DRAFT1Level 3

Level 3 MCQs
Taxation
DE LA SALLE UNIVERSITY
Accountancy Department
Tax Review (INTAXTN)
3rd Term 2019 - 2020
(Final Integrating Examination)
Instruction: Choose the best answer among the given choices. University policies on
academic honesty as stated and inferred in the student handbook are strictly enforced
1. Which of the following fringe benefits is subject to fringe benefit tax?

a) De minimis fringe benefits given to rank and file employees
b) De minimis fringe benefits given to managerial/supervisory employees
c) Fringe benefits in excess of de minimis benefits given to rank and file
employees
d) Fringe benefits in excess of de minimis benefits given to
managerial/supervisory employees
2. Which of the following sale of shares of stocks is subject to capital gains tax?
a) Sale by dealer of securities of shares of stocks of resident foreign corporation at
a gain
b) Sale by nondealer of securities of unquoted shares of stocks of domestic
corporation at a gain
c) Sale by nondealer of securities of quoted shares of stocks of domestic
corporation thru the facilities of Philippine Stock Exchange at a gain
d) Sale by dealer of securities of quoted shares of stocks of domestic corporation
directly to the buyer and not thru the facilities of Philippine Stock Exchange at a
gain
3. In which type of sale by a non-VAT registered taxpayer may he claim tax credit for
the applicable input VAT on purchases?
a) Sale subject to 12% value added tax
b) Sale subject to 0% value added tax
c) Either a or b
d) Neither a nor b
4. Which of the following services is exempted from value added tax?
a) Rendition of review services by a Bar Review Center
b) Rendition of review services by a CPA Review Center
c) Either a or b
d) Neither a nor b
5. Which of the following types of partnership is considered a taxable corporation for
purposes of income tax?
a) General professional partnership
b) Commercial or business partnership
c) Either a or b
d) Neither a nor b
6. What is the tax treatment on the share in net income of a lawyer partner in a law
firm?
a) It is subject to final withholding tax.
b) It is subject to creditable withholding tax.
c) It is subject to capital gains tax.
d) It is subject to value added tax.
7. In which type of sales transaction by a VAT-registered taxpayer may it claim tax

refund for the excess of input VAT over output VAT?
a) Sale subject to 12% value added tax
b) Sale subject to 0% value added tax
c) Either a or b
d) Neither a nor b
8. Which type of importation by a non-VAT registered taxpayer is subject to import
VAT?
a) Importation in the ordinary course of business
b) Importation for personal use or consumption
c) Both a and b
d) Neither a nor b
9. Which of the following is subject to value added tax?
a) Wage of a nurse in a hospital
b) Salary of a law professor in law school
c) Professional fee of a CPA Reviewer in a center
d) All of the above
10. Which sale of a VAT-registered taxpayer is subject to output VAT?

a) Sale of roasted chicken
b) Sale of salted egg
c) Sale of Del Monte pineapple tidbits
d) All of the above
11. Which of the following is subject to final withholding tax?

a) Distribution of income of the estate to the heirs
b) Distribution of income of the trust to the beneficiaries
c) Both a and b
d) Neither a nor b
12. Which of the following is a generally a taxable entity for purposes of income tax?
a) Co-ownership
b) Estate under extrajudicial settlement
c) Revocable trust
d) None of the above
13. Who among the following partners are required to file annual income tax return in
relation to their share in net income of their partnership?
a) Civil engineer who is a partner in a hardware partnership
b) CPA who is a partner in a laundry partnership
c) Lawyer who is a partner in a security agency partnership
14. Which partnership is subject to improperly accumulated earnings tax?
c) Either a or b
d) Neither a nor b
15. Which share in net income of commercial or business partnership is subject to

creditable withholding tax?
a) The share in net income actually distributed to the partners
b) The share in net income constructively distributed to the partners
c) Either a or b
d) Neither a nor b
16. Atty. Juan De La Cruz sold his 2 nd rest house with book value of P1,000,000 at a
selling price of P1,500,000. The fair value of the said property is P1,800,000 while
its zonal valuation is P2,000,000. What is the capital gains tax on the said
transaction?
a) P120,000
b) P60,000
c) P30,000
d) P48,000
17. On July 1, 2020, Reign Cruz, an employed nurse of La Salle Health Institute,
acquired shares of stocks of DMCI, a close corporation, at a cost of P100,000. The
said investment has a fair value of P300,000 on December 31, 2020. On February
1, 2021, Reign Cruz sold the said investment for P600,000. What is the capital
gains tax on the said transaction?
a) P45,000
b) P30,000
c) P75,000
d) P90,000
18. On 2018, Mr. Supervisor T. Manager, a middle manager employee, received from
ABC Co. fringe benefits amounting to P130,000 in excess of the de minimis fringe
benefit provided by law. What is the fringe benefit tax?
a) P45,500
b) P70,000
c) P41,600
d) P61,176
19. ABC Co. acquired a printer from its VAT-registered supplier at a regular selling price
of P56,000. Afterwards, ABC Co., which is also a VAT-registered seller of goods,
sold a printer to DOH with a regular selling price of P112,000. What is the standard
input on the sale of printer to DOH?
a) P5,000
b) P6,000
c) P7,000
d) P12,000
20. Using the same data in number 19, what is the final withholding VAT on the said
sale of printer?
a) P5,000
b) P6,000
c) P7,000
d) P12,000
21. ABC Co., a VAT-registered Taxpayer, is a manufacturer of lucky me instant
noodles. For the year ended December 31, 2020, ABC Co. presented the following
data:
Purchases of plastic for packaging of instant noodle with regular price of
P1,120,000
Purchases from nonVAT indigent farmers of wheat at a price of 224,000
What is the creditable INPUT VAT for the year ended Decemner 31, 2020?
a) P120,000
b) P144,000
c) P128,960
d) P124,480
22. ABC Co., a VAT-registered taxpayer, reported the following sales for the year
ended December 31, 2020:
Domestic sales at regular selling price of P560,000
Export sales at a price of 200,000
Domestic sales to Asian Development Bank at a price 100,000
Sales to DPWH at a regular selling price of 224,000
What is the output VAT to be reported by ABC Co. for the year ended December
31, 2020 in the VAT returns?
a) P60,000
b) P24,000
c) P84,000
d) 120,000
23. ACCRA Law Firm reported a net income of P5,000,000. The law firm has five
partners. What is the income tax to be paid and reported by the Law Firm in its
Annual Information Return?
a) P1,500,000
b) P500,000
c) P750,000
d) None
24. What is the tax mechanism available to the non-VAT registered taxpayer for the
input VAT shifted to them by their VAT-registered suppliers?
a) Tax credit
b) Allowable deductions from gross income
c) Tax shifting
25. ABC Co., a VAT-registered seller of goods, sold an equipment at a regular price of
P100,000. How much is the output VAT on this sale?
a) P10,714
b) P12,000
c) P3,000
d) P11,232
26. ABC Co., a VAT-registered seller of essential goods, sold a food to a senior citizen
with a regular price of P112,000. How much is the ouput VAT on this sale?
a) P12,000
b) P6,000
c) P14,400
d) None
27. Using the same data in number 26, how much shall the senior citizen pay ABC Co.?
a) P112,000
b) P100,000
c) P80,000
d) None
28. Which of the following is not a characteristic of value added tax?

a) It is an excise tax.
b) It is a national tax.
c) It is a proportional tax.
d) It is a direct tax.
29. Under the TRAIN Law, what is the quantitative threshold in order for non-VAT
registered seller of goods or services to be subjected to value added tax?
a) Gross sales or receipts exceeding P3,000,000 during the year or in
any 12-month period
b) Gross sales or receipts exceeding P1,919,500 during the year or in any
12-month period
c) Gross sales or receipts amounting to at least P3,000,000 during the year
or in any 12-month period
d) Gross sales or receipts amounting to at least P1,919,500 during the year
or in any 12-month period
30. In which of the following transactions is a non-VAT registered taxpayer-seller not

allowed to claim creditable input VAT?
a) Sales of goods subject to 12%-VAT
b) Sales of goods subject to 0%-VAT
c) Sales of goods exempted from VAT
d) All of the above
31. Which of the following sales transactions by a VAT registered taxpayer-seller is
subject to 12%-VAT?
a) Sale of goods in a foreign country and paid for in acceptable foreign currency
b) Sale of goods to Asian Development Bank or International Rice Research
Institute
c) Sale of goods to cooperative registered with Cooperative Development
Authority
d) Sale of goods to diplomatic missions and other agencies or instrumentalities
granted tax immunities
32. Which of the following fees is subject to value-added tax?

a) Salaries of professor teaching in College of Law
b) Professional fee of CPA reviewer in a Review Center
c) Wages of rank and file employee in government agency
d) Fee paid to agricultural contract growers and milling for others of palay
into rice, corn into grits, and sugar cane into raw sugar
33. Which of the following transactions is not a transaction deemed sale and therefore it
will not be subject to VAT?
a) Distribution of property dividends to stockholders in the form of inventories
b) Dacion en pago to creditors in the form of investment property
c) Consumption by the sole proprietor of existing goods of the business
d) Transfer of assets of corporations to another corporation due to
merger or consolidation
34. Which of the following products will not allow the manufacturer to claim the
presumptive input VAT?
a) Cooking oil
b) Cup noodles
c) Refined sugar
d) Sardines
35. Under NIRC of 1997 before the passage of TRAIN Law, when is the deadline for the
filing of the monthly value added tax return for the month of June?
a) July 20
b) July 25
c) July 15
36. What is the tax based for computation of output VAT on rendition of services?
a) Gross receipts
b) Gross service revenue
c) Gross sales
d) Landed value
37. Which of the following sales of real property is subject to VAT?
a) Sale of land by a college professor
b) Sale of real properties for low-cost housing and socialized housing as defined
by R.A. 7279
c) Sale of commercial lot valued at P1,500,000 and below
d) Sale of residential house and lot valued at P2,500,000 and below
38. Which of the following lease shall be subject to VAT?

a) Lease with monthly rental exceeding P15,000 but the annual aggregate of
rentals does not exceed P3,000,000
b) Lease with monthly rental not exceeding P15,000 but the annual aggregate of
rentals exceeds P3,000,000
c) Lease with monthly rental exceeding P15,000 and the annual aggregate of
rentals exceeds P3,000,000
d) Lease with monthly rental not exceeding P15,000 and the annual aggregate of
rentals does not exceed P3,000,000
39. Which of the following sale of medicine is subject to VAT?

a) Sale of drugs and medicines prescribed for diabetes
b) Sale of drugs and medicines prescribed for flu
c) Sale of drugs and medicines for high cholesterol
d) Sale of drugs and medicines for hypertension
40. How many days must lapse from the date of consignment to consignee in order for
the consigned goods to be considered transaction deemed sale to the consignor?
a) If actual sale to final consumer is not made within 30 days following the date
such goods were consigned.
b) If actual sale to final consumer is not made within 40 days following the date
c) If actual sale to final consumer is not made within 50 days following the date
d) If actual sale to final consumer is not made within 60 days following the
date such goods were consigned.
41. If a person who is a non VAT-registered issues an invoice or receipt showing his
TIN, followed by the word “VAT”, what is the extent of his tax liability to the said
transaction?
I. Other applicable percentage taxes
II. Output VAT due on the transaction without the benefit of input tax credit
III. 50% surcharge
a) I and III only
b) I and II only
c) II and III only
d) I, II and III
42. In which of the following creditable input VAT is payment of the input VAT not
necessary for the crediting of input VAT?
a) Transitional input VAT
b) Presumptive input VAT
c) Either A or B
d) Neither A nor B
43. Which of the following persons is not liable to pay Output VAT?
a) Those who are VAT-registered taxpayers.
b) Importers of goods not in the ordinary course of business.
c) Franchise grantees of radio/and or TV broadcasting whose gross annual
receipts do not exceed P10,000,000
d) Those engaged in the selling or leasing of goods, property or services whose
gross sales or gross receipts during the year or in any 12-month period exceeds
P3,000,000
44. Sale of which of the following items is subject to 12% Output VAT?
a) Sale of roasted chicken
b) Sale of corn grits
c) Sale of bagasse
d) Sale of salted egg
45. Importation of which of the following items is subject to 12% Output VAT?
a) Importation of fertilizers
b) Importation of feeds for aquarium fish
c) Importation of seeds, seedlings and fingerlings
d) Importation of poultry feeds
46. Which of the following rendition of services is subject to 12% Output VAT?
a) Tuition fee in University of the Philippines
b) Tuition fee in University of Santo Tomas
c) Tuition fee in Far Eastern University
47. Which of the following rendition of services is subject to 12% Output VAT?
a) Laboratory services made by medical clinic to patients
b) Dental services by Dental clinic to patients
c) Check-up services by Pediatrician to patients
d) Accommodation services by hospital to patients
48. Which of the following shall be considered transactions deemed sale to be

subjected to 12% Output VAT?
a) Change in the control of a corporation
b) Change in the trade or corporate name of a business
c) Either A or B
d) Neither A nor B
49. Which importation by an OFW is subject to 12% VAT?
a) Importation of professional instruments and implements
b) Importation of vehicle
c) Importation of tools of trade, occupation or employment
d) Importation of wearing apparel
50. Which of the following sale is subject to 12% VAT?

