)
Add: Taxable 500,000 1,300,000 -
income from
previous quarters
Total taxable 500,000 1,300,000 1,200,000 2,700.000
income
RCIT (20%) 100,000 260,000 240,000.00 540,000
MCIT 10,000 20,000 30,000 50,000
st st
1 Q-1,000,000 1 Q-1,000,000 GI - 5,000,000
2nd Q-1,000,000 2nd Q-1,000,000 X1%
rd
2,000,000 3 Q- 1,000,000
X1% 3,000,000
X1%
Higher of 100,000 260,000 240,000 540,000
RCIT/MCIT
Less: tax paid 0 100,000 260,000 260,000
from previous
quarters
Payable 100,000 160,000 (20,000) 280,000

44. How much is the VAT payable for the 1st Quarter VAT Return?
a. Php 46,000
b. Php 96,000.00
c. Php 360,000.00
d. Php 600,000.00
45. How much is the VAT payable for the 2nd Quarter VAT Return?
a. Php 68,000.00
b. Php 108,000.00
c. Php 328,000.00
d. Php 480,000.00

46. How much is the VAT payable (overpayment) for the 3rd Quarter VAT Return?
a. (Php 204,000.00)
b. Php 0
c. Php 96,000.00
d. Php 360,000.00

47. How much is the VAT payable for the 4th Quarter VAT Return?
a. Php 120,000.00
b. Php 216,000.00
c. Php 480,000.00
d. Php 720,000.00

48. Assuming the Company filed its 4th Quarter VAT return on January 20, 2023 and filed an amendment on
January 31, 2023, the imposable surcharge is?
a. None
b. 25% since the under-declaration is less than 30%
c. 25% based on the deficiency basic VAT
d. 50% due to falsity or fraud
Explanation: No surcharge is imposable since the original return was filed within the prescriptive period.
Solutions to the comprehensive problem:
Quarters 1st 2nd 3rd 4th
VATable sales 5,000,000 4,000,000 3,000,000 6,000,000
Output tax 600,000 480,000 360,000 720,000
Input tax 504,000 372,000 264,000 504,000
Net VAT payable 96,000 108,000 96,000 216,000
Less: tax paid 0 0 96,000 96,000
VAT Still Payable 96,000 108,000 0 120,000

Comprehensive Problem:
Nicanor is employed by ABC Corp. and has no other source of income. He received the following from his
employer in 2022:
Monthly Basic Salary 102,526.46
th
13 month pay and other benefits 142,649.82
De minimis benefits 26,000.00
SSS, PHIC and PAGIBIG Contributions 32,633.29
Other exempt benefits 45,177.93
49. How much is the total non-taxable or exempt compensation?
a. Php 161,177.93
b. Php 167,811.22
c. Php 193,811.22
d. Php 246,461.04
 Solution:
13th month pay and other benefits 90,000.00
De minimis benefits 26,000.00
SSS, PHIC and PAGIBIG Contributions 32,633.29
Other exempt benefits 45,177.93
Total 193,811.22

50. Assuming during annualization, it was determined that the tax withheld on compensation from January
to November is Php 200,000.00, how much is the tax required to be withheld on compensation in
Nicanor’s December compensation?
a. Php 74,890.20
b. Php 0
c. Php 46,715.20
d. Php 96,145.80
Solution:
Gross compensation income 1,476,776.56
Less: non taxable compensation:
13th month pay and other benefits 90,000.00
De minimis benefits 26,000.00
SSS, PHIC and PAGIBIG Contributions 32,633.29
Other exempt benefits 45,177.93 193,811.22
Taxable compensation income 1,282,967.34
Annual tax due (see graduated tax table) 274,890.20
Less: tax withheld 200,000.00
Tax required to be withheld in December 74,890.20

51. Assuming during annualization, it was determined that there was over withholding, until when is the
employer required to refund employee?
a. Not later than December 24
b. Not later than December 31
c. Not later than January 25 of the following year
d. Not later than January 31 of the following year
52. Assuming , further, that Nicanor was employed on November 1, how much is the 13th month pay to be
paid by his employer?
a. Php 17,087.74
b. Php 17,088.00
c. Php 102,526.46
d. Php 106,913.95
Solution:
Monthly Basic Salary 102,526.46
No. of months employed 2
Total basic compensation 205,052.92
Divide by 12 months 12
th
13 month pay 17,087.74

53. Which is FALSE in 13th month pay?

a. It is equivalent to the mandatory one month of total salary received by official and employees of
the government, GOCC or private offices
b. It can be higher than the threshold for exemption
c. To be eligible, employee must have worked for at least one (1) month during the calendar year
d. Payment cannot be deferred and is payable on or before December 24 of each year
Explanation: Basis of computation of 13th month pay is basic salary only and not total salary received.
 54. Assuming finally that during the same year, Nicanor sold his personal car for Php 601,000.00 which he
bought in 2020 for Php 600,000.00. Which is TRUE?
a. Nicanor is not required to file an Annual Income Tax Return since he has one employer during the
year and the tax was properly withheld
b. Nicanor is still qualified as a substituted filer provided the tax due on his compensation equals the
tax withheld by his employer
c. The capital gain is subject to regular tax
d. The gain is not required to be reported since it is a non-business/non-professional income
Explanation: Gains derived in dealings of property is subject to regular tax. Only capital gains from sale or
disposition of unlisted shares and real property classified as capital asset are not required to be reported as they
are subject to capital gains tax.

Comprehensive Problem:
Nicanor disclosed the following 2022 transactions for your review:
Customers Amount of Sale Amount collected
Senior citizens 100,000.00 100,000.00
Persons with disability 50,000.00 50,000.00
Solo parents 50,000.00 50,000.00
National Athletes 50,000.00 50,000.00
Athletes 50,000.00 50,000.00
Regular customers 400,000.00 300,000.00
Government 1,000,000.00 500,000.00
Total 1,700,000.00 1,100,000.00
He asked you to compute the following:

55. Assuming Nicanor is VAT-registered seller of goods, how much is the total output tax required to be
reported in the VAT return?
a. Php 102,000.00
b. Php 108,000.00
c. Php 174,000.00
d. Php 180,000.00
Solution: Total sales to athletes, regular customers and government Php 1.5M x 12%

56. Assuming Nicanor is VAT-registered seller of goods, how much is the VAT-exempt transaction required to
be reported in the VAT return?
a. Php 150,000.00
b. Php 200,000.00
c. Php 250,000.00
d. Php 300,000.00
Solution: Sales to senior citizens, PWDs and solo parents only. Athletes are subject to 12% rate.

57. Assuming Nicanor is VAT-registered seller of service, how much is the total output tax required to be
reported in the VAT return?
a. Php 102,000.00
b. Php 108,000.00
c. Php 174,000.00
d. Php 180,000.00
Solution: Collections from sales to athletes, regular customers and government Php 900,000 x 12%

58. Assuming Nicanor is Non-VAT-registered seller of service, how much is the percentage tax PAYABLE
assuming further that the required withholding was made by the government?
a. Php 6,000.00
b. Php 7,000.00
c. Php 11,000.00
 d. Php 17,000.00
Solution:
Customers Amount of Sale
Senior citizens 100,000.00
Persons with disability 50,000.00
Solo parents 50,000.00
National Athletes 50,000.00
Athletes 50,000.00
Regular customers 400,000.00
Government 1,000,000.00
Total sales 1,700,000.00
Rate 1%
Percentage tax due 17,000.00
Less: percentage tax withheld by government (1M x 1%) 10,000.00
Percentage tax payable 7,000.00
Note: For PT-registered taxpayers, percentage tax is based on sale. The rule on
imposition of VAT based on collection is for VAT-registered taxpayers only and does
not extend to PT-registered taxpayers.

Comprehensive Problem:
A taxpayer has the following financial information:
Gross sales 5,000,000
Cost of sales 4,000,000
Gross income 1,000,000
Deductions 500,000
Taxable income (loss) 500,000
Other information:
• The taxpayer has non-operating income (rent income) of Php 200,000.00.
• The taxpayer has opted Optional Standard Deduction as method of deduction.
59. Assuming the taxpayer is an individual taxpayer, how much is the taxable income?
a. Php 700,000.00
b. Php 720,000.00
c. Php 3,200,000.00
d. Php 3,120,000.00
Solution:
Gross sales 5,000,000
Less: OSD (40%) 2,000,000
Gross income 3,000,000
Add: NOI-Rent income 200,000
Taxable income 3,200,000

60. Assuming the taxpayer is a non-individual taxpayer, how much is the taxable income?
a. Php 720,000.00
b. Php 800,000.00
c. Php 3,120,000.00
d. Php 3,200,000.00
Solution:
Gross sales 5,000,000
Cost of sales 4,000,000
Gross income 1,000,000
Add: NOI-Rent income 200,000
Total gross income 1,200,000
Less: OSD (40%) 480,000
 Taxable income 720,000

Comprehensive Problem
The following were culled from the records of ABC Corp., a non-VAT trading company under BIR audit due to a
complaint for non-issuance of receipts:

Statement of Financial Position (Balance Sheet) per books:

Assets 2021 2020
Cash 2,000,000.00 1,000,000.00
Accounts Receivable 3,000,000.00 2,000,000.00
Merchandise Inventory 4,000,000.00 2,000,000.00
PPE 5,000,000.00 3,000,000.00
Total Assets 14,000,000.00 8,000,000.00
Liabilities
Accounts Payable 500,000.00 200,000.00
Other Payables 300,000.00 150,000.00
Total Liabilities 800,000.00 350,000.00

Statement of Comprehensive Income (Income Statement) per return (AITR):

2021
Gross sales 6,000,000.00
Sales returns and discounts 0.00
Net Sales 6,000,000.00
Less: Cost of sales:
Beginning Inventory 2,000,000.00
Add: Purchases 5,000,000.00
Total available for sale 7,000,000.00
Less: Ending inventory 4,000,000.00 3,000,000.00
Gross income 3,000,000.00
Less: Expenses:
Salaries and wages 500,000.00
Depreciation 500,000.00
Rent 500,000.00
Transportation and travel 500,000.00
Contractor’s expense 500,000.00 2,500,000.00
Net income 500,000.00

The Company intentionally did not file any corresponding tax returns except the annual income tax return
where it paid Php 100,000.00.

Audit findings:
• Under-declared sales of Php 4,000,000.00.
• Cost of sales is correct.
• Salaries and wages amounting to Php 200,000.00 were given to ghost employees.
• No withholding was made on rent and contractor’s expenses.
• No proof of transportation and travel expense in the amount of Php 100,000.00.
• Total actual input tax paid is Php 500,000.00.

61. In preparing the necessary assessment, how much is the total deficiency income tax including increments?
(Compute the interest until May 15, 2023)
a. Php 1,525,500.00
b. Php 1,727,800.00
c. Php 1,863,000.00
 d. Php 2,200,500.00
Solution:
Net income per books/AITR 500,000.00
Add: Adjustments:
Undeclared sales 4,000,000.00
Disallowed Salaries and wages 200,000.00
Disallowed due to non-withholding on rent 500,000.00
Disallowed due to non-withholding on contractor’s exp 500,000.00
Disallowed due to non-substantiation of travel 100,000.00 5,300,000.00
Adjusted taxable income 5,800,000.00

Income tax due (25% rate) 1,450,000.00

Less: tax paid 100,000.00
Deficiency basic income tax 1,350,000.00
Surcharge (50%) 675,000.00
Interest (12%) 4/16/22-5/15/23 175,500.00 850,500.00
Total Deficiency Income Tax 2,200,500.00
Note: tax rate is 25% since taxable income exceeded 5M. 50%Surcharge is imposable due
to non-issuance of receipts and under-declaration is more than 30%. Assessment is not
subject to compromise penalty.

62. How much is the deficiency basic value-added tax?

a. Php 340,000.00
b. Php 700,000.00
c. Php 840,000.00
d. Php 1,200,000.00
Solution:
Gross sales 10,000,000.00
Less: Non-VAT sales 3,000,000.00
VATable sales 7,000,000.00
Multiply by rate 12%
Output tax 840,000.00
Less: input tax 0.00
VAT tax due 840,000.00
Less: tax paid 0.00
Deficiency basic VAT 840,000.00
Note: Taxpayer is not entitled to input tax because of non-registration to VAT

63. Assuming ABC Corp., is a top withholding agent, how much is the deficiency basic expanded withholding
tax?
a. Php 85,000.00
b. Php 95,000.00
c. Php 105,000.00
d. Php 115,000.00
Solution:
Income Payment Amount Rate EWT
Purchase of goods 5,000,000.00 1% 50,000.00
Purchase of PPE 2,000,000.00 1% 20,000.00
Rent 500,000.00 5% 25,000.00
Contractor’s expense 500,000.00 2% 10,000.00
Total 105,000.00
 64. The following were lifted from the 2022 sales books and the duly filed percentage tax returns of ABC
Corp.:
Head Office Branch 1 Branch 2 Branch 3
Gross Sales 700,000.00 300,000.00 200,000.00 100,000.00

Percentage tax
returns:
1st Quarter 200,000.00 150,000.00 No return filed 100,000.00
nd
2 Quarter 100,000.00 No return filed 50,000.00 No return filed
rd
3 Quarter 150,000.00 50,000.00 No return filed No return filed
th
4 Quarter No return filed 50,000.00 No return filed No return filed
The Head Office’s and the Branches’ Certificate of Registration showed Percentage Tax Return as one of the tax
types. You were engaged to handle tax compliance of the Company. The total deficiency basic percentage tax you
will recommend for payment in the amendment of the returns is:
a. Php0.00
b. Php 2,000.00
c. Php 4,500.00
d. Php 45,000.00
Solution:
Head Office Branch 1 Branch 2 Branch 3
Gross Sales 700,000.00 300,000.00 200,000.00 100,000.00

Percentage tax
returns:
1st Quarter 200,000.00 150,000.00 0 100,000.00
2nd Quarter 100,000.00 0 50,000.00 0
3rd Quarter 150,000.00 50,000.00 0 0
4th Quarter 0 50,000.00 0 0
Total 450,000.00 250,000.00 50,000.00 100,000.00
Discrepancy 250,000.00 50,000.00 150,000.00 0
Total 450,000.00
Rate 1%
Deficiency PT 4,500.00

65. The records of ABC Corp., a VAT-registered taxpayer, for the TY 2022 are disclosed below:
Month Description of purchase Amount Input Tax
January Inventory 1,000,000.00 120,000.00
Machinery 2,000,000.00 240,000.00
February Inventory 500,000.00 60,000.00
Equipment 1,500,000.00 90,000.00
March Inventory 2,000,000.00 240,000.00
Delivery truck 3,000,000.00 360,000.00
Total 10,000,000.00 1,200,000.00
Note: Life of machinery, equipment and delivery truck is five (5) years
How much is the total input tax creditable against the output tax?
a. Php 420,000.00
b. Php 441,000.00
c. Php 1,179,000.00
d. Php 1, 200,000.00
Solution: 1,200,000.00. All input taxes are creditable including the input tax on purchase of depreciable goods
exceeding Php1,000,000.00 beginning January 1, 2022.
66. ABC Corp., a domestic manufacturing company, shared the following information:
Direct materials – Php 5,000,000.00
 Direct labor – Php 3,000,000.00
Factory overhead – Php 3,000,000.00
Assuming actual training expenses for skills development of employees paid to private enterprises (with
apprenticeship agreement) is Php 1,000,000.00, how much is the additional deduction that can be
claimed by the Company?
a. Php 0.00
b. Php 300,000.00
c. Php 500,000.00
d. Php 1,000,000.00
Solution: Additional deduction is allowed only if enrolled in public schools.

67. The General Information Sheet duly filed by ABC Corp., a domestic corporation whose shares are not
listed, with the Securities and Exchange Commission showed the following:

Stockholder Number of Shares Par Value (acquisition cost)

DEF Corp. (DC) 10,000 1,000,000.00
GHI Corp. (RFC) 10,000 1,000,000.00
JKL Corp. (NRFC) 10,000 1,000,000.00
MNO Corp. (DC) 10,000 1,000,000.00
Nicanor 10,000 1,000,000.00
JKL Corp. sold its shares to XYZ Corp., a non-resident foreign corporation for Php 2,000,000.00. How much is the
capital gains tax to be paid before transfer?
a. Php 0
b. Php 150,000.00
c. Php 250,000.00
d. Php 300,000.00
Solution: Selling price less cost (2,000,000.00-1,000,000) equals net capital gain times 15%

68. Nicanor donated the following properties in 2022:

Land to Department of Education for Acquisition cost – Php 5,000,000.00
construction of elementary school Zonal value – Php 4,000,000.00
Assessor’s fair value – Php 3,000,000.00
Prevailing market rate – Php 10,000,000.00
Land to Saint Nichols Academia, his alma mater in Acquisition cost – Php 1,000,000.00
high school, a private non-stock, non-profit Zonal value – Php 3,000,000.00
institution Assessor’s fair value – Php 2,000,000.00
Cash to Mahal Kita Foundation, accredited by Php 1,000,000.00
Philippine Council for NGO Certification
Cash to a priest Php 1,000,000.00
How much is the donor’s tax?
a. Php 45,000.00
b. Php 225,000.00
c. Php 285,000.00
d. Php 525,000.00
Solution:
Land to Saint Nichols Academia, his alma mater in high school, Php 3,000,000.00
a private non-stock, non-profit institution
Cash to Inday 1,000,000.00
Total donation 4,000,000.00
Less: exempt donation 250,000.00
Taxable donation 3,750,000.00
Rate 6%
Donor’s tax 225,000.00
Note: Donation to the government (education is a priority area) and to ACCREDITED
NGO are exempt from taxation. Donation to a non-stock, non-profit institution is taxable
if without accreditation from PCNC. Donation to a priest is a taxable donation.
 69. Inday provided you the list of the estate of Nicanor who died intestate on February 14, 2023. The
following are the details:
Properties:
• Family home – Php 15,000,000.00
• Inherited land – Php 5,000,000.00
• 1000 Shares in ABC Corp. an unlisted company – 5,000,000.00
• Bank deposits – Php 5,000,000.00
• Motor vehicles – Php 5,000,000.00
Other information:
• Funeral Expenses – Php 1,000,000.00
• Loss incurred on February 13, 2023 – Php 1,000,000.00
How much is the estate tax due?
a. Php 150,000.00
b. Php 300,000.00
c. Php 450,000.00
d. Php 750,000.00
Solution:
Exclusive Conjugal Total
Family Home 15,000,000 15,000,000
Inherited land 5,000,000 5,000,000
Shares of stocks 5,000,000 5,000,000
Bank deposits 5,000,000 5,000,000
Motor vehicle 5,000,000 5,000,000
Gross estate 35,000,000
Less: Share of spouse 15,000,000 15,000,000
Estate after share 20,000,000
Less: special deductions
Standard deduction 5,000,000
Family Home 7,500,000 12,500,000
Net estate 7,500,000
Rate 6%
Estate tax 450,000

