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Business Law and Taxation

Final Pre-board Examination


Batch 18 (October 2009)
1. The buyer acquires a real right to the fruits of the thing sold.
a. From the time the obligation to deliver the thing arises
b. From the perfection of the contract of sale
c. From the delivery thereof
d. From payment of the price
2. A buyer may sue the seller for breach of warranty against hidden defects of things
a. Within 40 days from delivery of the thing sold
b. Within 6 months from delivery of the thing sold
c. Within 1 year from delivery of the things sold
d. Within 4 years from discovery of the fraud
3. D is indebted to C in the amount of P200,000 and delivers to C his diamond ring by way of pledge. If
D sells the same diamond ring to T, when will T acquire ownership of the same?
a. From the time the sale is perfected between D and T
b. From the time T pays the price to D
c. From the time C consents to the sale between D and T
d. From the time T obtains actual possession of the diamond ring
4. In a partnership, the partners share in the profits
a. Equally
b. According to capital contribution

c. According to the contract


d. Justly and equitably

5. This kind of agent merely makes the principal and the third person meet and when they arrive at an
agreement or contract becomes entitled to compensation.
a. Broker
c. Factor
b. Commission agent
d. Attorney at law
6. The following are advantages of no-par value share of stock. Which is the exception?
a. No-par value shares allow flexibility in price.
b. The stockholders of no-par value shares are relieved of personal liability for unpaid stock
subscription
c. It allows the issue of stocks in exchange of property.
d. No-par value shares afford a possible remedy of relief from the evil of over-capitalization
and stock watering.
7. C appointed S to sell the formers car for P200,000. S sold the car to P for P200,000 but S acted in
her own name. After delivery, P inspected the car and she found hidden defects in the car. Can P file
an action against C even when S acted in her own name?
a. No, under caveat emptor let the buyer beware.
b. Yes, because this is a contract involving property belonging to the principal.
c. No, because S acted in her own name not of the principal.
d. Yes, because the contract of sale is already perfected.
8. A bill of exchange to which no document is attached when presentment for payment or acceptance is
made.
a. Trade acceptance
c. Clean bill of exchange
b. Bank acceptance
d. Documentary bill of exchange

9. The distinction between a proxy and a voting trust is that in a voting trust:
a. The trustee had no legal title to the shares of the transferring stockholder.
b. Unless coupled with interest, is revocable at any time.
c. Is not limited to any particular meeting.
d. Stock certificate is not cancelled.
10. A and B entered into a universal partnership of all present property. The common property of the
partnership shall be
a. All the properties which belonged to each of the partners at the time of the constitution of
the partnership
b. All the properties which shall belong to each of the partners after the constitution of the
partnership
c. All the properties which belonged to each of the partners at the time of the
constitution of the partnership as well as the profits which they may acquire
therewith
d. All the properties which belonged to each of the partners at the time of the constitution of
the partnership as well as the properties which each may acquire thereafter
11. P appointed A his agent for the purpose of selling his car for P600,000 with 10% commission. A sold
the same car to T for P800,000. How much should A pay to P?
a. P600,000 only
b. P540,000 or minus already the 10% commission
c. P800,000
d. P720,000 or minus already the 10% commission
12. Which of the following instruments is negotiable?
a. Good to Jose dela Paz or order, P20,000 (Sgd. Pedro Cura)
b. I hereby authorize you to pay Jose dela Paz or order, P20,000 (Sgd. Pedro Cura)
c. I promise to pay Jose dela Paz or order P20,000 worth in sugar. (Sgd. Pedro Cura)
d. I promise to pay Jose dela Paz or order P20,000 on May 23.
13. Statement 1. Where the business of the partnership is in imminent danger of being lost, an industrial
partner who refuses to give an additional contribution agreed upon can be compelled to sell his
interests to the others.
Statement 2. A partner appointed as manager in the Articles of Partnership can be removed with or
without cause.
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
14. Stock corporations are prohibited from retaining surplus profits in excess of one hundred percent of
their paid-in capital stock in this case:
a. When justified, by definite corporate expansion projects or programs approved by the
board directors
b. When there is pension plan as agreed in the Collective Bargaining Agreement
c. When the corporations is prohibited under any loan agreement with any financial
institution or creditor, whether local or foreign, from declaring dividends without its
consent