a) Sale, importation, printing, or publication of books and any newspaper,
magazine, review, or bulletin which appears at regular intervals with fixed prices
for subscription and sale, and which is devoted principally to the publication of
paid advertisements.
b) Sale of books, newspapers, magazines in electronic format.
c) Either A or B
d) Neither A nor B
51. Which of the following is subject to VAT?

a) Export sales by persons who are not VAT-registered
b) Export sales by VAT-registered persons
c) Either A or B
d) Neither A nor B
52. Which rendition of services is not subject to VAT?

a) Transportation services by domestic common carries by air relative to cargoes
from one place to in the Philippines to another place in the Philippines
b) Transportation services by domestic common carries by sea relative to
passengers from one place to in the Philippines to another place in the
Philippines
c) Transportation services by domestic common carries by land relative to cargoes
from one place to in the Philippines to another place in the Philippines
53. Which of the following sales of electricity is subject to VAT?

a) Sale of power or fuel generated thru renewable sources of energy
b) Sale of electricity by MERALCO
c) Both A and B
d) Neither A nor B
54. Which of the following is subject to VAT?

a) Insurance commissions in a non-life insurance policy
b) Insurance commissions in a life insurance policy
c) Both A and B
d) Neither A nor B
55. Which premium is not subject to VAT?
a) Premium collected by pre-need companies
b) Premium collected by HMOs
c) Premium collected by insurance companies for life insurance policy
56. Where the estate is under extrajudicial settlement, to whom shall the income of the
estate be taxable?
a) Heirs
b) Administrator
c) Executor
d) Estate
57. How shall the taxable income of the estate under judicial settlement and not
organized as One Person Corporation be subjected to income tax?
a) In the same case of a taxable corporation
b) In the same case of a self-employed individual
c) In the same case of a pure-compensation income earner
d) In the same case of a general professional partnership
58. Which of the following is a special deduction from the gross income of an estate
under judicial settlement?
a) An allowance paid to an heir out of the corpus of the estate.
b) An amount of income of the estate for the taxable year which is
properly distributed during such year to any heir.
c) Both A and B
d) Neither A nor B
59. To whose taxable income shall a portion of income of estate be included if such
portion will vest for benefit of the grantor?
a) Taxable income of the trust
b) Taxable income of the trustee
c) Taxable income of the trustor
d) Taxable income of the beneficiary
60. Which of the following income of the trust during the year is taxable to the trustee?
a) The income of a trust for the taxable year which is distributed to the
beneficiaries during the year.
b) The portion of the income of the trust which may be applied to the
payment of premiums upon policies of insurance on the life of the grantor.
c) The portion of the income of the trust which may be revoked by the
grantor.
d) The income of a trust for accumulation of income, whether for an
unascertained person or persons with contingent interest.
61. Which of the following is a special deduction from current year taxable income of
the trust to be filed by the trustee?
a) The amount of the income of the trust for the taxable year which is to be
distributed currently to the beneficiaries.
b) The amount of income collected by a guardian of an infant which is to be
held or distributed as the court may direct.
c) The amount of the income of the trust for the taxable year which is
properly paid or credited to any beneficiary.
d) Any of the above.
62. The portion of income of estate or trust distributable to heir or beneficiary shall be
subjected to what type of tax to the executor or trustee?
a) Final tax of 15% to be withheld by the executor or trustee
b) Creditable withholding tax of 15% to be withheld by the executor or trustee
c) Final tax of 10% to be withheld by the executor or trustee
d) Creditable withholding tax of 10% to be withheld by the executor or
trustee
63. Which of the following partnerships is a taxable corporation in so far as the income
tax is concern?
c) Both A and B
d) Neither A nor B
64. Which of the following partnerships is required to file annual return to BIR
concerning its income?
c) Both A and B
d) Neither A nor B
65. The payments by their clients to which type of partnership are exempted from
creditable withholding tax?
c) Both A and B
d) Neither A nor B
66. Who shall pay the income tax on the taxable income of general professional
partnership?
b) Clients of general professional partnership
c) Partners of general professional partnership in their separate income
tax returns
67. The share of a partner in the income of a general professional partnership
amounting to P720,000 shall subjected to what type of tax to the general
professional partnership?
a) Final tax of 15% to be withheld by the GPP
b) Creditable withholding tax of 15% to be withheld by the GPP
c) Final tax of 10% to be withheld by the GPP
d) Creditable withholding tax of 10% to be withheld by the GPP
68. The share of a partner in the income of a commercial partnership exceeding

P720,000 shall subjected to what type of tax to the commercial partnership?
a) Final tax of 15% to be withheld by the commercial partnership
b) Creditable withholding tax of 15% to be withheld by the commercial
partnership
c) Final tax of 10% to be withheld by the commercial partnership
d) Creditable withholding tax of 10% to be withheld by the commercial
partnership
69. Which co-ownership is not a taxable entity in so far as income tax is concern?
a) Co-ownership whose activities of the co-owners are usually limited
to the preservation of the co-ownership property and the collection
of the income therefrom.
b) Co-ownership that is formed or established voluntarily, or upon agreement
of the parties, for the operation of a partnership business.
c) Co-ownership whose income is invested by the co-owners in business or
other income-producing activities.
d) None of the above.
70. As a general rule, to whom shall the income of a co-ownership be taxed?

a) To the co-ownership
b) To the co-owners in their separate income tax return
c) To the partners
d) To the stockholders
71. Which distributable income of a general professional partnership to its partners is

subject to final tax?
a) The share in net income actually distributed to the partners.
b) The share in net income credited to the capital account of the partners.
c) Both A and B.
d) Neither A nor B.
72. A lawyer, a civil engineer and a CPA established a partnership for the rendition of
consultancy services. How shall the income of the partnership be taxed?
a) It will be taxed like a taxable corporation.
b) It will be taxed like a self-employed individual.
c) It will be taxed like a pure-compensation income earner.
d) It will be exempted from payment of income tax.
73. Which of the following sales is subject to presumed capital gain tax?
a) Sale of condominium unit classified as inventory by a real estate company
b) Sale of law office by a law firm
c) Sale of house and lot by a CPA
d) Sale of industrial land by a manufacturing company
74. Which type of trust is considered an income taxable entity?

a) Revocable trust
b) Irrevocable trust
c) Both A and B
d) Neither A nor B
75. What is the tax rate of capital gains tax on sale of shares of stocks?
a) 15% on capital gain
b) 6/10 of 1% on selling price
c) 6% on capital gain
d) 5% on selling price
Level 3
RFBT
I. Law on Obligation
1. In which of the following types of obligation will delay not exist?

A. Negative obligation
B. Personal obligation
C. Real obligation
D. Positive obligation
2. In which of the following negligence is the defense of exercise of diligence

of a good father of a family in the selection of employee be a tenable
defense on the part of the employer?
A. Culpa criminal
B. Culpa contractual
C. Culpa aquiliana
D. Culpa delicta
3. A, B and C wrote a promissory note which states “I promise to pay

P12,000 to D, E, F and G.” G indorsed back the promissory note to A.
How much obligation is extinguished by confusion or merger?
A. P4,000
B. P3,000
C. P1,000
D. P12,000
4. In what type of delay is consignation the proper remedy on the part of
injured party?
A. Mora solvendi
B. Mora obligori
C. Mora directa
D. Mora accipiendi
5. It refers to the remedy available to unpaid creditor to ask for the

cancellation of contract entered by the judgment debtor to defraud the
creditor.
A. Accion directa
B. Accion pauliana
C. Accion subrogatoria
D. Accion publiciana
6. In which of the following sources of civil obligation is meeting of minds

between the plaintiff and defendant not necessary?
A. Quasi-delict
B. Quasi-contract
C. Either A or B
D. Neither A nor B
7. What is the quantum of evidence necessary to recover civil damages for

action based on a crime?
A. Preponderance of evidence
B. Substantial evidence
C. Clear and convincing evidence
D. Proof beyond reasonable doubt evidence
8. D has the obligation to deliver a specific laptop to C but the former may
render a specific cellphone as substitive. Who has the right of choice in
this obligation?
A. Generally C unless granted to D
B. Generally D unless granted to C
C. Always C
D. Always D
9. What is the degree of diligence to be observed by the common carrier in

the transportation of passengers?
A. Diligence of a good father of a family
B. Diligence agreed upon by the contracting parties even less that
extraordinary diligence as long as the minimum is ordinary
diligence
C. Extraordinary diligence
D. Diligence of a reasonable prudent person
10. Who shall be entitled to the improvement by nature of the
determinate thing during the pendency of suspensive condition or
suspensive period in an obligation to deliver a determinate thing?
A. Debtor
B. Creditor
C. Both A and B
D. Neither A nor B
11. A bus of JAM Liner Inc., while being driven by its employee bus
driver, met an accident with a private automobile owned and driven by
Oscar. Pedro, a passenger of the bus, and Tomas, a pedestrian, were
injured. What is the source of obligation between Tomas and JAM Liner
Inc.?
A. Law
B. Contract
C. Quasi-delict
D. Quasi-contract
12. A, B and C are liable to D in the amount of P60,000. C voluntarily

paid P60,000 to D. Afterwards, B becomes insolvent. How much may C
validly ask for reimbursement from A?
A. P60,000
B. P30,000
C. P20,000
D. None
13. It refers to the promise or particular conduct to be performed in

the execution of an obligation.
A. Obligee
B. Obligor
C. Prestation
D. Vinculum
14. What is the source of an obligation when a stranger gives support

to a child of another person without the knowledge of the person obliged
to give support?
A. Negotiorum gestio
B. Solutio indebit
C. Quasi-delict
D. Delict
15. Which of the following is not a civil liability arising from delict?
A. Restitution
B. Condonation
C. Reparation
D. Indemnification
16. What is the remedy available to the creditor when the debtor fails
or refuses to perform his obligation to deliver a determinate thing?
A. He may ask the obligation to be complied with by a third person at
the expense of the debtor with damages.
B. He may file an action for exact fulfillment plus damages.
C. He may file an action for annulment of obligation.
D. He may file an action for declaration of nullity of obligation.
17. When is demand necessary for debtor’s delay to exist?

A. When the law expressly so declares that demand is waived.
B. When the obligation is a unilateral one.
C. When it appears that the designation of the time was controlling
motive.
D. When the obligor has rendered it beyond his power to perform.
18. It refers to illicit act which impairs the strict and faithful fulfilment
of the obligation.
A. Dolo
B. Culpa
C. Contravention of tenor
D. Mora
19. It refers to a type of damages awarded by the court by way of

correction for the public good.
A. Moral damages
B. Exemplary damages
C. Nominal damages
D. Temperate damages
20. Which of the following obligations is immediately demandable?