70. ABC Corp. has made the following transactions:

Transactions Amount
Subscribed shares of stock at XYZ Corp. (DC) with par value Php100 1,000,000.00
Loan - private entities 1,000,000.00
Loan – PRTC Bank 1,000,000.00
Rent 1,000,000.00
Donation of real property (zonal is higher) 1,000,000.00
Cash donation 1,000,000.00
How much is the total documentary stamp tax required to be paid?
a. Php 27,002.00
b. Php 34,500.00
c. Php 34,502.00
d. Php 42,002.00
Solution:
Transactions Amount Rate DST
Subscribed shares of stock at XYZ Corp. (DC) 1,000,000.00 2/200 10,000.00
Loan - private entities 1,000,000.00 1.50/200 7,500.00
Loan – PRTC Bank 1,000,000.00 1.50/200 7,500.00
st
Rent 1,000,000.00 1 2,000-P6 2,002.00
Excess P2/1,000
Donation of real property (zonal is higher) 1,000,000.00 15/1000 7,500.00
Cash donation 1,000,000.00 0 0
Total DST 34,502.00
 Regulatory Framework for Business Transactions

1. Jose owes Pepe and Pilar P40,000. Jose defaults upon maturity and so Pepe and Pilar sued him. Complaint was filed
in the appropriate court and after answer to the complaint by Jose, Pepe assigns his credit to Pilar for only P10,000.
Can Jose exercise his right of legal redemption?

a. Yes, within 30 days from the assignment of the credit in litigation

b. Yes, within 30 days from the demand to pay by the creditor
c. No, the parties did not reserve the right to redeem in the problem
d. No, because the assignment of credit is made to a co-owner
e. No, legal redemption is not given in pacto de retro sale

Article 1634. When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish
it by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and the interest
on the price from the day on which the same was paid. A credit or other incorporeal right shall be considered in
litigation from the time the complaint concerning the same is answered. The debtor may exercise his right within
thirty days from the date the assignee demands payment from him. (1535)

Article 1635. From the provisions of the preceding article shall be excepted the assignments or sales made: (1) To a
co-heir or co-owner of the right assigned; (2) To a creditor in payment of his credit; (3) To the possessor of a tenement
or piece of land which is subject to the right in litigation assigned. (1536)

2. I. The pledgor or mortgagor must be the absolute owner of the property given as a security.
II. The pledgor or mortgagor must be the debtor.
III. The pledgor or mortgagor must have the free disposal of his property.

a. I, II and III are true

b. I and III are true; II is false
c. I is true; II and III are false
d. II is true, I and III are false
e. All are false

Article 2085. The following requisites are essential to the contracts of pledge and mortgage: (1) That they be
constituted to secure the fulfillment of a principal obligation; (2) That the pledgor or mortgagor be the absolute owner
of the thing pledged or mortgaged; (3) That the persons constituting the pledge or mortgage have the free disposal of
their property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their
own property. (1857)

3. Which of the following entities is not among the covered persons of AMLA?
a. Thrift Bank of Lugi who receives deposits from corporations only
b. CPA-Lawyer who acts as legal counsel of Thrift Bank of Lugi
c. Casino who regularly deposits money to Thrift Bank of Lugi
d. Jewelry dealer of the President of Thrift Bank of Lugi

However, “Covered persons” shall exclude lawyers and accountants acting as independent legal professionals in
relation to information concerning their clients or where disclosure of information would compromise client
confidences or the attorney-client relationship. (Sec. 3, RA 10365)
4. In which of the following situations is the Government Procurement Reform Act not applicable?

a. The project of the City of Manila for rehabilitation of its roads and bridges
b. The project of Department of Human Settlements and Urban Development for housing project which
requires acquisition of 3 hectares of land in the City of Manila.
c. The City of Manila wants to hire 20 CPA-Lawyers as their consultants in various departments of the City
d. Barangay 123 of the City of Manila wants to procure goods for its constituents

EXCEPT:

(1) Procurement for goods, infrastructure projects, and consulting services funded from Foreign Grants covered
by RA 8182, as amended by RA 8555;

(2) Acquisition of Real Property which shall be governed by RA 8794;

(3) Public-Private sector infrastructure or development projects and other procurement covered by RA 6957, as
amended by RA 7718;

(4) Disposal of Government properties;

(5) Leasing out of publicly-owned real property for private use

(6) Formation of joint venture partnerships between government corporations and private entities

5. Which of the following instances is Lemon Law rights applicable?

a. A brand-new car modified by the owner thereof which entailed cutting of some of its electrical wirings
b. A brand-new car damaged due to accident or force majeure
c. A brand-new car that did not comply with the change oil policy of the manufacturer for its warranty
d. A brand-new car which entailed four separate repair attempts within the 12-month period
e. A brand-new car which was neglected in an open space and left to rot in the rain

Exceptions in Lemon Law

- Non-compliance of obligations under the warranty

- Unauthorized modifications
- Abuse or neglect of the BNMV
- Damage to vehicle due to accident or force majeure

6. S1: All “per se violations” are needed to be determined by the Philippine Competition Commission as illegal by
inquiring into the circumstances affecting it.

S2: In case of “not per se violations”, it is enough that such agreement between competitors be shown to exist for
it to be considered a violation.
a. True, True
b. True, False
c. False, False
d. False, True

What Are Per Se Violations?

These anti-competitive agreements that are inherently illegal and require no further inquiry into their actual effect
on the market or the intentions of the parties who engaged in the illegal act or agreement. The Philippine
Competition Act classifies price fixing and bid rigging as per se violations. See PCA Chapter 3, Section 14 (a)

What Are Not Per Se Violations?

Not per se violations are other anti-competitive agreements prohibited by the law which have the object or effect of
substantially preventing, restricting, or lessening competition. Since these agreements are not per se illegal, the PCC
needs to conduct inquiries to determine whether they restrict competition and violate the PCA. See PCA Chapter 3,
Section 14 (b) and (c)

7. Miguel, a special customs agent is charged before the Ombudsman with having acquired property out of proportion
to his salary, in violation of the Anti-Graft and Corrupt Practices Act. The Ombudsman issued a subpoena duces tecum
to Banco de Cinco commanding its representative to furnish the Ombudsman records of transactions by or in the name
of Miguel, his wife and children. A second subpoena was issued expanding the first by including the production of
records of friends of Miguel in said bank and in all its branches and extension offices, specifically naming them.
Miguel moved to quash the subpoenas arguing that they violate the Secrecy of Bank Deposits Law. In addition, he
contends that the subpoenas are in the nature of ―fishing expedition or ―general warrants and are constitutionally
impermissible with respect to private individuals who are not under investigation.
Is Miguel‘s contention tenable?
a. Tenable, there was a clear denial of the right to due process since there was no proper hearing.
b. Not tenable, the inquiry into illegally acquired property extends to cases where such property is
concealed by being held by or recorded in the name of other persons.
c. Not tenable, the AMLC should be the one in-charge of the investigation
d. Tenable, the properties are owned by his family members

The Ombudsman has the power to issue subpoena and subpoena duces tecum, take testimony in any investigation or
inquiry, as well as examine and access bank accounts and records.

Bank deposits of a public official, his spouse and unmarried children may be taken into consideration in the
enforcement of Section 8 of The Anti-Graft and Corrupt Practices Act.

8. After many years of shopping in the Metro Manila area, housewife HW has developed the sound habit of making
cash purchases only, none on credit. In one shopping trip to Super Mall, she got the shock of her shopping life for the
first time, a store‘s smart salesgirl refused to accept her coins in payment for a purchase worth not more than two
hundred pesos. HW was paying using her meticulously saved coins in the denominations of 25 centavos, 1 peso, 5
pesos, 10 pesos and 20 pesos. Strange as it may seem, the salesgirl told HW that her coins were not ―legal tender.
Being one of the shoppers in Super Mall, please select the legal tender of coins.
i. 25 centavos up to P100
ii. 25 centavos up to P200
iii. 25 centavos up to P500
iv. 1 peso, 5 pesos, 10 pesos, 20 pesos up to P1,000
v. 1 peso, 5 pesos, 10 pesos 20 pesos up to P2,000
vi. 1 peso, 5 pesos, 10 pesos 20 pesos up to P5,000

a. i and ii only
b. ii and v only
 c. iii and vi only
d. iii and v only
e. ii and v only

9. Dana Gianina purchased on a 36-month installment basis the latest model of the Nissan Sentra Sedan car from the
Jobel Cars Inc. In addition to the advertised selling price, the Jobel cars imposed finance charges consisting of interests,
fees and service charges. It did not, however, submit to Dana a written statement setting forth therein the information
required by the Truth in Lending Act (RA 3765). Nevertheless, the conditional deed of sale which the parties executed
mentioned that the total amount indicated therein included such finance charges.

Has there been substantial compliance of the aforesaid Act?

a. Yes, the conditional sale provided the curative effect which shall retroact to the date when the loan
was released
b. Yes, partial compliance shall mean full compliance with the law
c. No, the consent of Dana was not properly obtained since it was not notarized
d. No, subsequent compliance to the law shall likewise mean non-compliance

It cannot be deemed in substantial compliance with the law (UCPB v. Beluso).

The Court of Appeals held that the imposition of interest in the following provision found in the promissory notes of
the spouses Beluso is void, as the interest rates and the bases therefor were determined solely by petitioner.

10. Chito Santos is a director of both Platinum Bank and Kwik Pawnshop. He owns 10% of the outstanding capital stock
of Platinum Bank and 40% of Kwik Pawnshop. Platinum plans to enter into a contract with Kwik that will make both
companies earn very substantial profits. The contract is presented at the respective board meetings of Platinum and
Kwik. In order that the contract will not be voidable, what conditions will have to be complied with, except: Chito
would have to make sure that
a. his presence as director at the meeting is not necessary to constitute a quorum for such meeting
b. his vote is not necessary for the approval of the contract
c. the contract is fair and reasonable under the circumstances
d. Majority vote of the directors and 2/3 vote of the independent directors approve the material contract
e. Only d is not applicable to be complied with in the meeting concerned

SEC. 31. Dealings of Directors, Trustees or Officers with the Corporation. – A contract of the corporation with (1) one
or more of its directors, trustees, officers or their spouses and relatives within the fourth civil degree of consanguinity
or affinity is voidable, at the option of such corporation, unless all the following conditions are present: (a) The
presence of such director or trustee in the board meeting in which the contract was approved was not necessary to
constitute a quorum for such meeting; (b) The vote of such director or trustee was not necessary for the approval of
the contract; (c) The contract is fair and reasonable under the circumstances; (d) In case of corporations vested with
public interest, material contracts are approved by at least two-thirds (2/3) of the entire membership of the board,
with at least a majority of the independent directors voting to approve the material contract; and (e) In case of an
officer, the contract has been previously authorized by the board of directors. Where any of the first three (3)
conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such
contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding
capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full
disclosure of the adverse interest of the directors or trustees involved is made at such meeting and the contract is fair
and reasonable under the circumstances.

11. The BOD of X Co, acting on a standing authority of the stockholders to amend the by-laws, amended its by-laws so
as to disqualify any of its stockholders who is also a stockholder and director of a competitor from being elected to its
BOD.
Y, a stockholder holding sufficient assets to assure him of a seat in the BOD, filed a petition with the SEC for a
declaration of nullity of the amended by-laws. He alleged among other things that as a stockholder, he had acquired
rights inherent in stock ownership such as the right to vote and be voted upon in the election of directors. Is the
stockholder‘s petition tenable?
a. Corporations have the power to make by-laws declaring a person employed in the service of a rival
company to be ineligible for the Corporation‘s BOD
b. No, by-laws cannot contravene the provisions of the Corporation Code
c. No, by-laws cannot contravene the provisions of the Articles of Incorporation
d. No, both C and D

SEC. 46. Contents of Bylaws. – A private corporation may provide the following in its bylaws: (a) The time, place and
manner of calling and conducting regular or special meetings of the directors or trustees; (b) The time and manner
of calling and conducting regular or special meetings and mode of notifying the stockholders or members thereof; (c)
The required quorum in meetings of stockholders or members and the manner of voting therein; (d) The modes by
which a stockholder, member, director, or trustee may attend meetings and cast their votes; (e) The form for proxies
of stockholders and members and the manner of voting them; (f) The directors’ or trustees’ qualifications, duties
and responsibilities, the guidelines for setting the compensation of directors or trustees and officers, and the
maximum number of other board representations that an independent director or trustee may have which shall, in
no case, be more than the number prescribed by the Commission; (g) The time for holding the annual election of
directors or trustees and the mode or manner of giving notice thereof; (h) The manner of election or appointment
and the term of office of all officers other than directors or trustees; (i) The penalties for violation of the bylaws; (j)
In the case of stock corporations, the manner of issuing stock certificates; and (k) Such other matters as may be
necessary for the proper or convenient transaction of its corporate affairs for the promotion of good governance and
anti-graft and corruption measures.
A corporation has the inherent power to adopt by-laws for its internal government and to regulate the conduct and
prescribe the rights and duties of its members towards itself and among themselves about the management of its
affairs. The Corporation law also allows a corporation to prescribe in its by-laws the qualifications, duties, and
compensation of directors, officers, and employees. (Gokongwei v. SEC, April 11, 1979)

12. Mr. A applied for a medical life insurance. The insured did not inform the insurer that one week prior to his
application for insurance, he was examined and confined at St. Luke‘s Hospital where he was diagnosed for lung
cancer. The insured soon thereafter died in a plane crash. Is the insurer liable considering that the fact concealed had
no bearing with the cause of death of the insured?
a. It is sufficient that his nondisclosure misled the insurer in forming his estimate of the risks of the proposed
insurance policy or in making inquiries.
b. The concealed fact was not material to the death of the accused. It was not the proximate cause of the
death.
c. The insured should have died based on the disease concealed, hence there was no concealment.
d. Yes, liable since it was the remote cause of the death of the insured

Concealment is the failure or neglect to communicate that which a party knows or ought to communicate. A
concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance.

It is not determined by the event, but the probable and reasonable influence of the facts on the party to whom
communication is due or of the facts upon the party to whom the representation is made, in forming his estimate of
the advantages and disadvantages of the proposed contract or in making his inquiries.

13. The essential features of partnership includes the following, except:

a. The object must be lawful
b. The parties must have the knowledge and expertise in the chosen field
c. There must be a mutual contribution of money, property, or industry to a common fund
d. There must be a valid contract
e. There must be legal capacity of the parties

Essential features / Elements of Partnership

(1) There must be a valid contract; (2) legal capacity to enter into a contract; (3) mutual contribution of money,
property or industry to a common fund; (4) lawful object; and (5) intention to divide profits and losses (1767, NCC)

14. The right of inspection is permissible in this case:

a. The stockholder has improperly used the information secured through any prior examination of the
records and minutes
b. The stockholder made the inspection to look for irregularities committed by the BOD
c. The stockholder is not acting in good faith or the inspection was not for a legitimate purpose
d. The stockholder has an ulterior purpose or has intention to use the information inappropriately to the
prejudice of the corporation

SEC. 73. Books to be Kept; Stock Transfer Agent. – Every corporation shall keep and carefully preserve at its principal
office all information relating to the corporation including, but not limited to: (a) The articles of incorporation and
bylaws of the corporation and all their amendments; (b) The current ownership structure and voting rights of the
corporation, including lists of stockholders or members, group structures, intra-group relations, ownership data, and
beneficial ownership; (c) The names and addresses of all the members of the board of directors or trustees and the
executive officers; (d) A record of all business transactions; (e) A record of the resolutions of the board of directors or
trustees and of the stockholders or members; (f) Copies of the latest reportorial requirements submitted to the
Commission; and (g) The minutes of all meetings of stockholders or members, or of the board of directors or trustees.
Such minutes shall set forth in detail, among others: the time and place of the meeting held, how it was authorized,
the notice given, the agenda therefor, whether the meeting was regular or special, its object if special, those present
and absent, and every act done or ordered done at the meeting. Upon the demand of a director, trustee, stockholder
or member, the time when any director, trustee, stockholder or member entered or left the meeting must be noted
in the minutes; and on a similar demand, the yeas and nays must be taken on any motion or proposition, and a record
thereof carefully made. The protest of a director, trustee, stockholder or member on any action or proposed action
must be recorded in full upon their demand. Corporate records, regardless of the form in which they are stored, shall
be open to inspection by any director, trustee, stockholder or member of the corporation in person or by a
representative at reasonable hours on business days, and a demand in writing may be made by such director, trustee
or stockholder at their expense, for copies of such records or excerpts from said records. The inspecting or reproducing
party shall remain bound by confidentiality rules under prevailing laws, such as the rules on trade secrets or processes
under Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as amended,
Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”, Republic Act No. 8799, otherwise known
as “The Securities Regulation Code”, and the Rules of Court. Page 35 of 73 A requesting party who is not a stockholder
or member of record, or is a competitor, director, officer, controlling stockholder or otherwise represents the interests
of a competitor shall have no right to inspect or demand reproduction of corporate records. Any stockholder who
shall abuse the rights granted under this section shall be penalized under Section 158 of this Code, without prejudice
to the provisions of Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as
amended, and Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”. Any officer or agent of
the corporation who shall refuse to allow the inspection and/or reproduction of records in accordance with the
provisions of this Code shall be liable to such director, trustee, stockholder or member for damages, and in addition,
shall be guilty of an offense which shall be punishable under Section 161 of this Code: Provided, That if such refusal
is made pursuant to a resolution or order of the board of directors or trustees, the liability under this section for such
action shall be imposed upon the directors or trustees who voted for such refusal: Provided, further, That it shall be
a defense to any action under this section that the person demanding to examine and copy excerpts from the
corporation’s records and minutes has improperly used any information secured through any prior examination of
the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a
legitimate purpose in making the demand to examine or reproduce corporate records, or is a competitor, director,
officer, controlling stockholder or otherwise represents the interests of a competitor. If the corporation denies or does
not act on a demand for inspection and/or reproduction, the aggrieved party may report such to the Commission.
Within five (5) days from receipt of such report, the Commission shall conduct a summary investigation and issue an
order directing the inspection or reproduction of the requested records. Stock corporations must also keep a stock
and transfer book, which shall contain a record of all stocks in the names of the stockholders alphabetically arranged;
the installments paid and unpaid on all stocks for which subscription has been made, and the date of payment of any
installment; a statement of every alienation, sale or transfer of stock made, the date thereof, by and to whom made;
and such other entries as the bylaws may prescribe. The stock and transfer book shall be kept in the principal office
of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or
stockholder of the corporation at reasonable hours on business days. A stock transfer agent or one engaged
principally in the business of registering transfers of stocks in behalf of a stock corporation shall be allowed to operate
in the Philippines upon securing a license from the Commission and the payment of a fee to be fixed by the
Commission, which shall be renewable annually: Provided, That a stock corporation is not precluded from performing
or making transfers of its own stocks, in which case all the rules and regulations imposed on stock transfer agents,
except the payment of a license fee herein provided, shall be applicable: Provided, further, That the Commission may
require stock corporations which transfer and/or trade stocks in secondary markets to have an independent transfer
agent.