d. When it can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation, such as providing preserves for probable
contingencies
15. The following are the rights of an unpaid seller, except:
a. A right of lien over the thing sold while he is still in possession
b. In case of insolvency on the part of the buyer, the right of stoppage in transit
c. Right to resell the things sold
d. Right to interest on the price of the sale
16. A, B and C borrowed en solidum from X, Y and Z, P900,000 payable on December 15, 2008. On
August 19, 2007, A paid X the whole amount of P900,000. If co-debtor B reimburses A on July 20,
2009, how much should he pay him?
a. Nothing, because the premature payment extinguished his liability for reimbursement
b. P300,000 only because the payment of A is unauthorized
c. P300,000 with interest from August 19, 2007 to July 20, 2009
d. P300,000 with interest from December 15, 2008 to July 20, 2009
17. The voting requirement needed in declaring cash or property dividend
a. Majority vote of the Board of Directors
b. Majority vote of the Board of Directors plus the vote of a majority of the outstanding
shares
c. Majority vote of the Board of Directors plus the vote of 2/3 of the outstanding shares
d. 2/3 votes of the directors plus a majority of the outstanding shares
18. A, B and C are partners. A contributed his services only, B P20,000 and C P10,000. The partnership
was liquidated. After payment of the partnership obligation, only P9,000 worth of assets remained.
The share of A will be
a. P3,000
c. Equal to the share of C
b. Equal to the share of B
d. Nothing
19. The following are instances of pledge created by operation of law, except:
a. Hotel keeper retains the things brought into the hotel by the guest who cannot pay his
hotel bills
b. An agent retains in pledge the thing which is the object of the agency regarding his
commission
c. A mechanic retains the car he repaired until he is paid
d. A depository retains the thing deposited until he is paid the charges due him
20. S and B agreed on the sale of a four hectare property at Macapagal Boulevard for the price of P75,000
per square meter on condition that if the price is not paid on a particular date, the sale will be
considered automatically cancelled. On the particular date agreed upon, B did not pay S, but B never
asked for a judicial cancellation nor made a notarial act of rescission. In this case
a. The sale is cancelled as per agreement.
b. S can validly refuse any subsequent offer to pay by B.
c. B can still pay S the price.
d. B cannot anymore pay the price simply because the sale is cancelled due to his failure to
pay on the stipulated date.
21. On December 15, 2006, S offered to sell to B his house and lost for P5,000,000. B requested S to
give him 60 days within which to raise the P5,000,000. On February 5, 2007, before the expiration of
the 60 day period, S informed B that he has raised the price to P7,000,000. Can B, under the
circumstances, compel S to accept P5,000,000 as payment for the house and lot?

a. No, because as between S and B, there is as yet no perfected sale.


b. Yes, because it was S who made the offer and B is just accepting the same.
c. No, because in a contract of sale S has the exclusive right to fix the price to which B can
only concur
d. Yes, because he impliedly committed himself to P5,000 in not rejecting the request of 60
days to raise the money
22. Which of these is not a special form of payment?
a. Application of payment
b. Dacion en pago

c. Cession en pago
d. Tender of payment & consignation

23. A contract as a rule must be in writing to be valid.


A taxpayer is not entitled to interest on the overpayment of tax subject of a refund because an
obligation derived from law is not presumed.
a. Both statements are true
b. Both are false
c. First is false, second is true
d. Second is false, first is true
24. In which of these cases does the law not allow the recovery of deficiency judgment?
a. In a sale of personal property on the installment basis should the buyer fail to pay
two or more installments after foreclosure of the chattel mortgage
b. In a contract of real estate mortgage
c. In a contract of antichresis
d. In a contract of chattel mortgage
25. A purchased on installment from B a house and lot. After a year of installment payment, A died. B
refuses to accept the monthly installment being tendered by his heirs contending that upon the death
of their father with whom he has a contract, the contract automatically terminated or cancelled. B is:
a. Wrong for right acquired in virtue of an obligation is transmissible
b. Wrong for the right to continue the payment is personal only to A
c. Correct for the contract is between him and A only
d. Correct because the parties did not agree on the transmissibility of the right
26. The by-laws may provide that the holders of a majority of the outstanding capital stock may elect all
members of the board of directors.
That it may also provide that no officer of the corporation shall be required to be a stockholder.
a. Both statements are true
c. First is false, second is true
b. Both are false
d. First is true, second is false
27. A subscribed to 1,000 shares of stock to X Corporation. She paid 25% of the said subscription.
During the stockholder meeting, can A vote all her subscribed shares?
a. No, because the subscription has not yet been fully paid
b. No, because As shares has become delinquent which cannot be voted.
c. Yes, as to the paid percentage of subscription
d. Yes, because unpaid shares can be voted
28. D and C agreed that D shall deliver to C ten kilos of marijuana instead of paying Ds loan amounting
to P1 million. Therefore:
a. Ds obligation is extinguished
b. D must deliver 10 kilos of marijuana

c. D must pay the 1 million.