A. Obligation in diem
B. Obligation ex die
C. Obligation with a suspensive condition
D. Obligation payable when debtor’s means permits him to do so
21. In which of the following cases, will the debtor lose the benefit of
the period?
A. When the debtor attempts to abscond
B. When through a fortuitous event the guaranties or securities were
impaired
C. When after the obligation has been contracted, the debtor becomes
solvent.
D. Any of the above.
22. Which of the following statements concerning is correct?

A. Solidarity implies indivisibility.
B. Indivisibility implies solidarity.
C. The solidary creditor can assign his interest in solidary receivable
even without the consent of his co-solidary creditors.
D. Solidary obligation may exist although the creditors and the
debtors may not be bound in the same manner and by the
same period and conditions.
23. In case both parties in a reciprocal obligation have committed a

breach and it cannot be determined which of the parties first violated the
reciprocal obligation, which is correct?
A. The obligation shall be deemed extinguished, and each party
shall bear his own damages.
B. The obligation shall remain to exist and the first infractor’s liability
shall be equitably tempered by courts.
C. The court shall moto proprio decree the rescission of the
obligation.
D. The court shall declare the nullity of the obligation.
24. Which of the following obligations in not enforceable by a court

action?
A. Solutio indebiti
B. Natural obligation
C. Negotiorum gestion
D. Culpa aquiliana
25. Which of the following is not a requisite of quasi-delict?
A. There is pre-existing relation between the plaintiff and
defendant.
B. There exists a wrongful act or omission imputable o the defendant
by reason of his fault or negligence.
C. There exists a damage or injury which must be proved by the
person claiming recovery.
D. There must be a direct causal connection or a relation of cause
and effect between the fault or negligence and the damage or
injury, or that the fault or negligence be the cause of the damage
or injury.
26. They refer to fruits produced by lands of any kind through

cultivation.
A. Natural fruits
B. Industrial fruits
C. Civil fruits
D. Commercial fruits
27. Advanced waiver of an action for which of the following is valid?

A. Bad faith
B. Fraud
C. Simple negligence
D. Gross fault
28. They refer to those which destined for the embellishment, use or
their preservation of another thing or more importance, have for their
object the completion of the latter for which they are indispensable or
convenient.
A. Accessions
B. Accessories
C. Alternatives
D. Accomplices
29. It refers to a right of a person to demand of another, as a definite

passive subject, the fulfillment of a prestation to give, to do or not to do.
A. Personal right
B. Real right
C. Equitable right
D. Legal right
30. Which of the following obligations is valid?
A. Obligation subject to a suspensive condition purely potestative
upon creditor.
B. Obligation subject to a suspensive condition that is contrary to
good customs or public policy.
C. Obligation subject to an impossible suspensive condition.
D. None of the above.
31. What is the prescriptive period for filing a civil action based on
negotiorum gestio?
A. 10 years
B. 6 years
C. 5 years
D. 4 years
32. Which of the following modes of extinguishment of obligation is

essentially gratuitous and requires acceptance by the obligor?
A. Remission
B. Merger
C. Compensation
D. Novation
33. It is a type of novation which refers to the transfer of all the rights
of the creditor to a third person, who substitute him in all his rights.
A. Expromission
B. Delegacion
C. Subrogation
D. Consignation
34. A is indebted in the amount of P10,000 to B. A failed to pay his

obligation on its maturity date. Due to financial difficulty, A transferred
his specific laptop with cost of P9,000 and accumulated depreciation of
P2,000 to B which the latter accepted as payment for the loan. The fair
value of the said laptop at the date of transfer is P8,000. How much
obligation is extinguished by the transfer of said laptop?
A. P10,000
B. P9,000
C. P8,000
D. P7,000
35. Who has the right of choice in application of payment?

A. Debtor
B. Creditor
C. Both debtor and creditor
D. Neither debtor nor creditor
36. On March 15, 2020, D obliged himself to deliver a 2020 Ford
Explorer limited edition to C to be delivered on April 22, 2020. D lives in
Manila City while C lives in Quezon City. On March 15, 2020 a 2020
Ford Explorer limited edition is located in Pasay City while on April 22,
2020 another 2020 Fore Explorer limited edition is located in Caloocan
City. Where shall the car be delivered?
A. Quezon City
B. Manila City
C. Pasay City
D. Caloocan City
37. A, B and C are liable in the amount of P6,000 to D and E, solidary

creditors as evidenced by a promissory note. E indorsed back the said
promissory note to A. How much obligation is extinguished?
A. P1,000
B. P2,000
C. P3,000
D. P6,000
38. D borrowed P3,000 from C as evidenced by a promissory note. To

secure the loan, D pledged and delivered his specific watch to C. At
maturity date of the note, C voluntarily returned the said watch to D.
Which contract is extinguished?
A. Contract of loan
B. Contract of pledge
C. Both A and B
D. Neither A nor B
39. In which of the following cases is tender of payment mandatory

prior to valid consignation?
A. When the title of the obligation has been lost
B. When the creditor is incapacitated to receive payment at the time it
is due
C. When, with just cause, the creditor refused to give a receipt
D. When two or more persons claim the same right to collect
40. Which of the following contract may become the subject matter of
legal compensation?
A. Contract of mutuum
B. Contract of commodatum
C. Contract of depositum
D. None of the above
41. Which of the following is considered legal tender?
A. Postal money order
B. Manager’s check
C. Bank draft
42. D made a bank deposit under a savings account to BDO in the

amount of P100,000. D also applied for a credit card with said Bank. D
purchased an item from SM using the said BDO credit card resulting to
an obligation of P50,000 with maturity date on June 30, 2020. What
mode of extinguishment of obligation is present upon the approval of
June 30, 2020?
A. Legal compensation
B. Conventional compensation
C. Facultative compensation
D. Judicial compensation
43. Which of the following is not considered a novation?

A. Shortening the term of the loan
B. Extension of the term of the loan
C. Both A and B
D. Neither A nor B
44. When is payment of the obligation by the debtor to a third person

considered valid?
A. When in bad faith, the debtor pays to one in possession of the
credit.
B. When, with notice of the assignment of the credit, the debtor pays
to the original creditor.
C. When the payment to a third person redounded to the benefit
of the creditor.
D. Any of the above
45. When will check, promissory note, bill of exchange or other

mercantile document produce the effect of payment?
A. When they have been encashed by the creditor or holder.
B. When through the fault of the maker or issuer they are impaired.
C. When their amount has already been credited to the account of the
maker or issuer.
46. What law shall govern dacion en pago?

A. Law on obligation
B. Law on sales
C. Law on contract
D. FRIA of 2010
47. Which of the following debts may become the subject matter of
legal compensation?
A. Void obligation
B. Unenforceable obligation
C. Voidable obligation
48. It refers to illicit act which impairs the strict and faithful fulfilment
of the obligation.
A. Dolo
B. Culpa
C. Contravention of tenor
D. Mora
49. When is payment made by the debtor to an incapacitated creditor

valid?
A. When it is beneficial to such creditor
B. When the creditor kept the thing
C. Either A or B
D. Neither A nor B
50. This equitable doctrine is based on the principle that a person

shall be precluded from denying an admission or representation against
the person who has relied on such admission or representation
Obligation in diem
A. Laches
B. Estoppel
C. Prescription
D. Pari delicto
51. D is indebted in the amount of P10,000 to C. T, D and C agreed

that T will pay P7,000 of D’s obligation to C. After payment by T of
P7,000 to C, D’s remaining cash amounted to P4,000 only. How much
out of D’s P4,000 cash be applied to C’s remaining claim against D?
A. P1,200
B. P3,000
C. P4,000
D. P2,100
52. D is indebted in the amount of P4,000 to C guaranteed by G. At

the maturity date of the loan, C indorsed the promissory note evidencing
the loan to G. Which contract is extinguished?
A. Contract of loan
B. Contract of guaranty
C. Both A and B
D. Neither A nor B
53. Which mode of extinguishment of obligation is onerous in nature?
A. Compensation
B. Merger
C. Both A and B
D. Neither A nor B
54. Where shall the payment of an obligation be made?

A. On the place designated in the obligation
B. On the domicile of the debtor
C. On the domicile of the creditor
D. On the place where the thing is located at the time of constitution
of obligation
55. In observance of right to procedural due process of the creditor,

how many notice/notices must be given by debtor to creditor in case of
consignation?
A. At least one notice
B. At least two notices
C. At least three notices
D. At least four notices
56. It is a compensation which can be claimed by one of the parties

who, however, has the right to object to it, such as when one of the
obligations has a period for the benefit of one party alone and who
renounces that period so as to make the obligations due.
A. Legal compensation
B. Conventional compensation
C. Facultative compensation
D. Judicial compensation
57. In case of novation of a contract of loan, which provision in the

original contract of loan will be extinguished?
A. Accessory contract of mortgage
B. Stipulation in favor of third person
C. Suspensive or resolutory condition
58. It is one of the two types of novation involving the change of

original debtor wherein the initiative does not emanate from the original
debtor and may be made even without his knowledge since it consists in
a third person assuming the obligation and it logically requires the
consent of third person and the creditor
A. Expromission
B. Delegacion
C. Subrogation
D. Consignation
59. What is the prescriptive period to file a civil action based on culpa
aquiliana?
A. 10 years
B. 6 years
C. 5 years
D. 4 years
60. Which of the following statements about payment of obligation is

incorrect?
A. Payment means only delivery of money but not performance,
in any other manner, of an obligation.
B. The payment of debts in money shall be made in the currency
stipulated even if it foreign currency.
C. The debtor of a thing cannot compel the creditor to receive a
different one, although the latter may be of the same value as, or
more valuable than that which is due.
D. In obligations to do or not to do, an act or forbearance cannot be
substituted by another act or forbearance against the obligee’s or
creditor’s will.
II. Law on Contract
1. Which of the following is a solemn contract?

A. Contract of sale of land
B. Contract of guaranty
C. Contract of antichresis
D. Contract of real estate mortgage
2. Which of the following is an accidental element in a contract?

A. Agreement to pay interest in a contract of loan
B. Price certain in money in a contract of sale
C. Registration in chattel mortgage registry in a contract of chattel
mortgage
D. Meeting of minds in a contract of agency
3. Which of the following innominate contracts pertains to Do Ut Facias?