15. Allan bought Billy’s property through Carlos, an agent empowered with a special power of attorney (SPA) to sell
the same. When Allan was ready to pay as scheduled, Billy called, directing Allan to pay directly to him. On learning of
this, Carlos, Billy's agent, told Allan to pay through him as his SPA provided and to protect his commission. Faced with
two claimants, Allan consigned the payment in court. Billy protested, contending that the consignation is ineffective
since no tender of payment was made to him. Is he correct?
a. No, since consignation without tender of payment is allowed in the face of the conflicting claims on the
plaintiff.
b. Yes, as owner of the property sold, Billy can demand payment directly to himself.
c. Yes, since Allan made no announcement of the tender.
 d. Yes, a tender of payment is required for a valid consignation

Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the
debtor shall be released from responsibility by the consignation of the thing or sum due. Consignation alone shall
produce the same effect in the following cases: (1) When the creditor is absent or unknown, or does not appear at
the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3) When, without
just cause, he refuses to give a receipt; (4) When two or more persons claim the same right to collect; (5) When the
title of the obligation has been lost.

16. The rule is that no stock dividend shall be issued without the approval of stockholders representing at least 2/3 of
the outstanding capital stock at a regular or special meeting called for the purpose. As to other forms of dividends:
a. a mere majority of the entire Board of Directors applies
b. a mere majority of the quorum of the Board of Directors applies
c. a mere majority of the votes of stockholders representing the outstanding capital stock applies
d. the same rule of 2/3 of the OCS vote applies

SEC. 42. Power to Declare Dividends. – The board of directors of a stock corporation may declare dividends out of the
unrestricted retained earnings which shall be payable in cash, property, or in stock to all stockholders on the basis of
outstanding stock held by them: Provided, That any cash dividends due on delinquent stock shall first be applied to
the unpaid balance on the subscription plus costs and expenses, while stock dividends shall be withheld from the
delinquent stockholders until their unpaid subscription is fully paid: Provided, further, That no stock dividend shall be
issued without the approval of stockholders representing at least two-thirds (2/3) of the outstanding capital stock at
a regular or special meeting duly called for the purpose. Stock corporations are prohibited from retaining surplus
profits in excess of one hundred percent (100%) of their paid-in capital stock, except: (a) when justified by definite
corporate expansion projects or programs approved by the board of directors; or (b) when the corporation is
prohibited under any loan agreement with financial institutions or creditors, whether local or foreign, from declaring
dividends without their consent, and such consent has not yet been secured; or (c) when it can be clearly shown that
such retention is necessary under special circumstances obtaining in the corporation, such as when there is need for
special reserve for probable contingencies.

SEC. 52. Regular and Special Meetings of Directors or Trustees; Quorum. – Unless the articles of incorporation or the
bylaws provides for a greater majority, a majority of the directors or trustees as stated in the articles of incorporation
shall constitute a quorum to transact corporate business, and every decision reached by at least a majority of the
directors or trustees constituting a quorum, except for the election of officers which shall require the vote of a
majority of all the members of the board, shall be valid as a corporate act.

17. AA is a partner in ABC Co. He was provided a company vehicle for his use in the usual conduct of the business.
While on his way to meet the client, he drove recklessly and sideswiped a pedestrian and incurred damages amounting
to P500,000.00 of hospital expenses. Under the circumstances,
a. Only AA is solely liable since it arises out of his personal act
b. The partnership and the partners of ABC Co. are solidarily liable
c. AA is principally liable and the partnership is secondarily liable
d. There is no liability since there is no contractual liability between the partnership and the pedestrian.
e. The partnership and the partners of ABC Co. are pro rata and subsidiarily liable for the contractual obligation.

Article 1822. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of
the partnership or with the authority of his co-partners, loss or injury is caused to any person, not being a partner in
the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so
acting or omitting to act. (n)

Article 1824. All partners are liable solidarily with the partnership for everything chargeable to the partnership under
articles 1822 and 1823. (n)
18. The principal duty of a resident agent is:
a. To manage the day-to-day operations for and on behalf of the foreign corporation
b. To establish effective operation controls for and on behalf of the foreign corporation
c. To receive for and on behalf of the foreign corporation notices, summons and other legal processes in
connection with actions against such corporation
d. To administer properties, supervise personnel, and manage the finances of the foreign corporation
e. To act as receiver of the foreign corporation

SEC. 144. Who May be a Resident Agent. – A resident agent may be either an individual residing in the Philippines or
a domestic corporation lawfully transacting business in the Philippines: Provided, That an individual resident agent
must be of good moral character and of sound financial standing: Provided, further, That in case of a domestic
corporation who will act as a resident agent, it must likewise be of sound financial standing and must show proof
that it is in good standing as certified by the Commission.

SEC. 145. Resident Agent; Service of Process. – As a condition to the issuance of the license for a foreign corporation
to transact business in the Philippines, such corporation shall file with the Commission a written power of attorney
designating a person who must be a resident of the Philippines, on whom summons and other legal processes may
be served in all actions or other legal proceedings against such corporation, and consenting that service upon such
resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign
corporation at its home office. Such foreign corporation shall likewise execute and file with the Commission an
agreement or stipulation, executed by the proper authorities of said corporation, in form and substance as follows:
Page 61 of 73 “The (name of foreign corporation) hereby stipulates and agrees, in consideration of being granted a
license to transact business in the Philippines, that if the corporation shall cease to transact business in the
Philippines, or shall be without any resident agent in the Philippines on whom any summons or other legal processes
may be served, then service of any summons or other legal process may be made upon the Commission in any action
or proceeding arising out of any business or transaction which occurred in the Philippines and such service shall have
the same force and effect as if made upon the duly authorized officers of the corporation at its home office.”
Whenever such service of summons or other process is made upon the Commission, the Commission shall, within ten
(10) days thereafter, transmit by mail a copy of such summons or other legal process to the corporation at its home
or principal office. The sending of such copy by the Commission shall be a necessary part of and shall complete such
service. All expenses incurred by the Commission for such service shall be paid in advance by the party at whose
instance the service is made. It shall be the duty of the resident agent to immediately notify the Commission in writing
of any change in the resident agent’s address.

19. Which of the following action will prescribe in six (6) years?

a. Unlawful detainer
b. Obligation arising from written contract
c. Obligation arising from quasi contract
d. Obligation arising from quasi delict
e. Obligations created by law

Article 1139. Actions prescribe by the mere lapse of time fixed by law. (1961)

Article 1140. Actions to recover movables shall prescribe eight years from the time the possession thereof is lost,
unless the possessor has acquired the ownership by prescription for a less period, according to articles 1132, and
without prejudice to the provisions of articles 559, 1505, and 1133. (1962a)

Article 1141. Real actions over immovables prescribe after thirty years. This provision is without prejudice to what is
established for the acquisition of ownership and other real rights by prescription. (1963)

Article 1142. A mortgage action prescribes after ten years. (1964a)

Article 1143. The following rights, among others specified elsewhere in this Code, are not extinguished by
prescription: (1) To demand a right of way, regulated in article 649; (2) To bring an action to abate a public or private
nuisance. (n)

Article 1144. The following actions must be brought within ten years from the time the right of action accrues: (1)
Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. (n)

Article 1145. The following actions must be commenced within six years: (1) Upon an oral contract; (2) Upon a quasi-
contract. (n)

Article 1146. The following actions must be instituted within four years: (1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict; However, when the action arises from or out of any act, activity, or conduct of any public
officer involving the exercise of powers or authority arising from Martial Law including the arrest, detention and/or
trial of the plaintiff, the same must be brought within one (1) year. (As amended by PD No. 1755, Dec. 24, 1980.)

Article 1147. The following actions must be filed within one year: (1) For forcible entry and detainer; (2) For
defamation. (n)

20. A corporation sole commences its legal personality

a. From and after the filing with the Securities and Exchange Commission of the said articles of incorporation.

b. From the date the Securities and Exchange Commission issues a certificate of incorporation under its
official seal.
c. From the execution of the articles of incorporation by the chief archbishop, bishop, priest, minister, rabbi
or presiding elder of any religious denomination.
d. Upon approval by congress granting juridical personality.
e. From his appointment by the particular religious sect to which he belongs

SEC. 110. Submission of the Articles of Incorporation. – The articles of incorporation must be verified, by affidavit or
affirmation of the chief archbishop, bishop, priest, minister, rabbi, or presiding elder, as the case may be, and
accompanied by a copy of the commission, certificate of election or letter of appointment of such chief archbishop,
bishop, priest, minister, rabbi, or presiding elder, duly certified to be correct by any notary public. From and after
filing with the Commission of the said articles of incorporation, verified by affidavit or affirmation, and accompanied
by the documents mentioned in the preceding paragraph, such chief archbishop, bishop, priest, minister, rabbi, or
presiding elder shall become a corporation sole and all temporalities, estate and properties of the religious
denomination, sect or church theretofore administered or managed as such chief archbishop, bishop, priest, minister,
rabbi, or presiding elder shall be personally held in trust as a corporation sole, for the use, purpose, Page 49 of 73
exclusive benefit and on behalf of the religious denomination, sect or church, including hospitals, schools, colleges,
orphan asylums, parsonages, and cemeteries thereof.

21. D bound himself to deliver either specific object 1 or object 2 to C. If one of the objects is lost due to fortuitous
event and without the fault of D, the effect is:

a. D may still choose which he shall deliver, only the value of the thing lost if he chooses the same.
b. D shall lose the right of choice when among the prestations whereby he is alternatively bound, only
one is practicable.
c. C may choose which of the objects he wants to deliver.
d. Obligation of D has been extinguished.
 e. It becomes a facultative obligation

Article 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively bound,
only one is practicable. (1134)

22. Which of the following statements is/are true?

i. The right to a patent belongs to the inventor, his heirs, or assigns
ii. When two (2) or more persons have jointly made an invention, the right to a patent shall belong to them
jointly
iii. In case the invention is made through commission, the inventor of the work shall own the patent, unless
otherwise provided in the contract.
iv. In case the employee made the invention in the course of his employment contract and part of his regular
duty, the patent shall belong to the employee.

a. I only
b. i and ii only
c. i, ii, and iii only
d. i, ii, and iv only
e. all of the above are true

Right to Patent. —The right to the patent belongs to the true and actual inventor, his heirs, legal representatives or
assigns. If two or more persons have an invention jointly, the right to the patent belong to them jointly.

Inventions Created Pursuant to a Commission. – The person who commissions the work shall own the patent, unless
otherwise provided in the contract (Sec. 30.1, IP Code).
In case the employee made the invention in the course of his employment contract, the patent shall belong to: (a) The
employee, if the inventive activity is not a part of his regular duties even if the employee uses the time, facilities and
materials of the employer.

23. What is the ground that must be alleged by an individual debtor in his petition to be declared in a state of
suspension of payments?

a. When such individual debtor does not have sufficient assets to cover his liabilities exceeding P500,000.
b. When such individual debtor has sufficient properties to cover his liabilities but he foresees the
impossibility of meeting when they respectively fall due.
c. When such individual debtor has already defaulted in the payment of his liabilities.
d. When such individual debtor has sufficient properties to cover his liabilities but he is contemplating
expanding his business.

The petition for suspension of payments is filed by the individual debtor who, possessing sufficient property to cover
all his debts but foreseeing the impossibility of meeting them when they respectively fall due.

24. S offered to B a specific thing for a certain price. B asked for 10 days to think of his acceptance, S agreed. Before
the lapse of the 10 days, S offered it to another, X, who readily accepted the offer of S. If you are S, is your withdrawal
of your offer to B valid?

a. No, because we agreed on a certain number of days for him to accept

b. Yes, because even if we agreed on a certain number of days for him to accept, the period was not
supported by a consideration distinct from the price
c. No, because I voluntarily agreed to give him a period to accept
 d. Yes, because I can always withdraw my offer before acceptance whether or not is was supported by a
consideration
e. No, there was already a perfected contract of sale

Article 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any
time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration,
as something paid or promised. (n)

If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to
withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror’s coming to know
of such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co.
v. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the
previous decision in South Western Sugar v. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of
Parañaque, Inc. v. Remolado, 135 SCRA 409; Sanchez v. Rigos, 45 SCRA 368).

25. S sold through a deed of sale to B a parcel of land with a non-apparent burden (which means that there are no
visible signs that there is a burden over the lot) on January 10, 2021 and B entered the property on March 10, 2021.
However, the fact is that there is a party wall which is registered which B does not know as a matter of fact and
discovered it on April 30, 2021. Since B discovered that the lot he bought has a party wall, his remedies are:

a. file an action for rescission within one year from January 10, 2021
b. file an action for rescission within one year from March 10, 2021
c. file an action for rescission after one year from January 10, 2021
d. file an action for rescission after one year from March 10, 2021
e. file an action for rescission within one year from April 30, 2021

Article 1560. If the immovable sold should be encumbered with any non-apparent burden or servitude, not mentioned
in the agreement, of such a nature that it must be presumed that the vendee would not have acquired it had he been
aware thereof, he may ask for the rescission of the contract, unless he should prefer the appropriate indemnity.
Neither right can be exercised if the non-apparent burden or servitude is recorded in the Registry of Property, unless
there is an express warranty that the thing is free from all burdens and encumbrances. Within one year, to be
computed from the execution of the deed, the vendee may bring the action for rescission, or sue for damages. One
year having elapsed, he may only bring an action for damages within an equal period, to be counted from the date
on which he discovered the burden or servitude. (1483a)

26. Which of the following is not prohibited under the Bank Secrecy Law?

a. Alvin, a friend of Agnes, who accompanied the latter to a bank to deposit money and disclosed that Sara
deposited 5 million pesos to her bank account to his wife.
b. Harold, a bank teller, disclosing to his wife, that his friend Gianna deposited 10 million pesos in his bank
account yesterday.
c. Carlo, an NBI agent investigating Philip because of his suspected illegal activities, examined the bank
accounts of the latter.
d. All of the above are prohibited acts.

Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments
in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person,
government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment,
or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the
money deposited or invested is the subject matter of the litigation.

Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any person other
than those mentioned in Section two hereof any information concerning said deposits.

27. In compliance with GPRA, when shall the pre-bid conference be held?

a. Within 10 days before the deadline for the submission and receipt of bids
b. Within 12 days before the deadline for the submission and receipt of bids
c. Within 14 days before the deadline for the submission and receipt of bids
d. Within 16 days before the deadline for the submission and receipt of bids

A pre-bid conference must be conducted at least twelve (12) calendar days before the deadline for the submission
and receipt of bids. (IRR-A Section 22.2)

Under Section 21.2.2 of the IRR of RA 9184, aside from newspaper advertisement, the Invitation to Bid shall likewise
be posted continuously in the Philippine Government Electronic Procurement System (PhilGEPS) website, website of
the Procuring Entity and at any conspicuous place in the premises of the Procuring Entity for seven (7) calendar days,
starting from the date of advertisement. After the seven (7)-day posting period, the pre-bid conference, for contracts
with an approved budget of One Million Pesos PhP 1,000,000.00 and above, shall be held at least twelve (12) calendar
days before the submission and receipt of bids.

28. Which among the following persons is not guilty of money laundering?

a. A person who knowing that the money he holds is a proceed of robbery, deposits the same in a bank.
b. A person who knowing that the money he holds is a proceed of qualified theft, uses the money in a
casino transaction.
c. A person, knowing that his neighbor holds a money which is a proceed of kidnapping for ransom, did not
report the same to the AMLC.
d. A person who knowing that the money entrusted to him by his office superior for safekeeping is a
proceed of smuggling and uses the same to acquire real estate.

Covered Persons

• Covered Persons Supervised or Regulated by the Bangko Sentral ng Pilipinas (BSP);

• Covered Persons Supervised or Regulated by the Insurance Commission (IC);

• Covered Persons Supervised or Regulated by the Securities and Exchange Commission (SEC);

• Designated Non-Financial Businesses and Professions (DNFBPs) - refer to businesses and professions, which
are not under the supervision or regulation of the BSP, SEC and IC, and designated as covered persons under
the AMLA;

• Persons who provide any of the following services:

• Casinos

• Real Estate developers and brokers

• Offshore Gaming Operators

29. A sent an email to B offering for sale his land for 1 Million pesos. D replied in the afore-said email and accepted
the offer. To prove his sincerity, B immediately deposited P100,000.00 to the bank account of A to which A
acknowledged the receipt through his online banking account. Is the sale valid?
a. Yes, sale of land can now be made electronically as functional equivalent of written contracts
b. No, sale of land is still governed by the Statute of Frauds, hence the sale is unenforceable not being in
writing
c. Yes, sale of land though governed by the Statute of Frauds, the E-Commerce Act provides this as an
exception.
d. No, sale of land is oral, hence, unenforceable.
e. Yes, the sale is valid since the sale was already executed

Partial performance is an exception to the Statute of Frauds. Statute of Frauds applies only to executory and not to
executed contracts. (Art. 1403, [2] NCC)

30. Under the Revised Corporation Code, the By-laws of a corporation can undergo an amendment, provided:

i. Majority vote of the BOD plus 2/3 of the OCS vote to ratify the act
ii. Majority vote of the BOD plus Majority vote of the OCS
iii. 2/3 vote only of the OCS is required
iv. 2/3 vote of the OCS is required to delegate the amendment and majority vote of the OCS is required to
revoke the delegation
v. Majority vote of the OCS is required to delegate the amendment and 2/3 vote of the OCS is required to
revoke the delegation
vi. Majority vote of the OCS is required to delegate and revoke the delegation to amend

a. i and iv
b. ii and v
c. iii and vi
d. i and v
e. ii and iv

SEC. 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. The owners of
two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a nonstock corporation may
delegate to the board of directors or trustees the power to amend or repeal the bylaws or adopt new bylaws:
Provided, That any power delegated to the board of directors or trustees to amend or repeal the bylaws or adopt
new bylaws shall be considered as revoked whenever stockholders owning or representing a majority of the
outstanding capital stock or majority of the members shall so vote at a regular or special meeting. Whenever the
bylaws are amended or new bylaws are adopted, the corporation shall file with the Commission such amended or
new bylaws and, if applicable, the stockholders’ or members’ resolution authorizing the delegation of the power to
amend and/or adopt new bylaws, duly certified under oath by the corporate secretary and a majority of the directors
or trustees. The amended or new bylaws shall only be effective upon the issuance by the Commission of a certification
that the same is in accordance with this Code and other relevant laws.
31. PR Corp. owns a beach resort with several cottages in Siargao. Jaime, the President of PR and a well-travelled
bachelor and known for being a womanizer, occupied one of the cottages for residential purposes. After Jaime‘s term
expired, PR wanted to recover possession of the cottage. Jaime refused to surrender the cottage, contending that as
a stockholder and former President, he has a right to possess and enjoy the properties of the corporation. Is Jaime‘s
contention correct?
a. Yes, the Trust Fund Doctrine has no application in this case
b. Yes, the Doctrine of Limited Liability will apply in this case
c. No, the Doctrine of Automatic Assumption of Assets will apply in this situation
d. No, properties registered in the name of the corporation are owned by it as an entity separate and
distinct from its stockholders
e. The matter must be decided by both the BOD and the OCS

Doctrine of Corporate Fiction

A corporation is an artificial being created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence.