d. D may choose between the two obligations.
29. A) Obligations between husband and wife, peoples obligation to pay taxes, obligation of the
employer to pay the salaries and benefits of their employees, and the obligation of the winner in
gambling to return his winning to the loser are obligations derived from law.
B) Death of the victim through mistake of fact mistaken to be an aswang, hitting a bystander through
recklessness, reckless digging on his own property that triggered a landslide and fall of the residential
structure of the adjacent property owner will give rise to an obligation derived from quasi-delict.
a. Only A is correct
c. Both are correct
b. Only B is correct
d. Both are wrong
30. A) Dindo insured his only house with Sunog Agad Insurance Co. Dindos house was hit by a
lightning and was totally burned. The insurance co. is not liable because the loss of the house was
due to fortuitous event.
B) The condition not to do an impossible thing shall be considered as not having been agreed upon.
a. Only A is false
c. Both are true
b. Only A is true
d. Both are false
31. The insurer refuses to pay the insurance claim by the insurer on the ground that the loss was due to
fire which is a fortuitous event is:
a. Correct for no person shall be responsible for damage or injury due to fortuitous event
b. Incorrect for the very nature of the insurer is he assumed the risk of loss
c. Incorrect for his obligation is derived from contract which is the law between the parties
d. Both B and C
32. On refusal by obligor to perform a positive personal obligation (Bonus)
a. He can be compelled for it is his obligation to do so
b. He cannot be compelled for to do so would violate his constitutional right against
involuntary servitude
c. Give rise to an action for damage in favor of the creditor or oblige
d. Both A and B
33. A) Real obligation is also known as an obligation to give
B) Delivery of money in payment of an indebtedness, delivery of the book borrowed, delivery of a
car purchased are examples of an obligation to do.
a. Only A is correct
c. Both are correct
b. Only B is correct
d. Both are wrong
34. D borrowed from C P1,000,000 to secure the payment of which the former verbally agreed to deliver
his 4 hectare agricultural land by way of antichresis and to pay 10% interest per annum. The contract
of loan and antichresis
a. Are both valid
b. Both null and void
c. The loan is valid but the antichresis is null and void
d. The contract of antichresis is valid, but the loan is null and void
35. Which of these is not an essential requisite common to both pledge and mortgage?
a. That the pledge or mortgage be constituted to secure the fulfillment of a principal
obligation

b. That the pledgor or mortgagor be the principal debtor


c. That the pledgor or mortgagor has the free disposal of the properties
d. That it is the essence of the pledge or mortgage that if the obligation is not paid the things
in which the pledge or mortgage consist may be alienated for the payment of the debt
36. In the absence of a marriage settlement, or when the regime agreed upon is void, the property
relations of the spouses who married before August 3, 1988 shall be governed by:
a. Absolute community of properties
c. Absolute separate of properties
b. Conjugal partnership of gains
d. No property relations
37. The ranch of the decedent was mortgaged to accommodate the request of his brother for a loan. The
value of the loan to the brother was not included as receivable in the gross estate of the decedent.
What would be the treatment of the unpaid mortgage on the ranch?
a. Deductible from gross estate
b. Not deductible from the gross estate
c. Deductible from the gross income of the estate
d. Deductible either from the gross estate or the gross income of the estate
38. Mr. John Samuelson, resident alien, donated a piece of jewelry to his son who got married on January
15, 2009. The piece of jewelry was mailed to his son on January 10, 2009, and was received and
accepted on January 20, 2009. When is the last day to file the donors tax return?
a. February 9, 2009
c. February 19, 2009
b. February 14, 2009
d. March 20, 2009
39. For value-added tax, which is not a requisite for the taxability of the sale of goods or property?
a. The sale must be an actual sale of goods of properties for a valuable consideration.
b. The transaction is undertaken in the course of trade or business.
c. The goods are for use or consumption in the Philippines.
d. The transaction must not be exempt under the Tax Code, special law or international
agreement.
40. Dreamboat Corporation registered under the VAT system on January 15, 2009. When would the last
day to manually file its first monthly VAT declaration?
a. February 20, 2009
c. April 25, 2009
b. March 20, 2009
d. None of the choices
41. An international air carrier doing business in the Philippines shall be subject to:
a. 3% percentage tax on gross receipts in the Philippines only
b. 2 % income tax on gross Philippine billings only
c. Both the 2 % income tax on gross Philippine billings and 3% percentage tax on
gross receipts in the Philippines
d. Neither the 2 % income tax on gross Philippine billings nor the 3% percentage tax on
gross receipts in the Philippines
42. One of the following is not a large taxpayer.
a. Taxpayer who pays value-added tax of P100,000 per quarter
b. Taxpayer whose gross sales or receipts per year is P1,000,000,000
c. Taxpayer who pays income tax of P100,000 per quarter
d. Taxpayer whose net worth is P300,000,000 at the close of each calendar or fiscal year
43. The following information are presented to you in connection with the determination of the fringe
benefits tax of the general manager of Jasmin Merchandising:
Paid by the company with official receipts in the name of the company:

a)
b)
c)
d)

Laptop computer for managers office use, P80,000


Air-conditioning unit for managers office use, P30,000
Groceries for managers family consumption, P10,000
Plumbing materials for use in the repair of managers residential house, P5,000
Paid by the manager with official receipts in the name of the company:
a) Purchase of clothes and shoes for the managers wife, P15,000
b) Samples of merchandise sold in the competitors store for marketing study, P12,000
How much is the fringe benefits tax due?
a. P14,118
b. P48,640
c. P58,824
d. P71,529
44. One of the following is deductible from the gross income even if not business related.
a. Rent expense
c. Bad debts
b. Travel expenses
d. Charitable & other contributions
45. An operator of an illegal horse-betting business, single, has the following data:
Receipts from illegal bets, P500,000
Rent of space where bets are received, gross of 5% withholding tax, P20,000
Salaries of assistants, gross of creditable withholding tax, P100,000
Bribe money to obtain protection from arrest and prosecution, P50,000
How much is the taxable income?
a. P380,000
b. P360,000
c. P330,000

d. P280,000

46. Noynoy Roxas paid Liberal Realty P600,000 for the right to lease a store space in Makati for 5 years
starting October 1, 2008. He would also pay a monthly rental of P50,000 starting October 1, 2008,
and would shoulder the annual real estate tax of P20,000 starting 2009. How much would be the total
deductions of Noynoy Roxas in 2008?
a. P670,000
b. P200,000
c. P180,000
d. P150,000
47. The taxable income before income tax of Elaine Corporation for the current year was P500,000.
During the year, the corporation received the following refund of taxes paid in previous years and
recoveries of accounts written off, all of which were credited to miscellaneous income:
Refund of percentage tax
P20,000
Refund of income tax
P50,000
Bad debt recovered (allowed as deduction)
P30,000
Bad debt recovered (disallowed as deduction)
P15,000
How much would be the income tax payable of the corporation for the current year?
a. P150,000
c. P115,550
b. P130,500
d. None of the choices
48. A fire occurred in the City of Dumaguete and by reason of which stock of plywood of a lumber
company was looted. The lumber company failed to record such loss in its books of accounts. Was
the loss deductible?
a. Yes. The loss was deductible because it was caused by fire.
b. Yes. The loss was deductible because it would correct to assume that the lumber company
reported it within 45 days after it was sustained.
c. No. The loss was not deductible because the conduct of the taxpayer is not charging
off in its books of accounts its loss proved that the alleged loss had not been suffered.
d. No. The loss was caused by carelessness.
49. One of the following individuals is not subject to income tax in the Philippines.
a. An American engineer who makes the Philippines his residence because of the nature of
his work

b. A Japanese visiting professor who occasionally teaches at one of the leading universities
in the Philippines, and stays here for an aggregate of 185 days
c. A Taiwanese singer who performs in one of the hotels in the Philippines for one (1) week,
and then leaves after he is through with his performances
d. A Filipino residing and working in America who comes to visit his relatives
50. Which of the following is taxable as a corporation?
a. General professional partnership
b. Co-ownership