A. I give that you may give.
B. I give that you may do.
C. I do that you may give.
D. I do that you may do.
4. What is the status of contract of sale of car between a minor and an

insane?
A. Rescissible
B. Voidable
C. Unenforceable
D. Void
5. Which of the following instruments may become the subject matter or
reformation?
A. Holographic will
B. Notarial will
C. Conditional donation inter vivos
D. Void agreement
6. What is the status of contract if the doubts are cast upon the principal
object of the contract in such a way that it cannot be known what may
have been the intention or will of the parties?
A. Rescissible
B. Voidable
C. Unenforceable
D. Void
7. What is the proper remedy available to the injured party in case of

incidental fraud?
A. Action for annulment of contract
B. Action for reformation of instrument
C. Action for damages
D. Action for declaration of nullity
8. In case of doubt in incidental circumstances of contract of commodatum,

it shall be interpreted in favor of?
A. Greatest reciprocity of interests
B. Least transmission of rights
C. Greatest transmission of rights
D. Least reciprocity of interests
9. This principle of contracts allows the contracting parties to provide any

stipulations they may deem convenient provided they are not contrary to
law, morality, good customs, public order or public policy.
A. Relativity of contract
B. Mutuality of contract
C. Autonomy of contract
D. Consensuality of contract
10. Which of the following contract may become the object of contract?
A. National park
B. Public streets
C. Patrimonial property of the state
11. Which of the following contracts may be assailed by a third

person?
A. Rescissible contract
B. Voidable contract
C. Unenforceable contract
D. Any of the above
12. What is the remedy of the injured party if the consent is vitiated?
13. What is the remedy of the injured party in case of absolutely

simulated contract?
14. What is the remedy of the injured party in case of relatively

simulated contract?
15. To whom shall civil interdiction, insanity, death or insolvency

before acceptance must happen to make the offer ineffective?
A. Offerer
B. Acceptor
C. Either offerer or acceptor
D. Both offerer and acceptor
16. In case of conflict between the spirit and the letter of the contract,
how shall it be interpreted?
A. The spirit shall prevail over the letter.
B. The letter shall prevail over the spirit.
C. The contract shall be construed to be void.
D. The contract shall be reformed.
17. The cause in this type of contract is the service compensated.
A. Onerous contract
B. Commutative contract
C. Gratuitous contract
D. Remuneratory contract
18. Who among the following may ask for reformation of instrument of
contract?
A. Either party in case of mutual mistake
B. Injured party
C. Successors in interest of injured party
D. Any of the above
19. What is the status of contract entered into during lucid interval?
A. Valid and binding
B. Void
C. Voidable
D. Unenforceable
20. It refers to a vice of consent that involves taking improper

advantage of his power over the will of another, depriving the latter of a
reasonable freedom of choice
A. Causal fraud
B. Undue influence
C. Violence
D. Intimidation
21. When does the acceptance made by letter or telegram bind the
offerer?
A. From the time he sent his offer.
B. From the time the acceptance was sent by the other party.
C. From the time the acceptance came to the knowledge of the
offerer.
D. From the time the acceptance was received by the offerer.
22. A offers his watch to B for P500. B said that he will buy it for P450.
Is the contract perfected?
A. Yes because the consent is manifested.
B. Yes provided B will pay P450.
C. No because there is no delivery of the watch.
D. No because a qualified acceptance constitutes a counter-offer.
23. ABC Inc. makes an advertisement for bidders of its land. J-Z is the
highest bidder. Is ABC Inc. bound to accept the offer of the highest
bidder?
A. Yes because advertisements for bidders are definite offers.
B. No because advertisements for bidders are simply invitation to
make proposals.
C. Yes because in auction sale the highest bidder is always the
winner.
D. No because the lowest bidder should be the winner.
24. A contract is entered into between A, a minor and B, an insane

person. C, the father of A ratified the contract. What is the status of the
contract after ratification?
A. Voidable
B. Rescissible
C. Uenforceable
D. Null and void
25. If one of the parties believed that he received a certain amount as a

loan, which the other delivered as a real deposit, what is the status of the
contract?
A. Voidable contract of loan on the part of the first party.
B. Voidable contract of real deposit on the part of the
second party.
C. Valid contracts of loan and deposit on both parties.
D. Void because of want of consent.
26. A borrowed money from B. Upon failure of A to pay the loan, B

threatened A to file a collection suit against A if the latter will not execute
the contract of mortgage. As a result of the threat, A entered into the
contract of mortgage. What is the status of the contract of mortgage?
A. Void because threat is illegal.
B. Voidable because the consent of A is vitiated.
C. Valid and binding because the claim of B is just and legal.
D. Unenforceable because there is violation of statute of fraud.
27. Which of the following statements is incorrect?
A. 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.
B. Failure to disclose facts, when there is duty to reveal them, as
when the parties are bound by confidential relations, constitutes
fraud.
C. A mere expression of an opinion does not signify fraud, unless
made by an expert and the other party has relied on the former’s
special knowledge.
D. The usual exaggerations in trade, when the other party had an
opportunity to know the facts, are in themselves fraudulent.
28. Before Don Lasal dies, his heirs enter into an agreement for the
partition of the estate of their father. What is the status of the contract?
A. Voidable
B. Void
C. Unenforceable
D. Rescissible
29. One of the parties has brought an action to enforce the

instrument, may he subsequently ask for its reformation?
A. Yes because the remedies are available as successive rights.
B. No because there has been an election as between inconsistent
remedies.
C. Yes because the injured party can never be estopped.
D. No if there is stipulation to that effect.
30. A offered B to purchase his car. A allowed B two weeks to accept

the offer. A and B also entered into a contract of option for the two weeks
allowance and B paid P200 for the option. Can A withdraw the offer
before acceptance by B?
A. Yes because an offer may be withdrawn by offerer before the
acceptance is communicated.
B. No because the option contract is supported by a
consideration.
C. No because the offer cannot be withdrawn once given.
D. Yes because the contract is not yet perfected.
III. Law on Sales
1. A and B entered into a contract whereby A will deliver his laptop to B

while the latter will deliver P10,000 cash and a cellphone with a value of
P10,000 to A. What is the name of the contract?
a. Contract of Barter
b. Contract of Agency
c. Contract of Sale
d. Contract for a Piece of Work
2. On January 1,2012, D borrowed from C P100,000 and as a security D

mortgaged his land to C. The contract of mortgage provides that D is
absolutely prohibited from selling the mortgaged land without the
consent of C. On January 2,2012, D sold the same land to X for P50,000
to be delivered on January 5,2012 without the consent of C. D failed to
pay the loan. Is the contract of sale between D and X valid?
a. No because D is no longer the owner of the land on January
2,2012.
b. No because D is no longer the owner of the land on January
5,2012.
c. Yes because D is still the owner of the land although it was
mortgaged to C.
d. Yes provided D will pay the amount due to C.
3. In case of doubt whether the contract of sale is one of emptio rei speratae
or one of emptio spei, how shall the court generally interpret the type of
the contract of sale?
a. Emptio rei speratae
b. Emptio spei
c. Both A and B
d. Neither A nor B
4. S sells to B 300 sacks of yellow corn from a mass stored in the

warehouse of S. The mass, however, actually consists of 280 sacks of
yellow corn. Which of the following statements is correct?
a. The sale is null and void because there is no consent.
b. The sale is null and void because there is no determinate object.
c. B becomes the owner of all the 280 sacks and S is bound to
deliver additional 20 sacks in the absence of contrary
agreement.
d. B becomes the owner of all the 280 sacks and S is not bound to
deliver the additional 20 sacks.
5. Which of the following contracts of sale is void?

a. Executory oral sale of real property or any interest therein
regardless of the price.
b. Executory oral sale of goods, chattels or things in action the price
of which is P500 or more.
c. Sale of a piece of land by the agent in the name of principal
wherein the authority of the agent to sell the land is not in
writing.
d. Sale of a piece of land by a third person in the name of owner but
who has not been given any authority.
6. B purchased the car of S for P100,000 payable within 30 days from the
date of sale. As a downpayment, B gives S P1,000 upon the execution of
their agreement. How much should B pay to S on the 30th day?
a. P100,000 because the P1,000 is an earnest money.
b. P99,000 because the P1,000 is an option money.
c. P100,000 because the P1,000 is an option money.
d. P99,000 because the P1,000 is an earnest money.
7. After the perfection of the contract of sale and after the delivery of the
goods by the seller to the common carrier for transmission to the buyer,
who shall bear the risk of loss of the object of the contract of sale before
its arrival to the buyer?
a. Buyer because any benefit therefrom during the same period
inures to him.
b. Seller because any benefit therefrom during the same period
inures to him.
c. Buyer because delivery to the common carrier means delivery to
the buyer.
d. Seller because goods remain at the seller’s risk until the
ownership of the goods is transferred to the buyer by actual or
constructive delivery.
8. A sold a residential house and lot at an installment price of P6,000,000

payable in 50 years at P10,000 per month to B. After total payments of
P5,200,000, B defaulted on the next installment. After following the
necessary procedures required by law, the contract of sale is properly
cancelled. How much cash surrender value is B entitled from A?
a. P4,400,000
b. P3,600,000
c. P4,200,000
d. P3,900,000
9. S, a capacitated person, sold to B, a minor, a chicken joy. May S demand

from B the payment of the purchase price?
a. No because the contract of sale is voidable since B is an
incapacitated person.
b. Yes because the subject matter is a necessary.
c. Yes even if the price is unreasonable.
d. No because the contract of sale is void if the buyer is a minor.
10. On January 1, S delivered an electronic calculator to B under a

sale or return arrangement. S gave B up to May 7 to return the electronic
calculator. Before May 7, the calculator was destroyed by fire. Should B
pay for the purchase price?
a. No because B is not yet the owner of the calculator.
b. No because the calculator is destroyed through fortuitous event.
c. Yes because B becomes the owner of the calculator upon
delivery.
d. Yes if the fire is due to the fault of B.
11. S stole the ring of O and sold the same ring to B for P500 who does
not have any knowledge that the ring was stolen. B is a purchaser in
good faith and for value. Which of the following statements is correct?
a. B acquires title to the ring if he is a purchaser in good faith.
b. O cannot recover the ring from B if he will not reimburse B for
P500.
c. O can recover the ring from B even if he will not reimburse B
for P500.
d. B will acquire title to the ring if he will not be prosecuted
12. What is the only ground before the unpaid seller may exercise his
right in stoppage in transitu?
a. When the goods are perishable in nature
b. When the goods are sold without stipulation as to credit
c. When the buyer becomes insolvent
d. When the goods have been sold on credit but the term has expired
13. The following are the instances when goods are no longer in transit
and therefore the unpaid seller can no longer exercise his right of
stoppage in transitu, except
a. If the buyer obtains delivery of the goods before arrival at the
appointed destination.
b. If the carrier or other bailee acknowledges to the buyer or his
agent, that he is holding the goods in his behalf, after arrival of the
goods at their appointed destination.
c. If the carrier or other bailee wrongfully refuses to deliver the goods
to buyer or his agent.
d. If the goods are rejected by the buyer, and the carrier or other
bailee continues in possession of them, even if the seller has
refused to receive them back.
14. It refers to the waiver of the warranty against eviction made by the
buyer without the knowledge of the risk of eviction. Thus, the seller
remains to be liable in case of eviction because the buyer acted in good
faith.
a. Waiver consciente
b. Waiver intencionada
c. Waiver sobrente
d. Waiver alluna
15. This is one of the two remedies of the vendee in case of breach of
warranties against hidden defects, of merchantability, of merchantable
quality or fitness for a particular purpose. It refers to the withdrawal
from the contract or rescission.
a. Accion quanti minoris
b. Accion redhibitoria
c. Accion pauliana
d. Accion subrogatoria
16. What is the status of the contract of sale when the animals are
suffering from contagious diseases or when the animals are found to be
unfit for the use or service for which they were acquired as stated in the
contract?
a. Void
b. Voidable
c. Rescissible
d. Unenforceable
17. What is the effect to the contract of sale if the determination of the
price is left to the judgment of a third person and such person is unable
or unwilling to fix the price?
a. The contract of sale is voidable.
b. The contract of sale is valid and binding.
c. The contract of sale is inefficacious unless the parties
subsequently agree upon the price.
d. The contract of sale is rescissible.
18. The following contracts of sale have prices which are certain and
therefore valid, except
a. S sold to B a specific watch for P2,500 which both parties agreed
upon.
b. S sold to B a certain ring of which the price is the salary of the
faculty member of La Salle School.
c. S sold to B a specific car the price of which is subject to
determination of X, third person.
d. S sold to B 500 shares of ordinary stocks of BPI at the price
equivalent to the closing price of the ALI’s ordinary shares on April
30,2020 at the Philippine Stock Exchange.
19. Which of the following statements concerning bilateral and