The property of a corporation, however, is not the property of the stockholders or members. Properties registered in
the name of the corporation are owned by it as an entity separate and distinct from those who compose it.

Similarly, properties of the shareholders, members or officers of the corporation are not the properties of the
corporation.

32. AA, a minority stockholder, filed a suit against BB, CC, DD, and EE, the holders of majority shares of MOP
Corporation, for alleged misappropriation of corporate funds. The complaint averred, inter alia, that MOP Corporation
is the corporation on whose behalf and for whose benefit the suit is to be brought. What suit can be filed?
a. Individual Suit
b. Class Suit
c. Derivative Suit
d. Representative Suit
e. Mandamus

A derivative suit is an action filed by stockholders to enforce a corporate action. A derivative suit is defined as one
brought by one or more stockholders in the name and on behalf of the corporation to redress wrongdoings.

33. A and B are twins. They inherited from their parents townhouses which are leased to students. The rents are
divided by them in equal share. In this case, A and B are:
a. Partners as to each other and therefore partners as to third persons
b. Partners as to each other but not partners as to third persons
c. Partners as to third persons but not partners as to each other
d. They are merely co-owners

Article 1769. In determining whether a partnership exists, these rules shall apply: (1) Except as provided by article
1825, persons who are not partners as to each other are not partners as to third persons; (2) Co-ownership or co-
possession does not of itself establish a partnership, whether such-co-owners or co-possessors do or do not share any
profits made by the use of the property; (3) The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a joint or common right or interest in any property from which the
returns are derived; (4) The receipt by a person of a share of the profits of a business is prima facie evidence that he
is a partner in the business, but no such inference shall be drawn if such profits were received in payment: (a) As a
debt by installments or otherwise; (b) As wages of an employee or rent to a landlord; (c) As an annuity to a widow or
representative of a deceased partner; (d) As interest on a loan, though the amount of payment vary with the profits
of the business; (e) As the consideration for the sale of a goodwill of a business or other property by installments or
otherwise. (n)

34. Which of the following is FALSE in the exercise of a stockholder with regard to right of inspection:
a. The right is absolute
b. The right does not apply to foreign corporation since it is not organized under the Philippine law
c. In cases of protecting trade secrets, the right may be restricted
d. The right may be exercised only at reasonable hours on business days
e. The right cannot be exercised by a competitor

SEC. 73. Books to be Kept; Stock Transfer Agent. – Every corporation shall keep and carefully preserve at its principal
office all information relating to the corporation including, but not limited to: (a) The articles of incorporation and
bylaws of the corporation and all their amendments; (b) The current ownership structure and voting rights of the
corporation, including lists of stockholders or members, group structures, intra-group relations, ownership data, and
beneficial ownership; (c) The names and addresses of all the members of the board of directors or trustees and the
executive officers; (d) A record of all business transactions; (e) A record of the resolutions of the board of directors or
trustees and of the stockholders or members; (f) Copies of the latest reportorial requirements submitted to the
Commission; and (g) The minutes of all meetings of stockholders or members, or of the board of directors or trustees.
Such minutes shall set forth in detail, among others: the time and place of the meeting held, how it was authorized,
the notice given, the agenda therefor, whether the meeting was regular or special, its object if special, those present
and absent, and every act done or ordered done at the meeting. Upon the demand of a director, trustee, stockholder
or member, the time when any director, trustee, stockholder or member entered or left the meeting must be noted
in the minutes; and on a similar demand, the yeas and nays must be taken on any motion or proposition, and a record
thereof carefully made. The protest of a director, trustee, stockholder or member on any action or proposed action
must be recorded in full upon their demand. Corporate records, regardless of the form in which they are stored, shall
be open to inspection by any director, trustee, stockholder or member of the corporation in person or by a
representative at reasonable hours on business days, and a demand in writing may be made by such director, trustee
or stockholder at their expense, for copies of such records or excerpts from said records. The inspecting or reproducing
party shall remain bound by confidentiality rules under prevailing laws, such as the rules on trade secrets or processes
under Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as amended,
Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”, Republic Act No. 8799, otherwise known
as “The Securities Regulation Code”, and the Rules of Court. Page 35 of 73 A requesting party who is not a stockholder
or member of record, or is a competitor, director, officer, controlling stockholder or otherwise represents the interests
of a competitor shall have no right to inspect or demand reproduction of corporate records. Any stockholder who
shall abuse the rights granted under this section shall be penalized under Section 158 of this Code, without prejudice
to the provisions of Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as
amended, and Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012”. Any officer or agent of
the corporation who shall refuse to allow the inspection and/or reproduction of records in accordance with the
provisions of this Code shall be liable to such director, trustee, stockholder or member for damages, and in addition,
shall be guilty of an offense which shall be punishable under Section 161 of this Code: Provided, That if such refusal
is made pursuant to a resolution or order of the board of directors or trustees, the liability under this section for such
action shall be imposed upon the directors or trustees who voted for such refusal: Provided, further, That it shall be
a defense to any action under this section that the person demanding to examine and copy excerpts from the
corporation’s records and minutes has improperly used any information secured through any prior examination of
the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a
legitimate purpose in making the demand to examine or reproduce corporate records, or is a competitor, director,
officer, controlling stockholder or otherwise represents the interests of a competitor. If the corporation denies or does
not act on a demand for inspection and/or reproduction, the aggrieved party may report such to the Commission.
Within five (5) days from receipt of such report, the Commission shall conduct a summary investigation and issue an
order directing the inspection or reproduction of the requested records. Stock corporations must also keep a stock
and transfer book, which shall contain a record of all stocks in the names of the stockholders alphabetically arranged;
the installments paid and unpaid on all stocks for which subscription has been made, and the date of payment of any
installment; a statement of every alienation, sale or transfer of stock made, the date thereof, by and to whom made;
and such other entries as the bylaws may prescribe. The stock and transfer book shall be kept in the principal office
of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or
stockholder of the corporation at reasonable hours on business days. A stock transfer agent or one engaged
principally in the business of registering transfers of stocks in behalf of a stock corporation shall be allowed to operate
in the Philippines upon securing a license from the Commission and the payment of a fee to be fixed by the
Commission, which shall be renewable annually: Provided, That a stock corporation is not precluded from performing
or making transfers of its own stocks, in which case all the rules and regulations imposed on stock transfer agents,
except the payment of a license fee herein provided, shall be applicable: Provided, further, That the Commission may
require stock corporations which transfer and/or trade stocks in secondary markets to have an independent transfer
agent.

“The right of inspection granted by Section 73 of the Corporation Code is not absolute, as when the stockholder is not
acting in good faith and for a legitimate purpose [Gonzales v. PNB, 122 SCRA 489 (1983)].

35. The following are the effects of dissolution, except:

a. The corporation ceases as a body corporate to continue the business for which it was established
b. The corporation continues as a body corporate during the winding-up or liquidation period
c. Upon the expiration of the winding-up period, the corporation cease to exist for all purposes
d. The corporation can still sue or be sued

SEC. 139. Corporate Liquidation. – Except for banks, which shall be covered by the applicable provisions of Republic
Act No. 7653, otherwise known as the “New Central Bank Act”, as amended, and Republic Act No. 3591, otherwise
known as the Philippine Deposit Insurance Corporation Charter, as amended, every corporation whose charter expires
pursuant to its articles of incorporation, is annulled by forfeiture, or whose corporate existence is terminated in any
other manner, shall nevertheless remain as a body corporate for three (3) years after the effective date of dissolution,
for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs,
dispose of and convey its property, and distribute its assets, but not for the purpose of continuing the business for
which it was established. At any time during said three (3) years, the corporation is authorized and empowered to
convey all of its property to trustees for the benefit of stockholders, members, creditors and other persons in interest.
After any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members,
creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest
vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons-in-interest.
Except as otherwise provided for in Sections 93 and 94 of this Code, upon the winding up of corporate affairs, any
asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated
in favor of the national government. Except by decrease of capital stock and as otherwise allowed by this Code, no
corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its
debts and liabilities.

The authorities are to the effect that suits by or against a corporation abate when it ceased to be an entity capable
of suing or being sued.

In the present case, petitioner filed its complaint not only after its corporate existence was terminated but also
beyond the three-year period allowed by Section 122 of the Corporation Code. Thus, it is clear that at the time of the
filing of the subject complaint petitioner lacks the capacity to sue as a corporation. To allow petitioner to initiate the
subject complaint and pursue it until final judgment, on the ground that such complaint was filed for the sole purpose
of liquidating its assets, would be to circumvent the provisions of Section 122 of the Corporation Code. (Alabang
Development Corporation, Petitioner, Vs. Alabang Hills Village Association And Rafael Tinio)
36. A particular partnership:

a. Has for its object determinate things, their use of fruits, or a specific undertaking, or the exercise of a
profession or vocation
b. Has for its object indeterminate things, their use of fruits, or a specific undertaking, or the exercise of a
profession or vocation
c. Has for its object determinate or indeterminate things, their use of fruits, or a specific undertaking, or the
exercise of a profession or vocation
d. Has for its object determinate and indeterminate things, their use of fruits, or a specific undertaking, or
the exercise of a profession or vocation

Article 1783. A particular partnership has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation. (1678)

37. X and Y were to marry in 3 months. Meantime, to express his affection, X donated a house and lot to Y, which
donation X wrote in a letter to Y. Y wrote back, accepting the donation and took possession of the property. Before
the wedding, however, Y suddenly died of heart attack. Can Y’s heirs get the property?
a. No, since the marriage did not take place.
b. Yes, since all the requisites of a donation of an immovable are present.
c. No, since the donation and its acceptance are not in a public instrument.
d. Yes, since X freely donated the property to Y who became its owner.

Article 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying
therein the property donated and the value of the charges which the donee must satisfy. The acceptance may be
made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done
during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified
thereof in an authentic form, and this step shall be noted in both instruments. (633)

38. The "veil" of corporate entity or fiction shall not be disregarded:

a. When the partnership is dissolved and its assets are transferred to another corporation with the same
personnel and address
b. When the subsidiary corporation has essentially the same set of directors and officers as the parent or
holding corporation and all decisions are made by the parent corporation.
c. When the corporation undertakes unlawful business and its directors are personally engaged in the said
unlawful business
d. When the corporation undertakes lawful business but the directors formed another corporation in order
not to pay its obligations to its employees.

Under the doctrine of separate legal entity, a corporation is considered to have a legal personality distinct
and separate from its directors, individual stockholders or members (Bustos v. Millians Shoe, Inc., G.R. No.
185024, April 24, 2017).

While a corporation may exist for any lawful purpose, the law will regard it as an association of persons or,
in case of two corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud
or illegality. This is the doctrine of piercing the veil of corporate fiction.
39. Barato Corporation was organized for the purpose of engaging in the buying and selling of cellular phones. Barato
Corporation, however, purchased 10 television sets and sold the same to its customers. Is the act of Barato
Corporation illegal?
a. No, because there is nothing illegal in the purchase of television sets
b. Yes, because Barato Corporation acted beyond the conferred powers
c. No, because the act of Barato Corporation is merely ultra vires
d. Yes, because it is contrary to morals and good customs
e. Yes, because it is an illegal corporate act

SEC. 44. Ultra Vires Acts of Corporations. – No corporation shall possess or exercise corporate powers other than
those conferred by this Code or by its articles of incorporation and except as necessary or incidental to the exercise
of the powers conferred.

40. Which of the following is/are the test to determine if there is a patent infringement?

i. Literal Infringement
ii. Doctrine of Equivalents
iii. Test of Dominancy
iv. Totality Rule

a. i and ii only
b. i, ii, and iii only
c. i, ii, and iv only
d. ii and iii only
e. all of the above

Literal Infringement – resort must be had to the words of the claim, if it clearly falls within the claim, infringement is
made out and that is the end of it. The overall context of the claims and specification must be analyzed to determine
whether there is exact identity of all material elements.

Doctrine of Equivalents – it recognizes the minor modifications in the patented invention are sufficient to put them
beyond the scope of literal infringement. The minor and significant changes/deviations will make them liable.

41. Which of the following is true regarding the creditor’s meeting?

a. presence of creditors holding claims amounting to at least two-thirds (2/3) of the liabilities shall be
necessary for holding a meeting
b. during the meeting, the creditors will vote for the proposed manner of payment by the debtor.
c. creditor who incurred his credit within 120 days prior to the filing of the petition shall be entitled to vote.
d. All of the above are true.

Creditor’s Meeting

Purpose - For the debtor to present the proposed agreement to the creditors as to the manner and time of payment
of debts.
Quorum - The presence of the creditors holding claims amounting to at least 3/5 of the liabilities shall be necessary
for holding the meeting or for the quorum.
Proceedings - During the meeting, the creditors will vote for the proposed manner of payment by the debtor.
However, creditors who incurred his credit within ninety (90) days prior to the filing of the petition are not entitled to
vote.

42. Who is a personal information controller below?

a. The person who processes information as instructed by another person or organization

b. An Individual who collects, holds, processes personal information in connection with the individual’s
personal, family, or household affairs
c. A juridical or natural person, qualified to act under the law, where a person outsources the processing
of personal information or sensitive personal information.
d. A person or organization who controls the collection, holding, processing or use of personal information.

Personal information controller (PIC) - refers to a person or organization who controls the collection, holding,
processing or use of personal information, including a person or organization who instructs another person or
organization to collect, hold, process, use, transfer or disclose personal information on his or her behalf.

43. In case of joint account between a juridical person and a natural person, who shall be entitled to the maximum
insured deposit of P500,000 in such joint account?

a. Juridical person
b. Natural person
c. Both juridical person and natural person equally
d. Both juridical person and natural person solidarily
e. Neither juridical person nor natural person

If the account is held by a juridical person or entity jointly with one or more natural persons, the maximum insured
deposit shall be presumed to belong entirely to such juridical person or entity.

44. The minimum retention period of all records of customer identification and transaction documents of their
customers by a covered person under AMLA?

a. At least 1 year from the date of transaction or from date of closure of the account
b. At least 3 years from the date of transaction or from date of closure of the account
c. At least 5 years from the date of transaction or from date of closure of the account
d. At least 10 years from the date of transaction or from date of closure of the account

Record Keeping – all records of all transactions of covered institutions shall be maintained and safely stored for five (5)
years from the date of transactions. With respect to closed accounts, the records on customer identification, account
files and business correspondences, shall be preserved and safely stored for at least five (5) years from the date when
they were closed.

45. What is the required vote for the termination of a membership in a cooperative for any of the valid causes?

a. At least majority of all the members and the board of directors of the cooperative with right to vote
b. At least ¾ of all the members and majority of the board of directors of the cooperative with right to
vote
c. At least ¾ of all the members of the board of directors of the cooperative
 d. At least majority of all the members of the board of directors of the cooperative

ART. 30. Termination of Membership. (1) A member of a cooperative may, for any valid reason, withdraw his
membership from the cooperative by giving a sixty (60) day notice to the board of directors. Subject to the bylaws of
the cooperative, the withdrawing member shall be entitled to a refund of his share capital contribution and all other
interests in the cooperative: Provided, That such fund shall not be made if upon such payment the value of the assets
of the cooperative would be less than the aggregate amount of its debts and liabilities exclusive of his share capital
contribution.
“(2) The death or insanity of a member in a primary cooperative, and the insolvency or dissolution of a member in a
secondary or tertiary cooperative may be considered valid grounds for termination of membership: Provided, That in
case of death or insanity of an agrarian reform beneficiary-member of a cooperative, the next-of-kin may assume
the duties and responsibilities of the original member
“(3) Membership in the cooperative may be terminated by a vote of the majority of all the members of the board of
directors for any of the following causes:
“(a) When a member has not patronized any of the services of the cooperative for an unreasonable period of time as
may be previously determined by the board of directors;
“(b) When a member has continuously failed to comply with his obligations;
“(c) When a member has acted in violation of the bylaws and the rules of the cooperative; and
“(d) For any act or omission injurious or prejudicial to the interest or the welfare of the cooperative.

46. Any provision or matter stated in the articles of incorporation may be amended:
a. by a 2/3 vote of the board of directors and the vote or written assent of the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock
b. by a majority vote of the board of directors and the vote or written assent of the stockholders representing
the majority of the outstanding capital stock
c. by a 2/3 vote of the board of directors and the vote or written assent of the stockholders representing the
majority of the outstanding capital stock
d. by a majority vote of the board of directors and the vote or written assent of the stockholders representing
at least two-thirds (2/3) of the outstanding capital stock

SEC. 15. Amendment of Articles of Incorporation. – Unless otherwise prescribed by this Code or by special law, and
for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority
vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in
accordance with the provisions of this Code. The articles of incorporation of a nonstock corporation may be amended
by the vote or written assent of majority of the trustees and at least two-thirds (2/3) of the members. The original
and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation.
Amendments to the articles shall be indicated by underscoring the change or changes made, and a copy thereof duly
certified under oath by the corporate secretary and a majority of the directors or trustees, with a statement that the
amendments have been duly approved by the required vote of the stockholders or members, shall be submitted to
the Commission. The amendments shall take effect upon their approval by the Commission or from the date of filing
with the said Commission if not acted upon within six (6) months from the date of filing for a cause not attributable
to the corporation.