c. General co-partnership
d. None of the choices

51. A resident citizen owns a real property classified as capital asset situated in USA. During the current
year, he sells the property for P5,000,000 realizing a gain of P2,000,000. What is the Philippine tax
consequence of the sale?
a. Subject to 6% capital gains tax
b. Subject to Section 24 (A)
c. Subject to either 6% capital gains tax or Section 24 (A)
d. Not subject to Philippine tax
52. The following must report their income under the cash basis except:
a. Those who keep records under the cash receipts and disbursement method
b. Those who do not keep books and records
c. Those whose books and records are inadequate to reflect the taxable income
d. Partners of a general professional partnership
53. Mr. Tony Dayag, VAT-registered real estate dealer, sold a real estate for P2,000,000 on November 29,
2008. The cost of property was P1,500,000. The terms of the sale were as follows:
Down payment, Nov. 29, 2008, P400,000, balance payable in monthly installments of P100,000
beginning on December 29, 2008 until fully paid, P1,600,000.
How much was the income to be reported in 2008?
a. P500,000
b. P200,000
c. P125,000
d. P100,000
54. Using the same data in the preceding number, how much was the output VAT in November 29, 2008?
a. P60,000
b. P50,000
c. P48,000
d. P15,000
55. An individual taxpayer is qualified to substituted filing of income tax return if he meets the following
requisites, except:
a. Pure compensation income earner
c. Withholding tax is correct
b. One employer in the Philippines
d. Minimum wage earner
56. A taxpayer receives an assessment notice on January 5, 2009. He files a motion for reconsideration
with the BIR on January 15, 2009. When is the last day for the submission of complete documents to
support his motion for reconsideration?
a. February 4, 2009
c. January 15, 2011
b. March 16, 2009
d. None of the choices
57. Boy Bonafe resides in Bacoor, Cavite while his place of work is in Sampaloc, Manila. He files his
income tax return for 2007 income on September 10, 2008 in Quezon City because the Revenue
District Officcer in the place is his college friend. The amount of tax due is P100,000. How much
will be the surcharge?
a. P50,000
b. P25,000
c. P20,000
d. None
58. Using the same data in the preceding number, how much is the interest on delinquency?
a. P8,111
b. P8,333.33
c. P8,091.33
d. P7,500

59. Which of the following national taxes is found in the Tax Code?
a. Sugar adjustment taxes
c. Documentary stamp tax
b. Taxes on narcotic drugs
d. Private motor vehicle tax
60. When a property is donated in contemplation of death, the basis of the tax shall be:
a. Fair market value at the time of donation
b. Fair market value in the hands of the donor before the time of donation
c. Fair market value at the time of death of the donor
d. Cost when the property was acquired
61. If a corporation to which the stockholder is indebted forgives the debt, the transaction has the effect of
a payment of what kind of dividend?
a. Stock dividend
c. Liquidating dividend
b. Cash dividend
d. Indirect dividend
62. C. Uberita has three wives under his tribal customs and practice. He has a total of six (6) qualified
dependent children from his three wives. He is entitled to total personal exemption of:
a. P200,000
b. P150,000
c. P50,000
d. Zero
63. Which of the following taxes has been replaced by VAT?
a. Common carriers tax on land transport of passengers
b. Franchise tax on water and gas
c. Gross receipts tax on banks and non-bank financial intermediaries
d. Caterers tax on operators of eating places
64. One of the following is not entitled to an optional standard deduction?
a. Resident citizen who is a pure compensation income earner
b. Resident alien who is pure business income earner
c. Domestic corporation
d. Resident foreign corporation
65. LCB is engaged in the sale of goods with net sales of P200,000. The actual entertainment,
amusement and recreation expenses for the taxable quarter total P2,000. For income tax purposes,
how much is the deductible entertainment, amusement and recreation expenses?
a. P2,000
b. P1,000
c. P500
d. None
66. Which of the following shall make the assessment final and executory?
a. Failure to respond to notice of informal conference within 15 days after receipt of such
notice
b. Failure to respond to pre-assessment notice within 15 days after receipt of such notice
c. Failure to file letter of protest with BIR within 30 days after receipt of assessment
notice
d. Failure to claim refund within 2 years after the date of payment
67. The minimum percentage of compromise on the basic assessed tax when financial incapacity is used
as basis because the company has not been in operation for 5 years is:
a. 40%
b. 30%
c. 20%
d. 10%
68. The ReSA Services, VAT-registered taxpayer, has the following data for the last quarter of 2008:
Cash sales, net of input tax
P3,000,000
Installment sales, net of input tax (collections)
P1,200,000
Deferred input tax, third quarter 2008
P 22,000

Purchases, total invoice value


P3,920,000
Monthly VAT payments (October and November 2008)
P 20,000
The tax payable on or before January 25, 2009 is:
a. P13,000
c. P42,000
b. P28,000
d. Not given
69. George Refund is a keeper of garage with annual gross receipts of more than P1,500,000. What
business tax is due on his receipts as keeper of garage?
a. Brokers tax
c. Common carriers tax
b. Value-added tax
d. Garage sales tax
70. Which of the following may not raise money for the government?
a. Power of taxation
b. Police power
c. Power of eminent domain
d. Privatization of governments capital assets