unilateral promise to buy and/or sell is incorrect?
a. Bilateral promise takes place when one party promises to buy and
the other party promises to sell a determinate thing at an agreed
price.
b. Bilateral promise is reciprocally demandable since this is as good
as a perfected contract of sale.
c. Unilateral promise not accepted by the promissee (policitacion)
does not produce any effect.
d. Unilateral promise accepted by the promissee is binding upon
the promissor even if it is not supported by a consideration
distinct from the price.
20. On May 1, S sold his registered/titled lot to X. The deed of sale was
in a private instrument. On May 3, S sold the same lot to Y in a public
instrument. On May 5, S sold again the said lot to Z in a public
instrument. Z immediately registered the sale with Register of Deeds on
May 5. X took actual possession of the lot on May 6. X, Y and Z were not
aware of the sale made to others. Who among the buyers has the better
right?
a. X because he first took actual possession in good faith.
b. X because he has the oldest title in good faith.
c. Y because he first took constructive possession in good faith.
d. Z because he is the first registrant in good faith.
21. A, B and C are co-owners of a rural lot bounded by D's farm lot in
the north with area of 1,000 SQM and also bounded by E's farm lot in
the south with area of 2,000 SQM. E's use of C's land appears to be best
justified. C sold his share in the co-owned rural lot to F. Who shall be
preferred among the persons interested in their right of legal redemption?
a. A and B
b. D
c. E
d. All of them proportionately
22. M issued a promissory note which states "I promise to pay P10,000
to bearer B." in exchange for marijuana. B generally indorsed and
delivered the promissory note to H in exchange for cellphone. H acted in
good faith. May H collect from M?
a. Yes because he is a holder in due course.
b. Yes because he is a purchaser in good faith and for value.
c. No because of M's defense of illegality of cause.
d. No because he does not pay money for the promissory note.
23. M issued a promissory note which states "I promise to pay P10,000
B." in exchange for laptop. B generally indorsed and delivered the
promissory note to H in exchange for cellphone. M became insolvent.
May H collect from B?
a. Yes provided prior notice of dishonor is given to B.
b. Yes because B warrants the solvency of maker.
c. No because B can never become liable to H.
d. No because even if notice of dishonor is given by H to B.
24. Which of the following is an indicator that a pacto de retro sale is

actually an equitable mortgage?
a. When the price of a sale with a right to repurchase is inadequate.
b. When the vendee obtains possession of the property.
c. When the purchaser retains for himself part of the purchase
price.
d. When the vendee binds himself to pay the real property taxes on
the thing sold.
25. What is the period for the exercise of right of legal redemption in
onerous transfer of immovable property from the reckoning provided by
law?
a. Within 4 years
b. Within 30 days
c. Within 10 years
d. Within 5 years
26. When may the seller ask the court for immediate cancellation of
sale of immovable property?
a. Reasonable ground to fear the loss of the immovable sold
b. Reasonable ground to fear the loss the price of the immovable sold
c. Either A or B
d. Neither A nor B
27. When may the vendee exercise the right to suspend payment of the
price?
a. When the vendor gives security for the return of the price
b. When the disturbance in vendee's possession is a mere act of
trespass
c. Either A or B
d. Neither A nor B
28. What is the proper remedy available to the seller in a contract of

sale when the buyer accepted the goods but wrongfully neglects to pay
for the goods sold?
a. Maintain an action for the price of the goods
b. Maintain an action for damages
c. Rescind the contract
d. Ask for declaration of nullity of contract
29. What is the proper remedy available to the buyer in a contract of

sale when the seller refuses to deliver the determinate thing sold?
a. File an action for exact fulfillment
b. File an action for annulment of contract
c. File an action for declaration of nullity of contract
d. File an action for rescission of contract
30. What is period for filing an action redhibitoria for animal with
redhibitory defect?
a. With 40 days from the date of delivery of the animal
b. With 6 months from the date of delivery of the animal
c. With 3 days from the date of delivery of the animal
d. With one year from the date of delivery of the animal
IV. Law on Pledge, Mortgage and Antichresis
1. It refers to a stipulation in a contract of pledge or contract of mortgage

whereby the thing pledged or mortgaged shall automatically become the
property of the creditor in the event of non-payment of the secured debt
within the term fixed.
a. Pactum creditarium
b. Pactum commissorium
c. Pactum debitarium
d. Pactum crematorium
2. A and B jointly borrowed P10,000 from C. In order to secure the

obligation, A pledged his cellphone while B pledged his laptop. At the
maturity date of the loan, A paid P5,000 of the loan. Which of the
following statements is correct?
a. The contract of pledge on the cellphone is extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone because a
contract of pledge is indivisible.
d. The contract of pledge on the laptop is extinguished.
3. If two or more things are pledged, who has the right to choose which
thing will be sold in the absence of stipulation in the contract of pledge?
a. Pledgor
b. Pledgee
c. Debtor
d. Government
4. What is the remedy of the pledgor-owner if there are reasonable grounds

to fear the destruction or impairment of the thing pledged with the fault
of the pledgee?
a. To ask for the return of the thing, upon offering another thing in
pledge, provided the latter is of the same kind as the former and
not of inferior quality but subject to the right of the pledgee to sell
the said pledged item in public auction.
b. To ask that the thing pledged be deposited judicially or
extrajudicially.
c. To ask that the thing pledged be deposited with a third
person.
d. To ask for the extinguishment of the contract of pledge.
5. Which of the following extinguishes only the contract of pledge but not
its secured contract of loan?
a. Return by the pledgee to the pledgor of the promissory note
evidencing the debt.
b. Renunciation or abandonment in writing by the pledgee of the
contract of pledge.
c. Appropriation by the pledgee of the thing pledgee in case of default
by the debtor in the payment of contract of loan.
d. Sale of the thing pledged in public auction by the pledgee for net
proceeds less than the amount of the loan.
6. Which of the following stipulations in a contract of pledge is valid?

a. A stipulation which provides that the contract of pledge is not
extinguished by the return of the thing pledged.
b. A stipulation allowing the appropriation by the pledgee of the
thing pledged in case the same is not sold in the first and
second auctions
c. A stipulation for the recovery of deficiency in case the proceeds
from the sale of the thing pledged is less than the amount of the
obligation.
d. A stipulation authorizing the pledgee to become the automatic
owner of the thing pledged in case of default by the debtor in the
payment of the secured contract of loan.
7. Which of the following statements regarding the sale of the thing pledged
in public auction regarding contract of pledge is incorrect?
a. The pledgee is generally entitled to the excess unless there is
stipulation to the contrary.
b. The pledgor may recover the excess if there is stipulation to that
effect.
c. The pledgee can never recover any deficiency even if there is
stipulation for such recovery.
d. The pledgor may become liable to any deficiency if there is
stipulation to that effect.
8. Which of the following is not a characteristic of contract of real estate

mortgage?
a. Accessory contract
b. Formal contract
c. Indivisible contract
d. Inseperable contract
9. Which of the following stipulations in a contract of real estate mortgage

is valid?
a. A stipulation forbidding the mortgagor-owner from alienating the
immovable mortgaged.
b. A stipulation providing that the mortgagee shall become the
automatic owner of the property mortgaged upon failure of the
debtor to pay the principal obligation.
c. Tipo or upset price which refers to price set by the parties as
the amount at which the property at which the property will
be sold at public auction.
d. A stipulation prohibiting a second mortgage with respect to
property registered under the Torrens System.
10. It is a type of foreclosure that may be availed only when when the
deed of real estate mortgage contains a special power of attorney (SPA)
authorizing the mortgagee-creditor to foreclosure it even without court
order.
a. Legal foreclosure
b. Conventional foreclosure
c. Judicial foreclosure
d. Extra-judicial foreclosure
11. It refers to the right of the mortgagor to repurchase the property

within a certain period after it was sold in public auction for the payment
of the mortgage debt.
a. Equity of redemption
b. Right of redemption
c. Conventional redemption
d. Right of preemption
12. In case of extrajudicial foreclosure of real property under Act No.

3135, what is the period of the exercise of right of redemption by the
debtor-mortgagor or any other persons authorized by the said law?
a. Within the term of one year and after the date of sale or
registration of the sheriffs certificate of foreclosure sale.
b. Within the term of 90 days and after the date of extrajudicial sale
or registration of the sheriffs certificate of foreclosure sale.
c. Within the term of two years and after the date of extrajudicial sale
or registration of the sheriffs certificate of foreclosure sale.
d. Within the term of six months and after the date of extrajudicial
sale or registration of the sheriffs certificate of foreclosure sale.
13. Notwithstanding Act 3135, Section 47 of RA 8791 (General

Banking Laws) provides that juridical persons whose property is being
sold pursuant to an extrajudicial foreclosure by banks, shall have the
right of redemption to be exercised
a. Within 3 months after the foreclosure and sale but not after
the registration of the certificate of foreclosure sale with the
applicable Register of Deeds.
b. Within 6 months after the foreclosure and sale but not after the
registration of the certificate of foreclosure sale with the applicable
Register of Deeds.
c. Within 1 year after the foreclosure and sale but not after the
Register of Deeds.
d. Within 2 years after the foreclosure and sale but not after the
Register of Deeds.
14. Which of the following statements regarding the sale of the thing
mortgaged in public auction regarding contract of real estate mortgage is
correct?
a. The mortgagor is generally entitled to the excess unless there is
b. The mortgagee may generally recover the deficiency unless there is
c. Both A and B.
d. Neither A nor B.
15. What is the classification of contract of chattel mortgage as to its

perfection?
a. Solemn contract
b. Consensual contract
c. Real contract
d. Legal contract
16. Where shall contract of chattel mortgage involving shares of stocks

be registered?
a. Chattel Mortgage Registry where the mortgagor resides
b. Chattel Mortgage Registry where the principal office of the
corporation is located
c. Both A and B
d. Neither A nor B
17. Which of the following statements regarding the sale of the thing
mortgaged in public auction regarding contract of chattel mortgage is
correct?
a. The mortgagee is generally entitled to the excess unless there is
b. The mortgagor may not generally recover the deficiency unless
there is stipulation to the contrary.
c. Both A and B.
d. Neither A nor B.
18. It is an accessory contract whereby the creditor acquires the right

to receive the fruits of an immovable of his debtor, with the obligation to
apply them to the payment of the interest, if owing, and thereafter to the
principal of his credit.
a. Contract of real estate mortgage
b. Contract of chattel mortgage
c. Contract of pledge
d. Contract of antichresis
19. What is the classification of contract of antichresis as to its

perfection?
a. Solemn contract
b. Consensual contract
c. Real contract
d. Legal contract
20. Which of the following may become the subject matter of contract
of antichresis?
a. Farm lot
b. Car
c. Shares of stocks
d. Patent
V. Law on Partnership
1. Which of the following is not a characteristic of particular partnership?

a. Principal contract
b. Gratuitous contract
c. Multilateral contract
d. Consensual contract
2. Which of the following is a prima facie evidence that a person is a partner

of a business?
a. Receipt of profit share as wages
b. Receipt of profit share as interests
c. Receipt of profit share as return of investment
d. Receipt of profit share as annuity to a widow
3. Which partner is not liable up to the extent of his separate assets?

a. Industrial partner
b. Limited partner
c. Both A and B
d. Neither A nor B
4. A, B and C are partners in ABC Partnership with loss agreement ratio of

1:4:5. A, B and C contributed capital in the amount of 6M, 1.5M and
2.5M, respectively. In the first year of ABC Partnership operation, it
reported net income of P100,000. How much is the share of partner B to
the net income?
a. P400,000
b. P333,333.33
c. P150,000
d. P250,000
5. Which stipulation is valid in a contract of partnership?

a. Stipulation excluding a capitalist partner from share in profit
b. Stipulation excluding an industrial partner from share in profit
c. Stipulation excluding a capitalist partner from share in loss
d. Stipulation excluding an industrial partner from share in loss
6. Which managing partner may be validly removed by the controlling

partner even without valid cause?
a. Managing partner appointed in the articles of co-partnership
b. Managing partner appointed in a separate document other
than the articles of co-partnership
c. Both A and B
d. Neither A nor B
7. A, B, C, D and E are partners in ABCDE Partnership with capital

contribution ratio of 1M, 2M, 3M, 4M and 5M, respectively. A, B and C
are proposing Robinson as its supplier of office supplies while D and E
are proposing SM as its supplier of office supplies. Who shall be the
supplier of ABCDE Partnership?
a. Both Robinson and SM
b. SM
c. Robinson
d. None of the above
8. Which act may be done by the managing partner alone?