47. Which of the following is FALSE concerning capitalist partners?

a. A capitalist partner is not bound to contribute to the partnership more than what he agreed to contribute
b. In case, however, of an imminent loss of the business, and there is no agreement to the contrary, he is
under obligation to contribute an additional share to save the venture
c. If the additional share is necessary and the capitalist partner declined to contribute, the partnership is
dissolved
 d. If an additional share is necessary because of an imminent loss and the capitalist partner refuses to
contribute, he shall be obliged to sell his interest to the other partners

Article 1808. The capitalist partners cannot engage for their own account in any operation which is of the kind of
business in which the partnership is engaged, unless there is a stipulation to the contrary. Any capitalist partner
violating this prohibition shall bring to the common funds any profits accruing to him from his transactions, and shall
personally bear all the losses. (n)

48. The contract of partnership was executed by the partners on February 1, 2021. The partners stipulated that they
would make the contributions of Php 1 million each on March 1, 2021. On April 1, 2021, one of the partners still failed
to comply with his obligation thus a demand was made by the partnership to deliver the said contribution. On May 1,
2021, the demand remained unheeded, thus the partners instituted a judicial action to get the contribution. In this
view, the interest and the damages shall accrue from?

a. February 1, 2021
b. March 1, 2021
c. April 1, 2021
d. May 1, 2021

Article 1786. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto.
He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may
have contributed to the partnership, in the same cases and in the same manner as the vendor is bound with respect
to the vendee. He shall also be liable for the fruits thereof from the time they should have been delivered, without
the need of any demand. (1681a)

Article 1788. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for
the interest and damages from the time he should have complied with his obligation. The same rule applies to any
amount he may have taken from the partnership coffers, and his liability shall begin from the time he converted the
amount to his own use. (1682)

49. AA and BB obliged to deliver a Lacoste shirt signed by Federer.

a. Joint divisible obligation

b. Joint indivisible obligation
c. Solidary divisible obligation
d. Solidary indivisible obligation

Article 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself
imply indivisibility. (n)

50. Acts or omissions where the liability of the employers is based upon the principle that the negligence of the
employee is presumed to be the negligence of the employer.

a. Culpa Contractual
b. Culpa Aquiliana
c. Dolo Causante
d. Culpa Interdictal
The master-servant rule is a legal guideline stating that employers are responsible for the actions of their employees.
It applies to any actions an employee undertakes while in the service of an employer that is within the scope of their
duties for that employer.

Contractual negligence or culpa contractual or negligence in the performance of a contract. The master and servant
rule applies, which means that the negligence of the servant is the negligence of the master.

51. It refers to a bank that has no physical presence in the country in which it is incorporated and licensed, and
which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision.
a. Foreign bank
b. Universal Bank
c. Commercial Bank
d. Intermediary Financial Institution
e. Shell bank

A shell bank is a bank that:

(a) has no physical presence in the jurisdiction in which it is incorporated and licensed (however described); and
(b) is not affiliated with a regulated financial services group that is subject to effective consolidated supervision.

52. It is the act of taking advantage of a shortage of securities in the market by controlling demand side and exploiting
market congestion during such shortages in a way as to create artificial prices.
a. Painting the tape
b. Squeezing the float
c. Hype and Dump
d. Improper Matched order
e. Marking the close

Squeezing the float – refers to taking advantage of a shortage of securities in the market by controlling the demand
side and exploiting market congestion during such shortages in a way to create artificial prices.

Any person who commits any act of illegal price manipulation of any basic necessity or prime commodity shall suffer
the penalty of imprisonment for a period of not less than five (5) years nor more than fifteen (15) years and shall be
imposed a fine of not less than Five thousand pesos (Php 5,000.00) nor more than Two million pesos (Php
2,000,000.00).

53. XXX Bank Corporation and ZZZ Corporation were merged into XX ZZ Bank Corporation. So as not to create any
unnecessary conflict, all the former directors of both banks wanted to be appointed /elected as members of the Board
of Directors of the merged bank. Each bank used to have eleven (11) members of the board. The maximum number
of directors of the merged bank is -
a. 15
b. 20
c. 21
d. 22
SEC. 22. The Board of Directors or Trustees of a Corporation; Qualification and Term. – Unless otherwise provided in
this Code, the board of directors or trustees shall exercise the corporate powers, conduct all business, and control all
properties of the corporation. Directors shall be elected for a term of one (1) year from among the holders of stocks
registered in the corporation’s books, while trustees shall be elected for a term not exceeding three (3) years from
among the members of the corporation. Each director and trustee shall hold office until the successor is elected and
qualified. A director who ceases to own at least one (1) share of stock or a trustee who ceases to be a member of the
corporation shall cease to be such.
Pursuant to Sections 15 and 17 of R.A. No. 8791, there shall be at least five (5), and a maximum of fifteen (15)
members of the board of directors of a BSFI: Provided, That in case of a bank merger or consolidation, the number of
directors may be increased up to the total number of the members of board of directors of the merging or
consolidating bank as provided for in their respective articles of incorporation, but in no case to exceed twenty-one
(21). The board of directors shall determine the appropriate number of its members to ensure that the number thereof
is commensurate to the size and complexity of the BSFI’s operations.

54. The reckoning of the prescriptive period to file action for annulment is four (4) years depending on the cause of
action. Identify which does not conform with the rule:

a. In case of fraud, from the time of the defect of the consent ceases
b. In case of intimidation, the time shall be from the time the defect of the consent ceases
c. In case of undue influence, from the time the defect of the consent ceases
d. In case of violence, from the time of the defect of the consent ceases

Article 1391. The action for annulment shall be brought within four years. This period shall begin: In cases of
intimidation, violence or undue influence, from the time the defect of the consent ceases. In case of mistake or fraud,
from the time of the discovery of the same. And when the action refers to contracts entered into by minors or other
incapacitated persons, from the time the guardianship ceases. (1301a)

55. S1 - Ordinary course of business means the transactions in pursuit of the individual debtor’s or debtor’s business
operations subsequent to rehabilitation or insolvency proceedings and on ordinary business terms.
S2 - Under the SSS Law, the female worker must have at least three (3) monthly contributions in the twelve month
period immediately preceding the semester of the childbirth, miscarriage or emergency termination of pregnancy.
S3 - A worker below 15 should be directly under the sole responsibility of parents or guardians; in family business;
work does not interfere with the child’s schooling/normal development; with work permit from DSWD.
a. S1 is True, S2 is False, S3 is True
b. S1 is True, S2 is False, S3 is False
c. S1 is False, S2 is True, S3 is False
d. S1 is False, S2 is False, S3 is True
e. All are False

Ordinary course of business means the transactions in pursuit of the individual debtor’s or debtor’s business operations
prior to rehabilitation or insolvency proceedings and on ordinary business terms.

A worker below 15 should be directly under the sole responsibility of parents or guardians; in family business; work
does not interfere with the child’s schooling/normal development; with work permit from DOLE, maximum hours 4
hours daily and 20 hours weekly only, no work from 8pm-6am (RA 9231).

56. S1 – Under the Cooperative Code, should the conciliation or mediation proceedings fail, the matter shall be
appealed to the Office of the President.
S2 – Layering happens when the money re-enters mainstream economy in legitimate-looking form, appearing to
have come from some legitimate transaction.
S3 – For joint accounts "or, and/or, and" each depositor in the joint account should sign separate claim form in filing
his claim in PDIC.
 a. S1 is True, S2 is False, S3 is True
b. S1 is True, S2 is False, S3 is False
c. S1 is False, S2 is True, S3 is False
d. S1 is False, S2 is False, S3 is True
e. All are False

Should conciliation or mediation proceedings fail, the matter shall be settled thru voluntary arbitration.

Steps in Money Laundering

(1) Placement – at this stage the launderer inserts the dirty money into a legitimate financial institution, usually in the
form of cash deposits.
(2) Layering – involves sending money through various financial transactions to change its form an make it more
difficult to follow. It may consist of bank-to-bank transfers, changing currency, or purchasing high value items.
(3) Integration – The money re-enters mainstream economy in legitimate-looking form, appearing to have come from
some legitimate transaction. It may involve a final bank transfer into the account of a local business in which the
launderer is “investing” in exchange for a cut of the profits or the sale of high value items bought during the layering
stage (IRR, RA 9160, Rule 4, Sec. 1)

57. For purposes of determining violation of the provisions of Anti-Money Laundering Law, a transaction is considered
as a "Suspicious Transaction" regardless of the amount involved, where which the following circumstances exist/s?
a. the amount involved is not commensurate with the client's business or financial capacity;
b. there is no underlying legal or trade obligation, purpose or economic justification;
c. client is not properly identified;
d. All of the above

These are transactions with covered institutions, regardless of the amount involved*, where any of the following
circumstances exist:
• There is no underlying legal or trade obligation, purpose or economic justification;
• The client is not properly identified;
• The amount involved is not commensurate with the business or financial capacity of the client;
• Taking into account all known circumstances, it may be perceived that the client’s transaction is structured in
order to avoid being the subject of reporting requirements under the Act;
• Any circumstance relating to the transaction which observed to deviate from the profile of the client and/or
the client’s past transactions with the covered institution;
• The transaction is in any way related to an unlawful activity or offense under this Act that is about to be, is
being or has been committed; or
• Any transaction that is similar or analogous to any of the foregoing.

58. In elections for the Board of Trustees of non-stock corporations, members may cast as many votes as there are
trustees to be elected but may not cast more than one vote for one candidate. This is true –
a. unless set aside by the members in plenary session.
b. in every case even if the Board of Trustees resolves otherwise.
c. unless otherwise provided in the Articles of Incorporation or in the By-laws
 d. in every case even if the majority of the members decide otherwise during the elections.

SEC. 23. Election of Directors or Trustees. – Except when the exclusive right is reserved for holders of founders’ shares
under Section 7 of this Code, each stockholder or member shall have the right to nominate any director or trustee
who possesses all of the qualifications and none of the disqualifications set forth in this Code. At all elections of
directors or trustees, there must be present, either in person or through a representative authorized to act by written
proxy, the owners of majority of the outstanding capital stock, or if there be no capital stock, a majority of the
members entitled to vote. When so authorized in the bylaws or by a majority of the board of directors, the
stockholders or members may also vote through remote communication or in absentia: Provided, That the right to
vote through such modes may be exercised in corporations vested with public interest, notwithstanding the absence
of a provision in the bylaws of such corporations. A stockholder or member who participates through remote
communication or in absentia, shall be deemed present for purposes of quorum. The election must be by ballot if
requested by any voting stockholder or member. In stock corporations, stockholders entitled to vote shall have the
right to vote the number of shares of stock standing in their own names in the stock books of the corporation at the
time fixed in the bylaws or where the bylaws are silent, at the time of the election. The said stockholder may: (a) vote
such number of shares for as many persons as there are directors to be elected; (b) cumulate said shares and give
one (1) candidate as many votes as the number of directors to be elected multiplied by the number of the shares
owned; or (c) distribute them on the same principle among as many candidates as may be seen fit: Provided, That
the total number of votes cast shall not exceed the number of shares owned by the stockholders as shown in the
books of the corporation multiplied by the whole number of directors to be elected: Provided, however, That no
delinquent stock shall be voted. Unless otherwise provided in the articles of incorporation or in the bylaws, members
of nonstock corporations may cast as many votes as there are trustees to be elected but may not cast more than one
(1) vote for one (1) candidate. Nominees for directors or trustees receiving the highest number of votes shall be
declared elected. If no election is held, or the owners of majority of the outstanding capital stock or majority of the
members entitled to vote are not present in person, by proxy, or through remote communication or not voting in
absentia at the meeting, such meeting may be adjourned and the corporation shall proceed in accordance with
Section 25 of this Code. The directors or trustees elected shall perform their duties as prescribed by law, rules of good
corporate governance, and bylaws of the corporation.

59. X is a director in T Corp. was elected to a 1-year term on Feb. 1, 2020. On April 11, 2020, X resigned and was
replaced by R, who assumed as director on May 17, 2020. On Nov. 21, 2020, R died. S was then elected in his place on
November 30, 2020. Until which time should S serve as director?
a. April 11, 2021
b. Feb. 1, 2021
c. May 17, 2021
d. Nov. 21, 2021
e. Nov. 30, 2021

SEC. 28. Vacancies in the Office of Director or Trustee; Emergency Board. – Any vacancy occurring in the board of
directors or trustees other than by removal or by expiration of term may be filled by the vote of at least a majority of
the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must be filled by the
stockholders or members in a regular or special meeting called for that purpose. Page 15 of 73 When the vacancy is
due to term expiration, the election shall be held no later than the day of such expiration at a meeting called for that
purpose. When the vacancy arises as a result of removal by the stockholders or members, the election may be held
on the same day of the meeting authorizing the removal and this fact must be so stated in the agenda and notice of
said meeting. In all other cases, the election must be held no later than forty-five (45) days from the time the vacancy
arose. A director or trustee elected to fill a vacancy shall be referred to as replacement director or trustee and shall
serve only for the unexpired term of the predecessor in office. However, when the vacancy prevents the remaining
directors from constituting a quorum and emergency action is required to prevent grave, substantial, and irreparable
loss or damage to the corporation, the vacancy may be temporarily filled from among the officers of the corporation
by unanimous vote of the remaining directors or trustees. The action by the designated director or trustee shall be
limited to the emergency action necessary, and the term shall cease within a reasonable time from the termination
of the emergency or upon election of the replacement director or trustee, whichever comes earlier. The corporation
must notify the Commission within three (3) days from the creation of the emergency board, stating therein the
reason for its creation. Any directorship or trusteeship to be filled by reason of an increase in the number of directors
or trustees shall be filled only by an election at a regular or at a special meeting of stockholders or members duly
called for the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated in the
notice of the meeting. In all elections to fill vacancies under this section, the procedure set forth in Sections 23 and
25 of this Code shall apply.

60. Which of the following expresses a correct principle of law?

a. Failure to disclose facts when there is a duty to reveal them, does not constitute fraud
b. Violence or intimidation does not render a contract annulled if employed not by a contracting party but by a
third person
c. A threat to enforce one’s claim through competent authority, if the claim is legal or just, does not vitiate
consent
d. Simulation of a contract always results in a void contract

Article 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by
confidential relations, constitutes fraud. (n)

Article 1336. Violence or intimidation shall annul the obligation, although it may have been employed by a third
person who did not take part in the contract. (1268)

Article 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a
third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy
binds the parties to their real agreement. (n)

61. XYZ Corporation bought ten (1 0) units of Honda Civic from CCC Corporation. ABC Bank granted a loan to XYC
Corporation which executed a financing agreement which provided for the principal amount, the installment
payments, the interest rates and the due dates. On due dates of the installment payments, XYZ Corporation was asked
to pay for some handling charges and other fees which were not mentioned in the Financing Agreement. Can XYC
Corporation refuse to pay the same?
a. No, because handling charges and other fees are usual in certain banking transactions
b. Yes, because ABC Bank is required to provide XYZ Corporation not only the amount of the monthly installments
but also the details of the finance charges as required by the Truth in Lending Act.
c. No, because the Finance Agreement is a valid document to establish the existence of the obligation.
d. Yes, because legally, finance charges are never allowed in any banking transaction.

Matters to be disclosed
(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction
but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on
the outstanding unpaid balance of the obligation.

62. Under the Intellectual Property Code, lectures, sermons, addresses or dissertations prepared for oral delivery,
whether or not reduced in writing or other material forms, are regarded as
a. non-original works
b. original works
c. derivative works
d. not subject to protection

Section 172 of the Intellectual Property Code provides that “lectures, sermons, addresses, dissertations prepared for
oral delivery, whether or not reduced in writing or other material form” are considered original creations in the
literary domain which are protected from the moment of their creation.
172.1 Literary and artistic works, hereinafter referred to as "works", are original intellectual creations in the literary
and artistic domain protected from the moment of their creation and shall include in particular:
(a) Books, pamphlets, articles and other writings;
(b) Periodicals and newspapers;
(c) Lectures, sermons, addresses, dissertations prepared for oral delivery, whether or not reduced in writing or other
material form;
(d) Letters;
xxxx xxxx

63. The Revised Corporation Code sanctions a contract between two or more corporations which have interlocking
directors, provided there is no fraud that attends it, and it is fair and reasonable under the circumstances. The interest
of an interlocking director in one corporation may be either substantial or nominal. It is nominal if his interest:
a. does not exceed 25% of the outstanding capital stock.
b. exceeds 25% of the outstanding capital stock.
c. exceeds 20% of the outstanding capital stock.
d. does not exceed 20% of the outstanding capital stock.

SEC. 32. Contracts Between Corporations with Interlocking Directors. – Except in cases of fraud, and provided the
contract is fair and reasonable under the circumstances, a contract between two (2) or more corporations having
interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking
director in one (1) corporation is substantial and the interest in the other corporation or corporations is merely
nominal, the contract shall be subject to the provisions of the preceding section insofar as the latter corporation or
corporations are concerned. Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be
considered substantial for purposes of interlocking directors.

64. Which of the following contracts is void?

a. An oral sale of a parcel of land

b. A sale of land by an agent in a public instrument where his authority from the principal is oral
 c. A donation of a wrist watch worth P4,500
d. A relatively simulated contract

Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void.

65. Which of the following is FALSE

a. The Statute of Frauds is not applicable in actions which are neither for damages nor for the specific
performance thereof
b. The defense of Statute of Frauds is personal to the parties and cannot be interposed by strangers
to the contract
c. The Statute of Frauds cannot be waived

d. The Statute of Frauds does not declare that contracts infringing it are void but merely unenforceable.

Under Article 6 of the Civil Code, rights may be waived, unless the waiver is contrary to law, public order, public policy,
morals or good customs, or prejudicial to a third person with a right recognized by law.

66. Which of the following statements is true for the prima facie evidence of knowledge of insufficiency of funds to
arise?

a. The making, drawing and issuance of a check payment of which is refused by the drawee because of
insufficient funds in or credit with such bank, when presented within (120) days from the date of the check.
b. The making, drawing and issuance of a check payment of which is refused by the drawee because of
insufficient funds in or credit with such bank, when presented within (30) days from the date of the check.
c. The making, drawing and issuance of a check payment of which is refused by the drawee because of
insufficient funds in or credit with such bank, when presented within (60) days from the date of the check.
d. The making, drawing and issuance of a check payment of which is refused by the drawee because of
insufficient funds in or credit with such bank, when presented within (90) days from the date of the check.

The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds
in or credit with such bank, when presented within ninety (90) days from the date of the check, shall be prima facie
evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the
amount due thereon, or makes arrangements for payment in full by the drawee of such check within (5) banking days
after receiving notice that such check has not been paid by the drawee. (Section 2, BP 22)

67. The Board of Directors of XYZ Corp. unanimously passed a Resolution approving the taking of steps that in reality
amounted to willful tax evasion. On discovering this, the government filed tax evasion charges against all the company’s
members of the board of directors. The directors invoked the defense that they have no personal liability, being mere
directors of a fictional being. Are they correct?
a. No, since as a rule only natural persons like the members of the board of directors can commit corporate
crimes.
b. Yes, since it is the corporation that did not pay the tax and it has a personality distinct from its directors.
c. Yes, since the directors officially and collectively performed acts that are imputable only to the corporation.
d. No, since the law makes directors of the corporation solidarily liable for gross negligence and bad faith in the
discharge of their duties.

SEC. 30. Liability of Directors, Trustees or Officers. – Directors or trustees who willfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.

A director, trustee, or officer shall not attempt to acquire, or acquire any interest adverse to the corporation in respect
of any matter which has been reposed in them in confidence, and upon which, equity imposes a disability upon
themselves to deal in their own behalf; otherwise the said director, trustee, or officer shall be liable as a trustee for
the corporation and must account for the profits which otherwise would have accrued to the corporation.

68. What if the licenses, clearances, permits, certifications or authorizations for the installation and operation of
telecommunication, broadcast towers, facilities, equipment and services require approval by appropriate local
legislative body such as the Sanggunian, what is the prescribed period for the approval of the said application?

a. A nonextendible period of twenty (20) working days

b. A nonextendible period of ten (10) working days
c. A nonextendible period of thirty (30) working days
d. A nonextendible period of forty (40) working day

If the granting authority fails to approve or disapprove an application for a license, clearance, permit,
certification or authorization within the prescribed processing time, said application shall be deemed
approved: Provided, That when the approval of the appropriate local legislative body is necessary, a
nonextendible period of twenty (20) working days is hereby prescribed.

69. What is the required vote for the removal of the elective officer of a cooperative?

a. Majority of all members of the board of directors present and constituting a quorum
b. Majority of all members of general assembly present and constituting a quorum
c. 3/4 of the regular members of general assembly present and constituting a quorum
d. Majority of all members of the board of directors present and constituting a quorum and 3/4 of all
members of general assembly present and constituting a quorum.
e. 2/3 of the voting members present and constituting a quorum.
“ART. 50. Removal. All complaints for the removal of any elected officer shall be filed with the board of directors.
Such officer shall be given the opportunity to be heard. Majority of the board of directors may place the officer
concerned under preventive suspension pending the resolution of the investigation. Upon finding of a prima facie
evidence of guilt, the board shall present its recommendation for removal to the general assembly.

“An elective officer may be removed by three fourths (3/4) votes of the regular members present and constituting a
quorum, in a regular or special general assembly meeting called for the purpose. The officer concerned shall be given
an opportunity to be heard at said assembly.
70. What is the maximum amount of education and training fund of a cooperative?

a. Not more than 50% of net surplus

b. Not more than 10% of net surplus
c. Not more than 3% of net surplus
d. Not more than 7% of net surplus

Order of Distribution

Reserve Fund 10%

Education and Training Fund
10%
Community Development Fund 3%
Optional or Land & Building Fund 7%
Interest on Share Capital & Patronage 70%
Refunds

71. Which of the following statements is true regarding paternity leave?

a. The man must be living/cohabitating with the pregnant woman for him to be entitled to paternity leave.
b. In the event that the paternity leave benefit is not availed of, said leave shall be convertible to cash.
c. Every married male employee in the private and public sectors shall be entitled to a paternity leave of
seven days with full pay for the first five (5) deliveries of the legitimate spouse with whom he is
cohabiting.
d. In case of live childbirth, a qualified female worker entitled to maternity leave benefits may, at her
option, allocate up to seven (7) days of said benefits to the child’s father, who is married to her.

You can avail of paternity leave benefits if you meet these conditions:

• Regardless of employment status (regular, probationary, casual, seasonal, fixed-term)

• Employed at the time of childbirth
• Have a wife who’s pregnant, has given birth, or has had a miscarriage
• The pregnancy, childbirth, or miscarriage has not happened for more than four times
• Legally married to your pregnant wife
• Living with your legitimate wife under one roof
• Properly notify your employer within a reasonable time of your wife’s pregnancy and the expected delivery
date (Not required for cases of miscarriage)

72. The data subject shall have the right, where personal information is processed by electronic means and in a
structured and commonly used format, to obtain from the personal information controller a copy of data undergoing
processing in an electronic or structured format, which is commonly used and allows for further use by the data
subject is referred as?
 a. Right to Erasure/Blocking
b. Right to Data Portability
c. Right to Access
d. Right to be informed

Sec. 18 - Right to Data Portability (to obtain a copy of such data in an electronic or structured format).

73. What is the quorum in the meeting of the general assembly of an ordinary cooperative?

a. At least majority of all the members entitled to vote

b. At least 25% of all the members entitled to vote
c. At least ¾ of all the members entitled to vote
d. At least 5% of all the members entitled to vote

Art. 35. Quorum. –A quorum shall consist of AT LEAST twenty-five per centum (25%) of all the members entitled to
vote (GR).

In the case of cooperative banks, the quorum shall be as provided in Art. 99 of this Code.

In the case of electric cooperatives registered under this code, a quorum, unless otherwise provided in the bylaws,
shall consist of five percent (5%) of all the members entitled to vote.

74. Which of the following is not a requirement of out of court rehabilitation?

a. The debtor must agree to the out-of-court or informal restructuring/workout agreement or

Rehabilitation Plan
b. It must be approved by creditors representing at least sixty-seven percent (67%) of the secured
obligations of the debtor
c. It must be approved by creditors representing at least seventy-five percent (75%) of the unsecured
obligations of the debtor
d. It must be approved by creditors holding at least seventy-five percent (75%) of the total liabilities,
secured and unsecured, of the debtor.

Minimum requirements
a. Debtor must agree to the out-of court rehabilitation;
b. Approved by creditors representing sixty-seven percent (67%) of the secured obligations of the debtor;
c. Approved by creditors representing at least seventy-five percent (75%) of the unsecured obligations of the debtor;
and
d. Approved by creditors holding at least eighty-five (85%) of the total liabilities, unsecured and secured, of the debtor
(Sec. 84, FRIA)

75. Which following is not an effect of Stay Order?

a. Suspending all actions or proceedings, in court or otherwise, for the enforcement of claims against
the debtor;
b. Suspending all actions to enforce any judgment, attachment or provisional remedies against the
debtor
c. Prohibiting the debtor from selling, encumbering, transferring or disposing in any manner any of its
properties except in the ordinary course of business
 d. Prohibiting the debtor from making any payment of its liabilities outstanding as of the
commencement date
e. Suspending all operations of the insolvent debtor
The Commencement Order shall include a Stay order which shall have the following effects:

Suspend all the actions or proceedings in court, or otherwise, for the enforcement of claim against the debtor;
Suspend all actions to enforce any judgement, attachment, or other provisional remedies against the debtor;
Prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except in
the ordinary course of business; and
Prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except as
may be provided herein.

76. A and B are twins. Together, they bought a lotto ticket, with both of them each providing three numbers and
paying half of the ticket price. They agreed to divide the winnings just in case their combination wins. In this case, A
and B are:
a. Partners as to each other
b. Joint owners of the winning ticket
c. They are merely co-owners
d. They are separate and distinct individuals

There is no doubt that if the plaintiffs merely formed a community of property the latter is exempt from the payment
of income tax under the law. But according to the stipulation facts the plaintiffs organized a partnership of a civil
nature because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the
prize which they may win, as they did in fact in the amount of P50,000 (article 1665, Civil Code). The partnership was
not only formed, but upon the organization thereof and the winning of the prize, Jose Gatchalian personally appeared
in the office of the Philippines Charity Sweepstakes, in his capacity as co-partner, as such collection the prize, the
office issued the check for P50,000 in favor of Jose Gatchalian and company, and the said partner, in the same
capacity, collected the said check. All these circumstances repel the idea that the plaintiffs organized and formed a
community of property only.

Having organized and constituted a partnership of a civil nature, the said entity is the one bound to pay the income
tax which the defendant collected under the aforesaid section 10 (a) of Act No. 2833, as amended by section 2 of Act
No. 3761. There is no merit in plaintiff's contention that the tax should be prorated among them and paid individually,
resulting in their exemption from the tax. (Gatchalian v. CIR)

77. The following are the effects or consequences of an unlawful partnership, except:
a. The contract is void ab initio and the partnership never exsisted in the eyes of the law
b. The contributions of the partners shall be confiscated in favor of the government
c. The instruments or tools and proceeds of crime shall be forfeited on favor of the government
d. The profits shall be confiscated in favor of the government

Effects of Unlawful partnership (unlawful object or purpose)

q It is void ab initio
q Profits shall be confiscated in favor of the government
q Instruments or tools and proceeds of the crime shall also be forfeited
q Contributions of the partners shall not be confiscated unless…
78. CDC maintained a savings account with CBank. On orders of the MM Regional Trial Court, the Sheriff garnished
P50,000 of his account, to satisfy the judgment in favor of his creditor, MO. CDC complained that the garnishment
violated the Law on the Secrecy of Bank Deposits because the existence of his savings account was disclosed to the
public. Is CDC's complaint meritorious or not?

a. No, what is prohibited under the law is the disclosure of the amount of the deposit
b. No, what is prohibited under the law is the account number of the depositor
c. Yes, the existence of his savings account was disclosed to the public
d. Yes, there was no written consent given by the depositor
e. Both c and d

Garnishment” means any legal or equitable procedure through which the earnings of any individual are required to
be withheld for payment of any debt.

Further, bank deposits may be garnished by creditors of the depositor, and it will not be considered as a violation of
the Bank Secrecy Law. The reason is that the amount of deposit is actually not disclosed. The intent of the legislature
is discussed by the Supreme Court in the case of China Banking Corporation v. Ortega, G.R. No. L-34964 dated January
31, 1973.

79. Pedro promised to give AA an orchard planted with mango trees on December 25, 2023. Before December 25,
2023, what right does AA have over the orchard?

a. AA has no right
b. AA has a personal right
c. AA has a real right
d. AA has both a personal and a real right

Article 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However,
he shall acquire no real right over it until the same has been delivered to him. (1095)

Real rights (also known as jus in re or jus in rem) are those enforceable against the whole world. Personal rights (also
referred to as jus in personam or jus ad rem) are those enforceable against a specific person or persons.

80. S1: Any denial of application or request for access to government service shall be fully explained verbally to the
applicant, stating the name of the person making the denial and the grounds upon which such denial is based.

S2: Any denial of application or request is deemed to have been made with the permission or clearance from the
highest authority having jurisdiction over the government office or agency concerned.
a. True, True
b. True, False
c. False, False
d. False, True

The law now requires that the denial of the application be fully explained in writing stating the name of the person
who denied the same and the grounds upon which denial is based.

Any denial is deemed to have been made with the permission from the highest authority having jurisdiction over the
government office or agency concerned.
81. S1: Kobe is a multi-billionaire man. He can engage in the business of insurance by allocating 200 billion pesos of
his personal money.
S2. A signed as a surety of B, his best friend, for the latter’s loan against C. A is considered as an insurer.
a. True, True
b. True, False
c. False, False
d. False, True

S1: Only corporation, partnership, or association of persons can transact any business of insurance.
S2: A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if
made by a surety who or which, as such, is doing an insurance business as hereinafter provided

82. A fire that burns in a place where it is supposed to burn is called:

a. Friendly Fire
b. Hostile Fire
c. Wild Fire
d. Bush fire

Fire insurance is commonly understood as property insurance and is used to cover a loss caused by “hostile” fire, but
not friendly fire. A “friendly fire” is contained in the intended place, such as a fireplace, furnace or a stove,
whereas a hostile fire is one that occurs outside of those confines.

83. Pledge and mortgage are accessory contracts. Which of the following statements is false?
a. They are meant to secure the fulfillment of a principal obligation.
b. They cannot exist if the principal obligation is void.
c. They can exist by themselves.
d. They can secure fulfillment of a voidable obligation.

Pledge and mortgage are accessory contracts and as such cannot exist by themselves.

84. The following are corporate acts in which the stockholder of a corporation shall have the right to dissent and
demand payment of the fair value of his shares of stock, except one
a. In case of an amendment to the Articles of Incorporation which has the effect of changing or restricting the
rights of any stockholder.
b. In case of merger or consolidation.
c. In case of sale, lease, mortgage or other disposal of all or substantially all of the corporate asset.
d. In case of incurring, creating or increasing bonded debts.

SEC. 80. When the Right of Appraisal May Be Exercised. – Any stockholder of a corporation shall have the right to
dissent and demand payment of the fair value of the shares in the following instances: (a) In case an amendment
to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of
shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of
extending or shortening the term of corporate existence; (b) In case of sale, lease, exchange, transfer, mortgage,
pledge or other disposition of all or substantially all of the corporate property and assets as provided in this Code;
(c) In case of merger or consolidation; and (d) In case of investment of corporate funds for any purpose other
than the primary purpose of the corporation.
85. Which of the following statements is true and correct?
a. Unless otherwise agreed upon by the parties, the sale of the mortgaged property extinguishes in full the
obligation of the mortgagor to the mortgagee.
b. Pledge and mortgage are considered principal contracts.
c. When the obligation is secured by a pledge or mortgage and it is not paid when due, the pledgee or
mortgagee may dispose the collateral even if there is no agreement to that effect between the parties.
d. In both pledge and mortgage, the creditor is entitled to deficiency judgment.

Article 2085. The following requisites are essential to the contracts of pledge and mortgage: (1) That they be
constituted to secure the fulfillment of a principal obligation; (2) That the pledgor or mortgagor be the absolute
owner of the thing pledged or mortgaged; (3) That the persons constituting the pledge or mortgage have the free
disposal of their property, and in the absence thereof, that they be legally authorized for the purpose. Third persons
who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.
(1857)

Article 2086. The provisions of article 2052 are applicable to a pledge or mortgage. (n)

Article 2087. It is also of the essence of these contracts that when the principal obligation becomes due, the things in
which the pledge or mortgage consists may be alienated for the payment to the creditor. (1858)

Article 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void. (1859a)

86. Statement 1: De jure corporation are not subject to attack, not even by the government.
Statement 2: De facto corporations are subject to direct attack by the government, although not subject to
collateral attack by private individuals.
a. Both statements are true
b. Both statements are false
c. Statement 1 is true, but statement 2 is false
d. Statement 1 is false, but statement 2 is true

SEC. 19. De facto Corporations. – The due incorporation of any corporation claiming in good faith to be a corporation
under this Code, and its right to exercise corporate powers, shall not be inquired into collaterally in any private suit
to which such corporation may be a party. Such inquiry may be made by the Solicitor General in a quo warranto
proceeding.

De jure corporation. Your corporation will be considered a de jure corporation when you have done everything
mandated by law to become a corporation. That is, a de jure corporation is a corporation that is organized with the
requirements of the relevant statute. In these situations, no one can challenge the corporate state of your company,
including private parties nor the state. A de jure corporation is a bona fide corporation that has fulfilled all
requirements, and granted limited liability protection under the law.

De facto corporation. A de facto corporation exists when steps are taken to incorporate the enterprise, but the
corporation did not comply with every aspect of the applicable statutes. The corporation will not be protected against
a challenge by the state in a quo warranto proceeding, but will be protected against third parties. Usually courts will
make a finding of a de facto if the corporation meets three requirements: (1) there must be a statute in existence by
which incorporation is legally possible (such as in Florida); (2) there has been a colorable attempt by the company to
comply with the statute; (3) and some actual use or exercise of corporate privileges. A de facto corporation is basically
a good faith attempt to become a corporation, but due to some technicality, does not fulfill every requirement
needed. https://tremblylaw.com/de-jure-de-facto-corporation-by-estoppel-know-what-you-are-and-why-it-is-
significant/

87. The vote required so that the maximum deposit insurance cover may be adjusted in such amount, for such period,
and/or for such deposit products –

a. the adjustment is approved by a majority vote of the Board of Directors of PDIC in a meeting called for
the purpose and chaired by the Secretary of Finance, subject to the approval of the President of the Philippines
b. the adjustment is approved by a 2/3 vote of the Board of Directors of PDIC in a meeting called for the
purpose and chaired by the Secretary of Finance, subject to the approval of the President of the Philippines
c. the adjustment is approved by a unanimous vote of the Board of Directors of PDIC in a meeting called for
the purpose and chaired by the Secretary of Finance, subject to the approval of the President of the Philippines
d. the adjustment is approved by a mere majority of the quorum of the Board of Directors of PDIC in a
meeting called for the purpose and chaired by the Secretary of Finance, subject to the approval of the President of
the Philippines

Provided, finally, That, in case of a condition that threatens the monetary and financial stability of the banking system
that may have systemic consequences, the maximum deposit insurance cover may be adjusted in such amount, for
such a period, and/or for such deposit products, as may be determined by a unanimous vote of the Board of Directors
in a meeting called for the purpose and chaired by the Secretary of Finance, subject to the approval of the President of
the Philippines (RA 9576).

88. S1 – BP 22 is a transitory crime, and it can be filed in the RTC where it was issued, delivered and dishonored.
S2 – Starting 2023, the contribution rate in SSS is set to 14%, with premium contributions of 9.5% for employer
and 4.5% for the employee.
S3 – 10 days Leave with pay for Victims of Violence Against Women and their Children is granted to women
employees who are victims of physical, sexual, psychological harm or suffering, or economic abuse.
S4 – Data sharing is the disclosure or transfer to a third party of personal data under the custody of a personal
information controller or personal information processor.
a. Only Statement 1 is false
b. Only Statement 2 is false
c. Only Statement 3 is false
d. Only Statement 4 is false
e. All statements are true

S2 – MTC has jurisdiction.