a. Submission of partnership claim to arbitration
b. Remission of claim of the partnership
c. Disposition of goodwill of the partnership
d. Act which would make it possible to carry on the ordinary
business of the partnership
9. Which partner may be validly excluded by the injured partner if such

partner engages in a prohibited business without permission from the
partnership?
a. Industrial partner
b. Capitalist partner
c. Both A and B
d. Neither A nor B
10. He refers to a person who is no longer a partner of business but

has left his capital in the business as loan, thereby, receiving interest
from such loan.
a. Nominal partner
b. Quasi-partner
c. Dormant partner
d. Silent partner
11. Which type of partnership is created even without express

agreement among the partners?
a. De jure partnership
b. De facto partnership
c. Partnership prescription
d. Partnership by estoppel
12. When will the juridical personality of the partnership commence?

a. On the date of signing of articles of co-partnership by the
partnership
b. On the date agreed mutually upon by the partners
c. On the date of issuance by SEC of certificate of registration under
its official seal
d. On the date of receipt by SEC of articles of co-partnership from the
partners
13. When an unlawful partnership is dissolved by a judicial decree, to
whom shall the partnership profits go?
a. To the innocent partner.
b. To the guilty partner.
c. To all the partners pro-rata.
d. To the state.
14. Which of the following statements concerning associations and

societies, whose articles are kept secret among the members, and
wherein any one of the members may contract in his own name with
third persons is correct?
a. They shall have separate juridical personality.
b. They shall be treated as a corporation.
c. They shall be treated as a partnership.
d. They shall be governed by the rules on co-ownership.
15. It is a principle which means that a partner has a right to choose

those whom he wants to be associated with the partnership.
a. Delectus personae
b. Deletus militus
c. Dilitus trustus
d. Deletos fructus
16. What is the effect if a contract of partnership with a capital of at

least P3,000 in money and/or personal property is not in a notarized
document and not registered with SEC?
a. The contract of partnership is null and void.
b. The partnership shall be classified as a corporation.
c. The partnership shall be classified as a sole proprietorship.
d. The liability of the partnership and the partners thereof to
third persons will not be affected.
17. A and B orally entered into a contract of partnership whereby A

contributed building while B contributed land. The partnership business
is being operated by the partners for almost 10 years already. A and B
divided equally the profits for 10 years. What is the status of the contract
of partnership after 10 years of operation?
a. It is void both as to the contracting parties and to third persons
because the contract of partnership is not in a public instrument
and an inventory of the immovable property is not signed and
attached to the public instrument.
b. It may be considered valid as to the contracting parties on the
basis of doctrine of estoppel and only third persons directly
affected by such void contract may file an action for
declaration of nullity.
c. It is rescissible both as to the contracting parties and to third
person because it is intended to defraud third person.
d. It is unenforceable both as to the contracting parties and to third
person because it violates status of fraud.
18. The articles of universal partnership is entered into without

specification as to its nature. What shall be its construction or
interpretation?
a. It is a particular partnership.
b. It is a universal partnership of all present property.
c. It is a universal partnership of profits.
d. It is a general professional partnership.
19. What is the prescriptive period for a partner to file an action to

impugn or question the manifestly inequitable sharing of partnership
profits or losses designated by a third person?
a. Within 3 months from the knowledge of such designation but
it must be before the said partner executes it.
b. After 3 months from the knowledge of such designation but it must
be before the said partner executes it.
c. Within 3 month from the knowledge of such designation but it
must be after the said partner executes it.
d. After 3 months from the knowledge of such designation but it must
be after the said partner executes it.
20. Which of the following partners is not allowed to participate in the

management of a partnership?
a. Capitalist partner
b. Industrial partner
c. Nominal partner
d. Managing partner
31. A and B are partners in an existing partnership with total liabilities

to third persons amounting to P15,000. C is admitted to the existing
partnership of A and B. After several years of operation from admission
of C, the total liabilities of the partnership to third persons increased by
P30,000. If the partnership became bankrupt and nothing remains from
its assets, how much may the creditor collect from the separate assets of
Partner C?
A. P15,000
B. P10,000
C. P5,000
32. A, B, C and D are partners in a general partnership with original
capital contribution of P4,000, P2,000, P1,000, and industry
respectively. After several years of operation, the partners decided to
liquidate the partnership. At the time of liquidation, the total assets of
partnership amounted to P57,000 while its total liabilities to third
persons amounted to P42,000. How much will be received by Partner D
at the time of liquidation?
A. P4,000
B. P2,000
C. P1,000
33. Which of the following is not an automatic ground of dissolution of

general partnership?
A. Insanity of a partner
B. Death of a partner
C. Insolvency of a partner
D. Civil interdiction of a partner
34. ABC Ltd. is a limited partnership. A and B are classified as general

partners while C and D are classified as limited partners. Aside from
them, E is an industrial partner. The total assets of the partners are
reported at P100,000 from its total liabilities to third persons amounted
to P130,000. Assuming the partnership is liquidated, how much may the
unpaid creditors of the partnership collect from E?
A. P10,000
B. P6,000
C. P15,000
D. P7,500
35. Which of the following may not be contributed by a limited

partner?
A. Money
B. Industry
C. Personal property
D. Real property
36. Which of the following claims shall be settled last in a general
partnership?
A. Salaries of employees of partnership
B. Capital contribution of a partner
C. Profit share of a partner
D. Loan payable to a partner
37. Which of the following rights is not available to an assignee of a

managing partner?
A. Right to share in net income of the managing partner
B. Right to share in net asset of the managing partner in case of
partnership liquidation
C. Right to manage the partnership
38. Which partner is exempted from making additional capital

contribution to the partnership to save the partnership business in case
of imminent loss?
A. Industrial partner
B. Capitalist-Industrial partner
C. Capitalist partner
39. Which cause for partnership dissolution will not terminate the
authority of any partner to act for the partnership?
A. When the cause of partnership dissolution is not by the act,
insolvency or death of a partner.
B. When the cause of dissolution is by the act, insolvency or
death of a partner, the person acting had no knowledge of
dissolution, death or insolvency of a partner.
C. Either A or B
D. Neither A nor B
40. In the absence of contrary agreement, what type of asset will be

received by the limited partner who validly withdraws from the limited
partnership?
A. Cash
B. The specific asset he contributed
C. Land
D. Intangible asset
41. Which of the following will require cancellation of articles of limited

co-partnership?
A. When all limited partners die.
B. When a person is admitted as a limited partner.
C. When a person is substituted as a limited partner.
D. When a person is admitted as a general partner.
42. The following are the accessory obligations of a partner concerning

his obligation to deliver a sum of money he promises, except
A. To deliver to the partnership at the time it was constituted or on the date
stipulated the money he has promised to contribute.
B. To pay interest on the amount he had promised to contribute from the
time he should have complied with his obligation without need of any
demand.
C. To pay damages suffered by the partnership by reason of the default in
the contribution of money.
D. To answer for eviction in case the partnership is deprived of the
money he
has contributed to the partnership in the same manner as the
vendor is bound
with respect to the vendee.
43. Which partner is not liable up to the extent of his separate assets
in a limited partnership?
A. Capitalist-industrial partner
B. Industrial partner
C. General partner exempted from liability to third persons
44. The partnership shall bear the risk of loss for the following
contributions of partners, except
A. Those property that cannot be kept without deteriorating.
B. Intangible property contributed by a partner where the partner
contributed only its use or enjoyment.
C. Tangible property contributed to be sold.
D. Personal property brought and appraised in the inventory unless
there is a stipulation to the contrary but the liability of the
partnership is limited only to the value of the things at which they
were appraised.
45. Which of the following statements concerning the obligations of a
partner is incorrect?
A. Every partner must account to the partnership for any benefit, and
hold as trustee for it any profits derived by him without the
consent of the other partners from any transaction connected with
the formation, conduct, or liquidation of the partnership or from
any use by him of its property.
B. To reimburse to the partnership the amount that he has taken
from the partnership coffers with interest from the time of
conversion plus damages suffered by partnership by reason of the
conversion.
C. To bring to the partnership capital his share of a partnership credit
which he has received in whole or in part even he may have given
his receipt if the other partners have not collected their shares and
the debtor becomes insolvent after the partner has received the
payment.
D. To pay to the partnership for damages suffered by it through
his fault but he may compensate them with the profits and
benefits which he may have earned for the partnership by his
industry.
46. Which of the following will not dissolve a general partnership?

A. Loss before delivery of property where the partner contributed only
its use or enjoyment.
B. Loss after delivery of property where the partner contributed only
its use or enjoyment.
C. Loss before delivery of specific thing, which a partner has promised
to contribute to the partnership.
D. Loss after delivery of specific thing, which a partner has
promised to contribute to the partnership.
47. The following are the requisites in order for an admission or

representation of a partner to be used as evidence against the
partnership, except
a. The admission or representation must concern partnership affairs.
b. The admission must be made judicially.
c. The admission must be made within the scope of the authority of
the partner making the admission.
d. The admission must be made during the existence of the
partnership
48. D is indebted to ABC Partnership, managing partner A of ABC

Partnership and B, a non-managing partner of ABC Partnership in the
amount of P20,000; P30,000 and P40,000, respectively. D paid P9,000 to
B who issued his personal receipt for the payment. How much payment
shall be applied to the claim of B?
A. P4,000
B. P6,000
C. P9,000
49. Which of the following partners may liquidate a partnership?

A. The liquidating partner agreed upon by the partners.
B. The partners who have wrongfully dissolved the partnership.
C. The legal representative of the last surviving partner, who is
insolvent.
50. It refers to the change in the relation of the partners caused by any
partner ceasing to be associated in the carrying on of the business.
A. Partnership dissolution
B. Partnership liquidation
C. Partnership termination
D. Partnership formation
VI. Negotiable Instruments Law
1. Which of the following is not a party to a negotiable instrument?

A. Maker in a promissory note
B. Drawer in a bill of exchange
C. Drawee-bank in a check
2. Where a signature is so placed upon the instrument that it is not clear in

what capacity the person making the same intended to sign, he is
deemed to be
A. an indorser
B. an acceptor
C. a drawer
D. a maker
3. Which of the following is not a requisite of a negotiable promissory note?
A. It must be in writing and signed by the maker.
B. It must contain an unconditional promise to pay a
certain sum of money.
C. It must be payable on demand, or at a fixed time or at
a determinable future time.
D. It must be payable to order or bearer.
4. It is an attribute of a negotiable instrument which means that as the
instrument is passed from one person to another, secondary contracts
are entered into thereby increasing the chances of the holder to collect
the amount payable on the instrument.
A. Accumulation of secondary contracts
B. Assignability
C. Transmissibility
D. Negotiability
5. How may a negotiable bearer instrument be negotiated?
A. By indorsement coupled with delivery.
B. By mere delivery.
C. By mere indorsement.
D. Either A or B.
6. Which of the following instruments is non-negotiable?

A. To A: Pay to P or order P100,000 and reimburse yourself out of my
money on your hands. Sgd. D.
B. I promise to pay to B or bearer P4,000 in four monthly installments
beginning January 1,2021. Sgd. M.
C. I promise to pay to P or order P10,000 together with all sums that may
be due to him on December 31,2020. Sgd M.
D. I promise to pay to P or order P1,000 five days after the death of Jay
Cruz. Sgd.M.
7. Which of the following instruments is invalid?

A. I promise to pay to bearer Julia Barreta P1,000. Sgd Gerad Ander.
B. I promise to pay to Berta Alonzo P1,000. Sgd. Gerad Erson.
C. Both A and B
D. Neither A nor B
8. Which of the following is a bearer negotiable instrument?