89. Principle of Proportionality in DPA means?

a. Information must be collected for specified and legitimate purposes determined and declared, and later
processed in a way compatible with such declared, specified and legitimate purposes only.
b. Personal Information to be collected and processed must be adequate, relevant and, where necessary
for purposes for which it is to be used the processing of personal information.
c. Data subject must be made aware of the nature, purpose, extent, retention, rights of data subject, and
recipients of the personal information.
d. Be informed whether personal information pertaining to him or her shall be, are being or have been
processed.

Transparency - The data subject must be aware of the nature, purpose, and extent of the processing of his or her
personal data, including the risks and safeguards involved, the identity of personal information controller, his or her
rights as a data subject, and how these can be exercised. Any information and communication relating to the
processing of personal data should be easy to access and understand, using clear and plain language.

Legitimate purpose - The processing of information shall be compatible with a declared and specified purpose which
must not be contrary to law, morals, or public policy.

Proportionality - The processing of information shall be adequate, relevant, suitable, necessary, and not excessive in
relation to a declared and specified purpose. Personal data shall be processed only if the purpose of the processing
could not reasonably be fulfilled by other means.

90. In case of casino, what is the threshold amount to be considered reportable transaction to Anti-Money Laundering
Council?

a. A transaction with amount exceeding P1,000,000

b. A transaction with amount exceeding P7,500,000
c. A transaction with amount exceeding P500,000
d. A transaction with amount exceeding P5,000,000
e. Regardless of the amount

91. The Corporation Code provides three methods of fixing the issued value of no-par value shares. Which of the
following is the exception?
a. The issued value of no-par value shares may be fixed in the articles of incorporation.
b. The issued value of no-par value shares may be fixed by the Board of Directors pursuant to the authority
conferred upon it by the articles or by-laws.
c. By the stockholders representing at least a majority of the outstanding capital stock at a meeting duly
called for the purpose.
d. By the stockholders representing at least 2/3 of the outstanding capital stock at a meeting duly called for
the purpose

Sec. 61 – Consideration for stocks

Vote to fix price of No-Par Shares

1. AOI
2. BOD as provided in the by-laws
3. SHs – M of OCS

SEC. 61. Consideration for Stocks. – Stocks shall not be issued for a consideration less than the par or issued price
thereof. Consideration for the issuance of stock may be: (a) Actual cash paid to the corporation; (b) Property, tangible
or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a
fair valuation equal to the par or issued value of the stock issued; (c) Labor performed for or services actually rendered
to the corporation; (d) Previously incurred indebtedness of the corporation; (e) Amounts transferred from unrestricted
retained earnings to stated capital; (f) Outstanding shares exchanged for stocks in the event of reclassification or
conversion; (g) Shares of stock in another corporation; and/or (h) Other generally accepted form of consideration.
Where the consideration is other than actual cash, or consists of intangible property such as patents or copyrights,
the valuation thereof shall initially be determined by the stockholders or the board of directors, subject to the
approval of the Commission. Shares of stock shall not be issued in exchange for promissory notes or future service.
The same considerations provided in this section, insofar as applicable, may be used for the issuance of bonds by the
corporation.

The issued price of no-par value shares may be fixed in the articles of incorporation or by the board of directors
pursuant to authority conferred by the articles of incorporation or the bylaws, or if not so fixed, by the stockholders
representing at least a majority of the outstanding capital stock at a meeting duly called for the purpose.

92. The following are qualifications of the BOD, except:

a. must own at least one share
b. majority must be residents of the Philippines
c. share must be registered in his name
d. share must be continuously registered in his name for a period of one year

SEC. 22. The Board of Directors or Trustees of a Corporation; Qualification and Term. – Unless otherwise
provided in this Code, the board of directors or trustees shall exercise the corporate powers, conduct all
business, and control all properties of the corporation. Directors shall be elected for a term of one (1) year
from among the holders of stocks registered in the corporation’s books, while trustees shall be elected for
a term not exceeding three (3) years from among the members of the corporation. Each director and
trustee shall hold office until the successor is elected and qualified. A director who ceases to own at least
one (1) share of stock or a trustee who ceases to be a member of the corporation shall cease to be such.

The requirement that majority must be residents of the Philippines was removed under RA 11232.

93. Cash dividend as distinguished from stock dividend

a. It does not involve a disbursement to the stockholders of accumulated earnings
b. It does not create a debt from the corporation in favor of SHs
c. It increases corporate capital
d. It is declared only by the Board of Directors

Cash Dividend Stock Dividend

• Involves a disbursement to • Does not involve any

the stockholders of disbursement
accumulated earnings
• Becomes the absolute • Still part of corporate property and
property of the SH (If may be reached by corporate
declared and paid) creditors
• Declared only by BOD • Declared by both BOD and SHs
• Does not increase the • Increases corporate capital
corporate capital
• Creates a debt from the • No such debt is created
corporation in favor of SHs
94. One of the following is a limitation of proxies. Which is?
a. Proxy acquires legal title to the shares of the stockholder.
b. A proxy votes even in the presence of the stockholder.
c. The proxy votes only for the meeting for which it was intended.
d. A proxy is irrevocable at any time.

95. S1 – The period to extend the life of the Corporation (if fixed) is 3 years prior to its expiration.
S2 – The period to extend the life of a Cooperative is 5 years prior to its expiration.
S3 – Under FRIA, all contracts of the debtor shall be deemed terminated and/or breached, unless the liquidator,
within 90 days from the date of his assumption of office, declares otherwise and the contracting parties agree thereto.
S4 – Under FRIA, within three (3) months from his assumption into office, the Liquidator shall submit a Liquidation
Plan to the court.

a. Only Statement 1 is false

b. Only Statement 2 is false
c. Only Statement 3 is false
d. Only Statement 4 is false
e. All statements are true

96. One of the following does not require stockholders’ 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.

SEC. 42. Power to Declare Dividends. – The board of directors of a stock corporation may declare dividends
out of the unrestricted retained earnings which shall be payable in cash, property, or in stock to all
stockholders on the basis of outstanding stock held by them: Provided, That any cash dividends due on
delinquent stock shall first be applied to the unpaid balance on the subscription plus costs and expenses,
while stock dividends shall be withheld from the delinquent stockholders until their unpaid subscription is
fully paid: Provided, further, That no stock dividend shall be issued without the approval of stockholders
representing at least two-thirds (2/3) of the outstanding capital stock at a regular or special meeting duly
called for the purpose. Stock corporations are prohibited from retaining surplus profits in excess of one
hundred percent (100%) of their paid-in capital stock, except: (a) when justified by definite corporate
expansion projects or programs approved by the board of directors; or (b) when the corporation is
prohibited under any loan agreement with financial institutions or creditors, whether local or foreign, from
declaring dividends without their consent, and such consent has not yet been secured; or (c) when it can
be clearly shown that such retention is necessary under special circumstances obtaining in the corporation,
such as when there is need for special reserve for probable contingencies.

97. It is the consumer’s right to be compensated for misrepresentation, shoddy goods or unsatisfactory services.

a. Right to safety
b. Right to information
c. Right to choose
d. Right to representation
e. Right to redress

• Right to redress - to be compensated for misrepresentation, or unsatisfactory services.

98. The Statute of limitation under the Philippine Competition Act –

a. 1 year
b. 2 years
c. 3 years
d. 5 years
e. 10 years

Any action arising from a violation of any provision of this Act shall be forever barred UNLESS COMMENCED
WITHIN FIVE (5) YEARS from:
• For criminal actions, the time the violation is discovered by the offended party, the authorities, or their
agents; and
• For administrative and civil actions, the time the cause of action accrues.

99. S1 – The vote required for the dissolution of a Cooperative where no creditors is affected is Majority of the BOD
plus ¾ of the members entitled to vote.
S2 - The vote required for the dissolution of a Corporation where no creditors is affected is Majority of the BOD
plus 2/3 of the OCS.
S3 –The petition for voluntary proceedings of the insolvent debtor if it is a partnership must be approved by
majority of the partners.
a. S1 is true, S2 and S3 are false
b. S2 is true, S1 and S3 are false
c. S3 is true, S1 and S2 are false
d. S1 is false, S2 and S3 are true
e. S2 is false, S1 and S3 are true

SEC. 134. Voluntary Dissolution Where No Creditors are Affected. – If dissolution of a corporation does not prejudice
the rights of any creditor having a claim against it, the dissolution may be effected by majority vote of the board of
directors or trustees, and by a resolution adopted by the affirmative vote of the stockholders owning at least majority
of the outstanding capital stock or majority of the members of a meeting to be held upon the call of the directors or
trustees. At least twenty (20) days prior to the meeting, notice shall be given to each shareholder or member of record
personally, by registered mail, or by any means authorized under its bylaws Page 55 of 73 whether or not entitled to
vote at the meeting, in the manner provided in Section 50 of this Code and shall state that the purpose of the meeting
is to vote on the dissolution of the corporation. Notice of the time, place, and object of the meeting shall be published
once prior to the date of the meeting in a newspaper published in the place where the principal office of said
corporation is located, or if no newspaper is published in such place, in a newspaper of general circulation in the
Philippines. A verified request for dissolution shall be filed with the Commission stating: (a) the reason for the
dissolution; (b) the form, manner, and time when the notices were given; (c) names of the stockholders and directors
or members and trustees who approved the dissolution; (d) the date, place, and time of the meeting in which the
vote was made; and (e) details of publication. The corporation shall submit the following to the Commission: (1) a
copy of the resolution authorizing the dissolution, certified by a majority of the board of directors or trustees and
countersigned by the secretary of the corporation; (2) proof of publication; and (3) favorable recommendation from
the appropriate regulatory agency, when necessary. Within fifteen (15) days from receipt of the verified request for
dissolution, and in the absence of any withdrawal within said period, the Commission shall approve the request and
issue the certificate of dissolution. The dissolution shall take effect only upon the issuance by the Commission of a
certificate of dissolution. No application for dissolution of banks, banking and quasi-banking institutions, preneed,
insurance and trust companies, NSSLAs, pawnshops, and other financial intermediaries shall be approved by the
Commission unless accompanied by a favorable recommendation of the appropriate government agency.

100. The following are correct insofar as a one-person corporation is concerned, except:
a. it does not require by-laws
b. it does not require a minimum capital stock
c. the period to elect the officer is within 5 days
d. the period to notify the nominee is within 5 days from the death of the single stockholder
e. the effectivity of the bond of the single stockholder if he is likewise the treasurer is 2 years.

SEC. 122. Treasurer, Corporate Secretary, and Other Officers. – Within fifteen (15) days from the issuance
of its certificate of incorporation, the One Person Corporation shall appoint a treasurer, corporate
secretary, and other officers as it may deem necessary, and notify the Commission thereof within five (5)
days from appointment. The single stockholder may not be appointed as the corporate secretary. A single
stockholder who is likewise the self-appointed treasurer of the corporation shall give a bond to the
Commission in such a sum as may be required: Provided, That the said stockholder/treasurer shall
undertake in writing to faithfully administer the One Person Corporation’s funds to be received as
treasurer, and to disburse and invest the same according to the articles of incorporation as approved by
the Commission. The bond shall be renewed every two (2) years or as often as may be required.
 Excel_Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

OPEN Final Preboard Examination on Financial Accounting and Reporting

April 30, 2023
Suggested answers/solutions by OCAMPO/OCAMPO

Question No. 1 - D
Question No. 2 - B
Question No. 3 - C
Direct materials 99,000
Direct materials purchases in transit, FOB shipping point 16,200
Work-in-process 68,400
Finished goods 81,000
Cost of goods out on consignment (P27,000 x .8) 21,600
Total inventory 286,200

Question No. 4 - A
Inventory, 1/1 375,000
Purchases 1,385,000
Goods available for sale 1,760,000
Cost of goods sold:
Cash sales 225,000
Sales on account (P265,000+P2,115,000-P175,000) 2,205,000
Total 2,430,000
x cost ratio (1 - .32) 0.68 (1,652,400)
Estimated inventory, 8/15 107,600
Salvage value of inventory (5,000)
Inventory loss 102,600

Question No. 5 - A
GAS at retail (P140,000+P420,000+P10,000-P2,000) 568,000
Sales (400,000)
Breakage (8,000)
Estimated ending inventory at retail 160,000
x cost ratio [(P297,000+P4,000)/(P420,000+P10,000-P2,000)] 0.70
Estimated ending inventory at cost 112,000

Question No. 6 - D
Question No. 7 - C
Carrying value, January 1 1,176,000
Increase in fair value due to growth and price changes 365,000
Decrease in fair value due to harvest (42,000)
Carrying value, December 31 1,499,000

Question No. 8 - B
Land purchase price 120,000
Payment of delinquent property taxes 35,000
Title search and insurance 6,500
City improvements for water and sewer 18,000
Cost of land 179,500

Building permit 8,000

Cost to destroy existing building on land 20,000
Contract cost of new building 1,650,000
Cost of building 1,678,000

Question No. 9 - C
Cost 450,000
2022 depreciation [24,000 x (P450,000/300,000)] (36,000)
Remaining depreciable amount, 1/1/23 414,000
/remaining estimated output, 1/1/23 230,000
2023 depreciation rate 1.80
x 2023 output 70,000
2023 depreciation 126,000

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Question No. 10 - A
Cost 500,000
Accumulated depreciation, 1/1/23 (P500,000 x 7/10) (350,000)
Remaining depreciable amount, 1/1/23 150,000
/remaining life, 1/1/23 2
2023 depreciation 75,000

Question No. 11 - C
Question No. 12 - A
Revaluation surplus - land (P8M - P6M) 2,000,000
Revaluation surplus - building (P48M - P36M) 12,000,000
Revaluation surplus, 1/1/23 14,000,000
Realized in 2023 (P12M/15) (800,000)
Revaluation surplus, 12/31/23 13,200,000

Question No. 13 - D
Question No. 14 - C
Purchase price 35,000,000
Less fair value of net assets:
Unadjusted 15,000,000
Patent 10,000,000
Receivable 2,000,000 27,000,000
Goodwill 8,000,000

Question No. 15 - A
Question No. 16 - A
Acquisition cost 5,400,000
Estimated restoration cost 450,000
Total 5,850,000
Residual value (650,000)
Amount subject to depletion 5,200,000
Depletion - 2022 (600,000 x P2.6*) (1,560,000)
Remaining amount subject to depletion, 1/1/23 3,640,000
Divide by remaining estimated reserves, 1/1/23 (1,875,000+400,000) 2,275,000
Depletion rate for 2023 1.60
* (P5,200,000/2,000,000)
Depletion - 2023 (400,000 tons x P1.60) 640,000

Question No. 17 - D
Question No. 18 - C
Carrying amount, 12/31/22 (P1,1160,000 x 3/5) 696,000
Recoverable amount, 12/31/22 (Value-in-use) 565,000
Impairment loss - 2022 131,000

Carrying amount, 12/31/22 - after impairment 565,000

/Revised remaining life 2
Amortization - 2023 282,500

Question No. 19 - A
CA, 1/1/21 (P250,000 x 4.5/5) 225,000
RA 75,000
Impairment loss - 2021 150,000

CA, 1/1/23 - without impairment (P250,000 x 2.5/5) 125,000

CA, 1/1/23 - before reversal of impairment (P75,000 x 1/3) 25,000
Reversal of impairment loss in P/L 100,000

Question No. 20 - A
Question No. 21 - C
Purchase price 360,000
Government grant received (50,000)
Net cost of machine 310,000
Depreciation - current year [(P310,000 - P5,000)/8] (38,125)
Carrying amount, 12/31 271,875

Question No. 22 - C

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 Average accumulated expenditures 475,000
Specific borrowing (400,000)
Attributed to general borrowing 75,000
General borrowing rate 0.12
Capitalizable borrowing cost - general 9,000
Capitalizable borrowing cost - specific (P400,000 x .1) 40,000
Total 49,000

Question No. 23 - B
Currency and coins 650
Balance in checking account 2,600
Customer checks waiting to be deposited 1,200
Commercial paper, purchased on 11/2/23, mature on 1/30/24 5,000
Cash and cash equivalents 9,450

Question No. 24 - A
Balance per bank statement, 12/31 1,465,800
Outstanding checks, 12/31 (624,750)
Receipts of 12/31, deposited 1/2 95,550
Unrecorded proceeds of bank loan (195,000)
Deposit of 12/23, omitted from bank statement 53,000
Errneous bank charge 82,100
Unrecorded proceeds of note collected by bank, net (40,300)
Erroneous debit memo 100,000
Errneous bank credit (25,000)
Cash balance per books, 12/31 911,400

Question No. 25 - D
Accounts receivable, 12/31 (P750/.03) 25,000
Credit sales (125,000)
Collections 131,000
Accounts written off 180
Accounts receivable, 1/1 31,180

Question No. 26 - D
Over (Under)
Erroneous credit to gain on sale of machine (P800,000 - P640,000) 160,000
Unrecognized loss (see computation below) 70,560
Unrecognized interest income (P569,440 x 12% x 6/12) (34,166)
Net overstatement (understatement) 196,394

Computation of loss on sale of machine:

Sales price (present value of NR) (P800,000 x 0.7118) 569,440
Carrying Amount 640,000
Loss on sale (70,560)

Question No. 27 - C
Date Payment Int. (11%) Principal C.A.
7/1/22 5,600,000
7/1/23 1,805,000 616,000 1,189,000 4,411,000
7/1/24 1,805,000 485,210 1,319,790 3,091,210

Question No. 28 - A
Cash (P1.5M x .75) 1,125,000
Receivable from factor (P1.5M x .1) 150,000
Allowance for doubtful accounts 35,000
Loss on factoring 190,000
Accounts receivable 1,500,000

Question No. 29 - D

Question No. 30 - A

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 PVF at 4%,
Cash flows 20 periodsPurchase price
Principal 700,000 0.4564 319,480
Interest 35,000 13.5903 475,661
795,141

Partial amortization schedule:

Date NI (5%) EI (4%) Disc. Amort. A.C.
3/1/23 795,141
8/31/23 35,000 31,806 3,194 791,947
2/28/24 35,000 31,678 3,322 788,625

Interest income - 2023:

3/1 - 8/31 31,806
9/1 - 12/31 (P31,678 x 4/6) 21,119
52,925

Question No. 31 - B
FV of FVTPL securities, 12/31/23 155,000
Less FV of FVTPL securities, 12/31/22 100,000
Unrealized holding gain (loss) - P/L 55,000

Question No. 32 - D
FV of FVTOCI securities, 12/31/23 130,000
Less cost of FVTOCI securities 150,000
Unrealized holding gain (loss) - accumulated OCI (20,000)