A. Pay to the order of ourselves P100.00. To B. Sgd. D.
B. I promise to pay to the order of myself P1,000. Sgd. M.
C. Pay to yourself or order P1,000. To Y. Sgd. D.
D. Pay to the order of cash. To A. Sgd. D
9. Where the negotiable instrument is so ambiguous that there is doubt
whether it is a bill of exchange or promissory note, which is true?
A. The holder may treat the negotiable instrument as either bill
of exchange or promissory note at his election.
B. The court shall determine whether the negotiable instrument is
either bill of exchange or promissory note.
C. The maker or acceptor may treat the negotiable instrument as
either bill of exchange or promissory note at his election.
D. The instrument becomes a non-negotiable instruments but
remains to be valid.
10. What indorsement will revert an originally negotiable bearer
instrument to its original bearer form?
A. Blank indorsement
B. Special indorsement
C. Qualified indorsement
1. The following are the functions of negotiable instruments, except

a. They are substitutes for money.
b. They increase the purchasing medium in circulation.
c. They increase credit transactions.
d. They are intended as legal tender.
2. It is an attribute of a negotiable instrument which allows it to be passed

from one hand to another similar to money, so as to give the holder in
due course the right to hold the instrument and collect the sum payable,
for himself free from personal defenses available to prior parties.
a. Accumulation of secondary contracts
b. Negotiability
c. Assignability
d. Tenderability
3. The following are the kinds of negotiable instruments, except

a. Promissory note
b. Bill of exchange
c. Checks
d. Bill of lading
4. The sum payable is sum certain for negotiable instruments although it is

to be paid under the following instances, except
a. By stated installments with escalation clause
b. With exchange, whether at a fixed rate or at a current rate.
c. With costs of collections or an attorney’s fee
d. With delivery of a thing other than money
5. Which of the following instruments is non-negotiable because it is
conditional order to pay?
a. Pay to B or order P1,000 and reimburse yourself out of my money
on your hands.
b. Pay to B or bearer P1,000 and debit the amount to my receivable.
c. Pay to B or order P1,000 on account of contract of sale between
you and ABC Inc.
d. Pay to B or order P1,000 out of my salary in the company.
6. Which of the following instruments is non-negotiable because it is not

payable in a determinable future time?
a. 60 days after sight, pay to the order of J P1,000.
b. On or before December 31,2025, I promise to pay X or order
P1,000.
c. On the death of X, I promise to pay B or order P1,000.
d. 10 days before the death of A, I promise to pay B or bearer
P1,000.
7. The following provisions do not affect negotiability of an instrument,

except
a. Authorization of sale of collateral securities in case the instrument
be not paid at maturity.
b. An order or promise to do any act in addition to the payment
of money.
c. Authorization of confession of judgment if the instrument be not
paid at maturity.
d. Waiver of the benefit the law intended for the advantage or
protection of the obligor.
8. Which of the following instruments is non-negotiable?

a. I promise to pay to B or order P1,000 on December 1,1985,
provided, however, that if this note is not paid at maturity date,
the ring pledged may be sold at public auction.
b. Six months after date, I promise to pay to B or order P1,000
waiving the right to appeal and all of valuation appraisement.
c. I promise to pay B or order P1,000 or 10 dogs at the option of
holder.
d. I promise to pay to bearer P1,000 and to deliver him two cars.
9. The negotiable character of an instrument is not affected by the following

circumstances, except
a. It is not dated.
b. It is not signed by the maker or drawer.
c. It bears a seal.
d. It designated a particular kind of current money in which payment
is to be made
10. The following are the instances when a negotiable instrument is

payable on demand, except
a. Where it is expressed to be payable on demand, or at sight or on
presentation.
b. Where it is payable at a fixed period after date or sight.
c. Where no time for payment is expressed.
d. Where an instrument is issued, accepted, or indorsed when
overdue, as regards to the person issuing, accepting or indorsing
it.
11. The following instruments are payable to order, except

a. I promise to pay to the order of B P1,000.
b. Pay to the order of ourselves P100.00. To B.
c. I promise to pay to the order of myself P1,000.
d. I promise to pay to the order of cash P1,000.
12. The following instruments are payable to bearer, except

a. Pay to the order of Pacman P1,000. (The issuer knew that the
Pacman is a fictitious person.)
b. Pay to cash. Pay to the order of money. Pay to the order of cash.
c. Pay to X or order P1,000. To Y. Sgd G. Indorsement. Sgd Y.
d. Pay to bearer B P1,000.
13. Which of the following instruments is negotiable?

a. I promise to pay P or order P10,000 on Christmas Day. Sgd. M.
b. I promise to pay P or order P10,000 on December 31, 2050.
Sgd. M.
c. I promise to pay P or order P10,000 10 days before the death of
Mr. Jerry Tom. Sgd. M.
d. I promise to pay P or order P10,000 when my means permit me to
do so. Sgd. M.
14. Which of the following instruments is payable on a determinable

future time?
a. I promise to pay P or order P10,000. Sgd. M.
b. I promise to pay P or order P10,000 on the death of Mr. Noli
Failon. Sgd. M.
c. I promise to pay P or order P10,000 on December 1, 1901. Sgd. M.
d. I promise to pay P or order P10,000 on December 1, 2050.
Sgd. M.
15. Where a signature is so placed upon the instrument that it is not

clear in what capacity the person making the same intended to sign, he
is deemed to be
a. An indorser
b. A maker
c. A drawer
d. An acceptor
16. In which of the following negotiable instruments shall the agent be

personally liable?
a. Pay to A or order P1,000. Jose Cruz by: Pedro Vega (sgd)
b. Pay to A or bearer P1,000. (sgd) Pedro Vega for Jose Cruz
c. Pay to A or order P1,000. (sgd) Pedro Vega as agent of Jose Cruz
d. Pay to A or bearer P1,000. (sgd) Pedro Vega, agent
17. What is the effect if an instrument originally payable to bearer is

negotiated by indorsement plus delivery?
a. It remains to be a bearer instrument that may be negotiated
by mere delivery.
b. It becomes an order instrument that must be negotiated by
indorsement plus delivery.
c. It becomes a non-negotiable instrument.
d. It is equivalent to assignment of credit.
18. What is the prima facie presumption of law regarding the time of
indorsement where an instrument does not bear date after the maturity
of the instrument?
a. Every negotiation is deemed prima facie to have been effected
before the instrument was overdue.
b. Every negotiation is deemed prima facie to have been effected after
the instrument was overdue.
c. Every negotiation is deemed prima facie to have been effected at
maturity date.
d. None of the above.
19. What is the prima facie presumption of law regarding the place of
indorsement in the absence of contrary evidence?
a. Every negotiation is deemed prima facie to have been effected
at the place where the instrument is dated.
b. Every negotiation is deemed prima facie to have been effected at
the place where the instrument is accepted.
c. Every negotiation is deemed prima facie to have been effected at
the place where the instrument is issued originally.
d. Every negotiation is deemed prima facie to have been effected at
the place where the instrument is discharged.
20. In case an instrument payable to order is merely delivered without

indorsement and the transferor indicates the indorsement at a date later
than the date of delivery, when does the negotiation takes effect for the
purpose of determining whether the transferee is a holder in due course?
a. At the time the indorsement was actually made.
b. At the time of the delivery of instrument.
c. At the time of filing the case to compel the transferor to indicate
the indorsement.
d. At the time of the original issuance of instrument.
21. Where an instrument is payable to the order of two or more payees

or indorsees who are partners, who must indorse the instruments to
effectuate valid negotiation?
a. All of two or more payees or indorsees unless the one indorsing
has the authority to indorse for others.
b. Anyone of the payees only if there is authority given by majority of
the partners.
c. Anyone of the payees only if there is authority given by all of the
partners.
d. Anyone of the payees because the there is presumption of
mutual agency among the payees.
22. Which of the following indorsements is valid assuming the amount

of the instrument is P1,000?
a. Pay to X P400. Sgd Indorser
b. Pay to C P600 and Pay to D P400. Sgd Indorser
c. Pay to A or B P1,000. Sgd Indorser
d. Pay to A and B P1,000. Sgd Indorser
23. Which of the following indorsements is invalid assuming the

amount of the instrument is P1,000?
a. Pay to A and B P1,000. Sgd Indorser
b. Pay to A P1,000. Sgd by Minor Indorser.
c. Pay to P1,000. Sgd. Indorser.
d. Sgd. Indorser
24. Which of the following definitions of the kinds of indorsement

refers to facultative indorsement?
a. It is an indorsement by which the indorser binds himself to pay,
upon no other condition that the failure of parties to do so and of
due notice to him of such failure.
b. It is an indorsement which is subject to the happening of a
condition but the party required to pay the instrument may
disregard the condition. But any person to whom an instrument so
indorsed is negotiated will hold the same, or the proceeds thereof,
subject to the rights of the person indorsing conditionally.
c. It is an indorsement which waives the benefit provided by law
to the indorsers.
d. It is an indorsement wherein the name of the indorsee is
misspelled.
25. Which of the following definitions of the kinds of indorsement

refers to qualified indorsement?
a. It is an indorsement which specifies the person to whom, or to
whose order, the instrument is to be payable, and the indorsement
of such indorsee is necessary to the further negotiaition of the
instrument. If the instrument is originally an order instrument, it
will revert an instrument converted to bearer by blank indorsement
to its original character of being order instrument.
b. It is an indorsement which specifies no indorsee and an
instrument so indorsed becomes bearer instrument and may be
negotiated by delivery.
c. An indorsement which either prohibits the further negotiation of
the instrument, or constitutes the indorsee the agent of the
indorser or vests the title in the indorsee in trust for or to the use
of some other person. But the mere absence of words implying
power to negotiate does not make an indorsement this kind of
indorsement.
d. It is an indorsement that constitutes the indorser a mere
assignor of the title to the instrument and may be made by
adding to the indorer’s signature the words “without recourse”
or any words of similar import and such indorsement does not
impair the negotiable character of the instrument.
26. Which of the following is a not a restrictive indorsement?

a. Pay to C only. Sgd. B or Pay to C and no other person. Sgd. B
b. Pay to C for collection. Sgd. B or Pay to C for deposit. Sgd. B
c. Pay to X in trust for C. Sgd. B
d. Pay to C, at indorsee’s risk. Sgd. B
27. M, issued a PN payable to order to A. A negotiated it to B by blank

indorsement. B negotiated it to C by mere delivery. C negotiated it to D
by Special Indorsement coupled with delivery. D negotiated it to E by
mere delivery. Is the negotiation to E valid?
a. Yes because of blank indorsement.
b. No because the instrument is payable to order.
c. Yes because instrument payable to bearer can be converted to
order instrument.
d. No because order instrument is always order instrument.
28. M issues A PN payable to order to A. A specially indorsed it to B

coupled with delivery. B specially indorsed it to C coupled with delivery.
C indorsed it in blank to D coupled with delivery. D specially indorsed it
to E coupled with delivery. E specially indorsed it to F coupled with
delivery. Which indorsement can be stricken or cancelled out by F?
a. A to B
b. E to F
c. D to E
d. C to D
29. Who is the holder of a bearer negotiable instrument?

a. The possessor of it
b. The bearer of it
c. The payee or indorsee who is in possession of it
d. Any of the above
30. Which of the following is not primarily liable to a negotiable

instrument?
a. Maker
b. Drawer
c. Acceptor
d. None of the above
31. In a negotiable instrument, who is secondarily liable for being

guarantor of solvency of the person primarily liable?
a. General indorser
b. Qualified indorser
c. Person negotiating the instrument by mere delivery
d. All of the above
32. M makes a PN payable to the order of P. P indorses the note to A, A

to B, B to C, C to H, holder. H presents the note to for payment but M
dishonors it. H notifies P, A, B and C. After giving the notice, H, holder
further negotiates the note to I, I to J, and J to K. Who benefited from the
notice given by H to P?
a. A, B, C, only
b. I, J, K only
c. A, B, C, I, J, K
d. A, B, C, I only
33. The following are the modes of discharging a negotiable

instrument, except
a. By payment in due course by the maker
b. By the intentional cancellation, destroying, burning, or tearing of
the instrument by the holder
c. When the principal debtor becomes the holder of the instrument at
or after maturity in his own right
d. By payment in due course by drawer
34. Payment in due course by or in behalf of the principal debtor

discharges the instrument. The following are the requisites of payment in
due course, except
a. Payment must be made at or after maturity date.
b. Payment must be made to the holder.
c. Payment must be made using check.
d. Payment must be made by the debtor in good faith.
35. He is a person whose name is inserted by a drawer of a bill or any

indorser to whom the holder may resort in case of need; that is to say, in
case the bill is dishonored by non-acceptance or non-payment.
a. Referee in case of need
b. Accomodation party
c. Acceptor for honor
d. Payor for honor
36. A bill may be accepted before it has been signed by the drawer, or
while otherwise incomplete, or when it is overdue, or after it has been
dishonored by a previous refusal to accept, or by non payment. But when
a bill payable after sight is dishonored by non-acceptance and the
drawee subsequently accepts it, in the absence of agreement, when is the
holder entitled to have the bill accepted?
a. As of the date of the second presentment for acceptance.
b. As of the date of first presentment for acceptance.
c. As of the date of the actual acceptance.
d. As of the date of second refusal.
37. The following are examples of qualified acceptance by acceptor.