Question No. 33 - A
Acquisition cost 360,000
Share of profit (P150,000 x 30%) 45,000
Dividends received (P90,000 x 30%) (27,000)
Carrying amount, 12/31/23 378,000

Held for sale (40%):

Carrying amount (P378,000 x 40%) 151,200
Fair value less costs to sell [(P390,000 x .95) x 40%] 148,200
Amount to be reported (whichever is lower) 148,200

Question No. 34 - D
Future value of annuity due of P1 for 6 periods at 8%: 7.9228
Future value of 1 for 4 periods at 10%: 1.4641
Future value of ordinary annuity of 1 for 4 periods at 10%: 4.6410

Years 1 to 6 (P800,000 x 7.9228) 6,338,240

Years 7 to 10 (P6,338,240 x 1.4641) 9,279,817

Years 7 to 10 (P800,000 x 4.6410) 3,712,800
12,992,617

Question No. 35 - D
Question No. 36 - A
Question No. 37 - B
Unadjusted accounts payable 1,100,000
Unrecorded purchases 20,000
Unrecorded purchase returns (35,000)
Adjusted accounts payable 1,085,000

Question No. 38 - C
CA of old liability 10,000,000
Less PV of new liability
Principal (P8M x .6575) 5,260,000
Interest (P8M x .21 x 2.2832) 3,835,776 9,095,776
Difference (Gain on change in ECF) 904,224

Question No. 39 - C
Issue price 3,000,000

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 Less liability component:
PV of redemption price (P3M x 1.1 x 0.6830) 2,253,900
PV of interest (P3M x 6% x 3.1699) 570,582 2,824,482
Equity component 175,518

Question No. 40 - D
Payment Int. (10%) Dec. in liab. Lease liability
1/1/22 6,330,000
1/1/22 1,000,000 - 1,000,000 5,330,000
1/1/23 1,000,000 533,000 467,000 4,863,000
1/1/24 1,000,000 486,300 513,700 4,349,300

Lease liability, 1/1/23 4,863,000

Interest on lease liability - 2023 486,300
Lease liability, 12/31/23 5,349,300

Question No. 41 - B
Question No. 42 - A
Current service cost 3,000,000
Gain on settlement (500,000)
Interest, net [(P10M - P9M) x .06] 60,000
Net amount in profit or loss 2,560,000

Question No. 43 - A
Actuarial loss on DBO 800,000
Remeasurement loss (gain) on PA [(P9M x .06) - P630,000] (90,000)
Net amount in OCI 710,000

Question No. 44 - B
Cumulative expense, year 3 {167 x 100 x [(P21 x 3/3) + (P3 x 2/2)]} 400,800
Cumulative expense, year 2 {165 x 100 x [(P21 x 2/3) +(P3 x 1/2)]} (255,750)
Expense - year 3 145,050

Question No. 45 - A
Question No. 46 - B
Income before tax and depreciation expense 2,000,000
Depreciation - 2023 for tax purposes (400,000)
Taxable profit 1,600,000
x Tax rate 0.35
Current tax expense/payable 560,000

Question No. 47 - A
Total proceeds (with ordinary shares) 7,000,000
Fair value of preference shares (20,000 x P150) (3,000,000)
Allocated to ordinary shares 4,000,000
Par value of ordinary shares (60,000 x P50) (3,000,000)
Share premium 1,000,000

Note: The redeemable preference shares are financial liabilities

Question No. 48 - D
Total equity, 12/31 448,700
Prior period error (10,000)
Gain on sale of treasury shares (9,000)
Dividends declared 60,000
Net income (75,500)
Total equity, 1/1 414,200
Share capital (300,000)
Retained earnings, 1/1 114,200

Question No. 49 - D
Total equity 95,000,000
Less Preference SHE
Liquidation value (200,000 x P115) 23,000,000

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 Dividends (P20M x .12) 2,400,000 25,400,000
Ordinary SHE 69,600,000
Outstanding ordinary shares 500,000
Book value per ordinary share 139.20

Question No. 50 - A
Profit 20,000,000
Net interest expense on bonds (P8M x .05 x .65) 260,000
Profit to OS 20,260,000
/WA outstanding OS
Actual 10,000,000
Potential (P8M/P1T x 150) 1,200,000 11,200,000
Basic EPS 1.81

Question No. 51 -D
Question No. 52 -D
Question No. 53 -B
Question No. 54 -A
Question No. 55 -B
Question No. 56 -A
Question No. 57 -A
Effect on 2023 C.O.
(1) Depreciation for 2022 - under -
(2) Litigation settlement (P25,000 x .7) (17,500)
(3) Inventory, 12/31/21 - under -
(4) Disposal of business segment (Discontinued operation) -
(17,500)

Question No. 58 - C
Question No. 59 - D
Question No. 60 - A
Profit before income tax 880,000
Adjustments for:
Depreciation on property, plant and equipment 250,000
Provision for impairment losses 150,000
Unrealized foreign exchange gains (60,000)
Fair value adjustment gain on FA at FVTPL (130,000)
Fair value adjustment loss on investment property 190,000
Share of profit of associate (220,000)
Gain on sale of FA at AC (85,000)
Loss on sale of equipment 70,000
Gain on debt extinguishment (125,000)
Gain on distribution of non-cash assets to owners (40,000)
Interest expense 150,000
Interest income (80,000)
Operating income before changes in working capital accounts 950,000
Changes in operating assets and liabilities:
Increase in accounts receivable (350,000)
Decrease in inventory 100,000
Increase in accounts payable 300,000
Net cash generated from operations 1,000,000
Interest paid (200,000)
Interest received 90,000
Income taxes paid (160,000)
Net cash provided by operating activities 730,000

Supporting computations:
Interest expense 150,000
Interest payable, beginning of the year 100,000
Interest payable, end of the year (50,000)
Interest paid 200,000

Interest income 80,000

Interest receivable, beginning of the year 30,000
Interest receivable, end of the year (20,000)
Interest received 90,000

Page 6 of 7 www.teamprtc.com.ph FAR.FinPB5.23

Question No. 61 - C
Sales - Division 1 3,000,000
Traceable operating costs (1,900,000)
Allocated indirect operating costs (P500,000 x .25) (125,000)
Operating profit - Division 1 975,000

Question No. 62 - A
Question No. 63 - B
Cash 3,500,000
Inventory (P27M x 300/270) 30,000,000
Property, plant and equipment (P9M x 300/150) 18,000,000
Total assets 51,500,000
Current liabilities (7,000,000)
Noncurrent liabilities (5,000,000)
Total equity 39,500,000
Share capital (P4M x 300/100) (12,000,000)
Retained earnings 27,500,000

Question No. 64 - B
Question No. 65 - D
Question No. 66 - B
The investment is measured at cost (P500,000+P25,000). See PFRS for SEs Section 6 par. 103(b).

Question No. 67 - B
The investment is measured at cost (P500,000+P25,000). See PFRS for SEs Section 6 par. 103(b).

Question No. 68 - D
Equity, Dec. 31 (P12.3M - P5M) 7,300,000
Equity, Jan. 1 (P9.5M - P3M) (6,500,000)
Net increase (decrease) in equity 800,000
Owner contributions:
Reissuance of treasury shares (2,000 x P8) (16,000)
Owner distributions:
Retirement of preference shares (5,000 x P11) 55,000
Acquisition of treasury shares (5,000 x P12) 60,000
Comprehensive income (net income) 899,000

Question No. 69 - B
Sales 480,000
Cost of sales (P62,400+P320,000-P64,000) (318,400)
Sales salaries expense (P40,000+P1,920) (41,920)
Advertising expense (P5,360 - P560) (4,800)
Administrative salaries expense (52,000)
Office expense (P4,000 - P1,200) (2,800)
Doubtful accounts expense [(P33,600 x .08) - P2,160] (528)
Depreciation (P67,200 x .2) (13,440)
Insurance expense (2,040)
Interest expense (2,688)
Profit before tax 41,384

Question No. 70 - D
Proceeds from issuance of shares 750,000
Net income (P82,000 - P64,000) 18,000
Cash dividends declared (3,000)
Total equity, 12/31 765,000
Total liabilities, 12/31 120,000
Total assets, 12/31 885,000

Page 7 of 7 www.teamprtc.com.ph FAR.FinPB5.23

 Advanced Financial Accounting and Reporting

1. B 11. C
2. C 12. B
3. C 13. A
4. A 14. B
5. C 15. B
6. D 16. B
7. B 17. C
8. C 18. A
9. C 19. C
10. A 20. D

21. A
BEE CEE DEE GEE TOTAL
Beg 60,00 40,000 30,000 10,000 140,000
NCA (15,000) (15,000)
Balance 45,00 40,000 30,000 10,000 125,000
Loss (47,500) (28,500) (9,500) (9,500) (95,000)
Balance ( 2,500) 11,500 20,500 500 30,000
Absorption 2,500 (1,500) (500) (500) -
Payment. - 10,000 20,000 - 30,000

22. B
Since Superman will be credited in full for amount invested, the capital balance will be 1,200,000 which is 1/3 capital
interest. Therefore, total capital of the partnership shall be computed as such:

1.2M/ 1/3 = 3,600,000

23. D
14,000 + 10,000 + 6,000 = 30,000

24. C
Cash, beg + Proceeds – all Liab – Cash Withheld = Cash for payment
4,000 + 3,000 + 4,000 – 7,000 – 2,000 = 2,000

25. C

Warle Xin Yates TOTAL

Beg 8,000 15,000 6,000 29,000
Loss (5,400) (8,100) (13,500) (27,000)
Balance 2,600 6,900 (7,500) 2,000
Abs (3,000) (4,500) 7,500 -
Balance. (400) 2,400 - 2,000
Abs 400 (400) - -
Payment - 2,000 - 2,000

Loss:
Accounts Receivable- 6,000 – 3,000 3,000
Inventory- 14,000 – 4,000 10,000
Plant Assets (Theoretical Loss) 12,000
Cash withheld 2,000
Total Loss 27,000

26. D
Since there is no given capital ratio, it is assumed to be equal to the contributions ratio, hence this is under the net
investment method. 15,000 + 200,000= 215,000
27. C 32. A
Inventory ( 250,000- 200,000) 50,000 Available Cash 300,000
Land (900,000- 800,000) 100,000 Less: Prioritized Claims:
Total revaluation 150,000 FS 150,000
PS 75,000
A: P 150,000 x 50% = P 75,000
US w/P (40,000 +5,000 +10,000) 55,000 280,000
B: P 150,000 x 30% = P 45,000
Cash Available for Unprioritized Claims 20,000
D: P 150,000 x 20% = P 30,000 Less: Unprioritized Claims
US Portion of PS Claim 25,000
28. D US w/out Priority 75,000 100,000
Unadjusted Total Capital P 2,025,000 Deficiency to Unprioritized Claims 80,000
Revaluation of Assets 150,000
Adjusted Capital before Admission 2,175,000 Recovery Rate (20,000/100,000) 20%
Divide by 4/5
Total Capital after Admission 2,718,750 33. D
Multiply by 1/5 Refer to above solution
Janice’s Investment for 1/5 Interest 543,750
34. A
PS 100,000: SP 75,000 x 100% 75,000
29. A
Adj Bal Purchased Cap 25,000 x 20% 5,000
A: P 810,000 + 75,000 = 885,000 177,000 Total 80,000
B: P 729,000 + 45,000 = 774,000 * 20% 154,800
D: P 486,000 + 30,000 = 516,000 103,200 35. C
Sales 13,125
Adj. Capital of Donna 516,000 Less: COS (11,520+ 936) * 50/80 7,785
Less: Purchased Capital 103,200 Gross Profit 5,340
Balance of Donna after Purchase 412,800 Less: OPEX (360+ 2,625) 2,985
Consignment Profit 2,355
Capital of B Purchased by J 154,800
Share in the Gain (15,000* 30%) 4,500 36. C
Cash Received by Blanche 159,300 Bal before Consignment Profit 2,316
Cons Profit 2,355
Loss= 450,000 -(2,175,000* 20%) = 15,000
Adjusted Balance/ Inv End 4,671
30. A
37. A
Net Gain (1,440,000 + 1,280,000 –
COS: Beg 38,400
2,000,000 - 220,000) 500,000
Shipments 99,840
SHE ( 2,500,000 – 1,200,000). 1,300,000
End (30,720)
Payment to SH (500,000/ 1,300,000) 38%
COS at BP 107,520
Divide by 1.2
31. B
Est Cash (166,000 + 112,000 + 104,000) 382,000
COS at Cost 89,600
Less: Prioritized Claims Multiply by 0.2
(26,000 + 76,000 + 112,000) 214,000 AFOVBI (COS) 17,920
Cash Available to Unsecured 168,000
Less: Unsecured (276,000 + 24,000) 300,000
Est Deficiency (132,000) 38. A
ERR= 168/300 56% Br: Sales 134,400
Less: COS at Cost 89,600
Partilly Secured: GP 44,800
Secured 112,000 x 100% 112,000 Less:OPEX 23,040
Usecured 24,000 x 56% 13,440
Net Income 21,760
Total 125,440

39. C
HO: Sales 384,000
Less: COS
Beg 76,800
 Purchases 320,000
Shipments (83,200) 53. B
End (62,720) 250,880 The Joint Arrangement is a Joint Venture (rights over NA)
GP 133,120 and the joint venturer will set up the investment account at
Less:OPEX 46,080 the FV of the asset contributed of 500,000
HONI 87,040
Br True Net Income 21,760
CNI 108,800 54. D
Inv, beg 500,000
40. B Share in NI (144,000 * 50%) 72,000
Sales 300,000 Share in Dividends (36,000*50%) (18,000)
COS: Inv, beg 19,000 Inv, end 554,000
Purchases 20,000
Shipments 180,000
Inv, end (40,000) 179,000 55. B
GP 121,000 RE, beg 100,000
OPEX 80,000 NI 72,000
RBNI 41,000 Dividends (18,000)
Share in NI 72,000
41. D RE, end 226,000
AFOVBI: TGAS 31,500
Inv, end (40,000*60%)/ 1.2 *.2 (4,000) 56. C
COGS 27,500 Inv in JV 500,000
Equipment 480,000
( 180,000/ 150,000= 120%) Gain on Sale 20,000

Sales 400,000 57. D

COS: Inv, beg 40,000 Cost 250,000
Purchases 210,000 NCI (250,000/ .80 x .20) 62,500
Shipments (150,000)
Total 312,500
Inv, end (50,000) 50,000
Less: BV of NA (250,000)
GP 350,000
OPEX 210,000 Excess 62,500
HONI 140,000
Land BCVR: (62,500 x 25%) 15,625
HONI 140,000 Reported By P 300,000
RBNI 41,000 Reported by S 50,000
RA 27,500 Consolidated Land 365,625
CNI 208,500
58. C
42. A Building BCVR: 62,500 x 75%) 46,875
RBNI 41,000 Reported By P 400,000
RA 27,500 Reported by S 150,000
TBNI 68,500 Consolidated Building 596,875

59. A
43. B P’s APIC prior to Bus Com 60,000
APIC recognized upon issuance 50,000
HO BRANCH Less: CTIRS 55,000
Books Books
Consolidated APIC 55,000
Unadj Balance 95,000 73,400
(a) Cash in Transit 5,000
(b) SIT (90,000-75,000) 15,000 60. B
(c) RIT (1,600) P’s RE prior to Bus Com 140,000
Adj Balance 93,400 93,400 Less: Expenses 65,000
Consolidated RE 75,000
52. B 61. A (Refer to previous solution)
Upstream adjustments
RGP on beginning inventory
(P6,125 x 25%) P 1,531
62. D
Downstream adjustments DM 950,000
DGP on ending inventory Conv Cost 4,050,000
(P10,500 x 30%) 3,150 TMC 5,000,000

COGS = P1,232,000 + P882,000 63. C

–P56,000 -P1,531 + 3150 SIP 475,000
= P2,059,619

53. D
Materials Conv Cost
CNI = P80,500 + P78,750 + P1,531 – P3,150 C&T 425,000 425,000 425,000
= P 157,631 IP,end 50,000 50,000 25,000
54. B TOTAL 475,000 475,000 450,000
Item: AR 1M * ( 0.32- 0.33) 10,000
Instmnt: AP 1M (.305-.316)= 11,000 Unit Cost:
11,000* .980296 (10,783) Mat (950,000/ 475,000) 2
Net Amount 783 CC (4,050,000/ 450,000) 9
Total Unit Cost 11
55. D
15,000/3 = 5,000 * 2 months= 10,000 C&T 425,000 * 11 4,675,000
IP,end
56. B
Mat (50,000*2) 100,000
Temporal Method:
AR CR 850,000 CC (25,000*9) 225,000 325,000
Inventories HR 575,000
Plant Assets HR 900,000 64. D
TOTAL ASSETS 2,325,000 Gross Loss= 975,000- 1M = (25,000)
CIP= 600,000 – 25,000
57. D = 575,000
All items at Current Rates: 2,650,000
65. D
58. D PB 700,000
CIP (same with %age of Comp) 575,000
Prod NRV Joint Cost APC Total Cost U.C. Contract Liability 125,000
X 31,000 21,700 5,000 26,700 33.38
66. C
A 26,000 18,200 4,200 22,200 37.00 GL at 100% (75,000)
K 27,000 18,900 4,000 21,900 54.75 GL in 2027 25,000
84,000 58,800 10,200 70,800 - GL IN 2028 (50,000)

59. B (Refer to above solution) 67. B

Transaction Price
DP 100,000
60. C Balance 50,000 x 3.17 158,500
258,500
PROD I PROD II SERV A SERVE B
Budg costs P 480,000 P 520,000 P40,000 P60,000 Franchise Revenue 258,500
Alloc of A 19,630 18,518 (40,000) 1,852 Interest revenue 158,500* .10 15,850
Alloc of B 31,827 30,025 -- (61,852) Direct Cost (27,000)
Totals P531,457 P 568,543 -- -- Indirect Cost (15,000)
 Profit for 2021 232,350

68. D
Balance of Note
158,500 – (50,000- 15,850) 124,350

Interest Revenue 124,350 x 10% 12,435

69. C

Franchise Revenue (258,500/4) 64,625

Interest revenue 158,500* .10 15,850
Direct Cost (27,000/4) (6,750)
Indirect Cost (15,000)
Profit for 2021 58,725

70. B

Franchise Revenue (258,500/4) 64,625

Interest revenue 158,500* .10 12,435
Direct Cost (27,000/4) (6,750)
Profit for 2021 70,310