Which acceptance is unqualified or general acceptance?
a. An acceptance to pay at a particular place
b. Conditional; that is to say, which makes payment by the acceptor
dependent on the fulfillment of a condition therein stated.
c. Partial; that is to say, an acceptance to pay part only of the
amount for which the bill is drawn.
d. Qualified as to time.
38. It is the formal declaration drawn up and signed by a notary that

he presented a foreign bill of exchange for acceptance or for payment and
that it was refused. It is required for a foreign bill but not for inland bill.
a. Notice of dishonor
b. Protest
c. Petition
d. Complaint
39. The following are the instances when a protest of negotiable bill of
exchange is mandatory, except
a. Where an inland bill has been accepted for honor.
b. Where an inland bill contains a referee in case of need.
c. Where an inland bill is dishonored by the acceptor for honor
d. Where an inland bill is dishonored by non-acceptance by the
drawee or non-payment by the acceptor
40. As a general rule, where shall protest be made?

a. At the place where the bill is written.
b. At the place where the payee is residing.
c. At the place where the bill is dishonoured.
d. At the place where the holder is residing.
41. Where an acceptance for honor does not expressly state for whose
honor it is made, the law presumes that it is made for the honor of the
a. Drawer
b. Drawee
c. Indorser
d. Payee
42. Who shall be given preference in case two or more persons offer to
pay a bill for the honor of different parties?
a. The person offering to pay the instrument in behalf of the
acceptor.
b. The person offering to pay the instrument in behalf of the drawer.
c. The person offering to pay the instrument in behalf of the payee.
d. The person offering to pay the instrument in behalf of the last
general indorser.
VII. Law on Corporation
1. Which of the following is a characteristic of a private corporation?

a. It is be created by operation of law.
b. It has no right of succession.
c. It has all the rights, powers and attributes of a person unless
denied by law.
d. It may be dissolved even without the consent of the state.
2. Which of the following is a necessary power of a private corporation?

a. Power to declare and distribute dividends
b. Power to enter into merger or consolidation
c. Power to sue
d. Power to issue checks
3. Which doctrine means that the decisions of the board of directors on act
of management cannot be reversed by the court of law?
a. Limited liability rule
b. Separate entity theory
c. Business judgment rule
d. Right of succession
4. Which of the following does not have juridical personality?

a. Ostensible corporation
b. De facto corporation
c. De jure corporation
d. Corporation by prescription
5. In which of the following corporate acts are preferred stocks classified as

non-voting in the Articles of Incorporation not allowed to vote?
a. Approval of management contract
b. Amendment of articles of incorporation
c. Dissolution of corporation
d. Merger or consolidation of corporations
6. What shares of stocks may be classified as no-par value shares of

stocks?
a. Common stocks
b. Preferred stocks
c. Both A and B
d. Neither A nor B
7. Which of the following corporations is not allowed to issue no-par value

shares?
a. Trust companies
b. Mining companies
c. Educational institution
d. Oil company
8. What is the minimum ownership of Filipinos in Public Utility?

a. 40%
b. 60%
c. 30%
d. None
9. Which of the following words may be included in the name of a Single

Person Corporation?
a. Corp.
b. Ltd.
c. Inc.
d. OPC
10. What is the effect of failure to submit by-laws under the Revised
Corporation Code?
a. The corporation remains to be a de jure corporation.
b. That is merely a non-automatic ground for corporation dissolution.
c. The corporation is ipso facto dissolved by operation of law.
d. The articles of incorporation will be rejected by SEC.
11. Which of the following is not a qualification of a member of board

of directors?
a. He must be a resident of the Philippines.
b. He must be a capacitated person.
c. He must be of legal age.
d. He must be a stockholder or subscriber of the corporation.
12. Which of the following corporate officers is required to be
stockholder-director?
a. Compliance officer
b. President
c. Secretary
d. Treasurer
13. Which of the following reasons of vacancy in the board of directors

does not allow the remaining members of the board constituting a
quorum to fill up the vacancy?
a. Disqualification
b. Abandonment of office
c. Expiration of term
d. Resignation
14. Which corporate act may not be validly performed by the executive
committee of the corporation?
a. Selection of independent external auditor
b. Approval of collectible bargaining agreement with labor union
c. Declaration of cash dividends
d. Incurring or increasing loan payable
15. It refers to a contractual right of incumbent shareholders to be

given the opportunity to purchase the shares at a reasonable price of co-
stockholders in a close corporation before it is offered to other persons.
a. Appraisal right
b. Preemptive right
c. Right of first refusal
d. Redeemable right
16. This doctrine means that the stockholders are liable only up to the
extent of their capital contribution..
a. Estoppel doctrine
b. Limited liability rule
c. Wasting asset doctrine
d. Trust fund doctrine
17. What type of dividend is treasury shares declared as dividends?
a. Property dividend
b. Stock dividend
c. Cash dividend
d. Scrip dividend
18. In which meeting is proxy voting not allowed?
a. Election of corporate officers
b. Meeting of executive committee
c. Meeting of board of directors
d. All of the above
19. Which right is not available to delinquent subscribers?

a. Right to dividends
b. Right to vote
c. Both A and B
d. Neither A nor B
20. Which right is available to subscribers who are not yet declared
delinquent?
a. Right to inspect corporate books
b. Right to vote
c. Both A and B
d. Neither A nor B
21. Which of the following is a valid consideration for the issuance of

shares of stocks?
a. Future services
b. Promissory note
c. Both A and B
d. Neither A nor B
22. When shall public sale of delinquent stocks be held counted from
the date of delinquency?
a. 60 days
b. 30 days
c. 10 days
d. Not less than 30 days but not more than 60 days
23. It refers to a business combination whereby two or more existing

corporations created a new corporation.
a. Merger
b. Consolidation
c. Joint arrangement
d. Joint venture
24. Which type of corporations it not allowed to be incorporated as a

close corporation?
a. Stock exchanges
b. Trading company
c. Review center
d. Restaurant business
25. What is the required vote for the revocation of the delegated power
of the board to amend by-laws?
a. At least majority of the board of directors with ratification of at
least 2/3 of the stockholders.
b. At least majority of board of directors with ratification of at least
majority of the stockholders.
c. At least 2/3 of the stockholders.
d. At least majority of the stockholders.
26. What is the required vote for the approval of management contract
when there is no interlocking directors between the managing and
managed corporation?
a. At least majority of the board of directors with ratification of at
least 2/3 of the stockholders for both managing corporation and
managed corporation.
b. At least majority of the board of directors with ratification of
at least majority of the stockholders for both managing
corporation and managed corporation.
c. At least majority of the board of directors with ratification of at
least 2/3 of the stockholders for managing corporation and at
least majority of the board of directors with ratification of at least
majority of the stockholders for managed corporation.
d. At least majority of the board of directors with ratification of at
least 2/3 of the stockholders for managed corporation and at least
majority of the board of directors with ratification of at least
majority of the stockholders for managing corporation.
27. What is the requirement for the fundamental amendment of the

articles of incorporation of stock corporation?
a. By at least 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.
b. By at least majority vote of the board of directors and
ratification vote of the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock.
c. By at least majority vote of the board of directors and the approval
vote of the stockholders representing at least two-thirds (2/3) of
the outstanding capital stock.
d. By at least majority vote of the board of directors and the oral
agreement of the stockholders representing at least two-thirds
(2/3) of the outstanding capital stock.
28. It refers to act committed by the corporation outside its express
powers, implied powers and incidental powers.
a. Illegal act
b. Unlawful act
c. Ultra vires act
d. Unauthorized act
29. It refers to a private corporation created for charitable purposes.

a. Eleemosynary corporation
b. Ecclesiastical corporation
c. Civil corporation
d. Lay corporation
30. How may a nonstock corporation be converted into a stock

corporation?
a. By mere amendment of articles of incorporation of nonstock
corporation
b. By dissolving a nonstock corporation and forming a new stock
corporation
c. Either A or B
d. Neither A nor B
31. In which corporation act is appraisal right available to a dissenting

stockholder?
a. Merger or consolidation of two or more corporations
b. Approval of management contract
c. Distribution of stock dividends
d. Increase or Incurring bond indebtedness
32. What is the term of office of a director of a stock corporation?

a. Five years
b. Three years
c. One year
d. Any of the above as long as provided in the by-laws
33. There are 1,100 outstanding common stocks in a private

corporation. Ten sits in the board will be filled up by the stockholders.
How many common stocks are necessary to obtain three guaranteed sits
in the board of directors?
a. At least 300 common stocks
b. At least 306 common stocks
c. At least 303 common stocks
d. At least 333 common stocks
34. What is the maximum limit for salary of board of directors?
a. 10% of net income before tax of the immediately succeeding year
b. 10% of net income before tax of the immediately preceding
year
c. 10% of net income before tax of the current year
d. 10% of net income after tax of the immediately succeeding year
35. There are 15 sits in the board of directors of a private corporation.

The board of directors held a meeting. 11 directors attended in the said
meeting. In the said meeting, the collective bargaining agreement with
the labor union was approved by 6 directors. Aside from that, the
corporate secretary was elected through the vote of 7 directors. Which
corporate act is valid?
a. Approval of collective bargaining agreement with the labor
union
b. Election of corporate secretary
c. Both A and B
d. Neither A nor B
36. Which is not a duty of a director of a private corporation?

a. Duty of loyalty
b. Duty of independence
c. Duty of diligence
d. Duty of obedience
37. Which of the following is an incorrect difference between a proxy

and voting trust agreement?
a. Proxy need not be notarized while voting trust agreement must be
notarized.
b. There is no transfer of title to proxy while there is transfer of title
to trustee.
c. Proxy is revocable at any time while trust agreement is irrevocable.
d. The proxy votes as an owner while the trustee votes as an
agent.
38. In which document shall denial of preemptive right be made for its
validity?
a. Articles of incorporation
b. By-laws
c. Either A or B
d. Both A and B
39. Which matter shall be provided in the articles of incorporation

instead of the by-laws?
a. Provisions on founder's shares
b. Formality of proxies
c. Time for holding annual election of directors
d. Procedures for issuance of certificate of stocks
40. Which matter may be provided in the by-laws and not necessarily
in the articles of incorporation?
a. Authorized capital stock of stock corporation
b. Creation of an executive committee
c. Term of existence of corporation
d. Place of principal office of the stock corporation in the Philippines
41. Which corporation act is not required to be ratified by the

stockholders?
a. Distribution of stock dividends
b. Approval of management contract
c. Acquisition of treasury shares
d. Adoption or amendment of by-laws
42. What is the nature of membership in a nonstock corporation?

a. Membership in a non-stock corporation and all rights arising
therefrom are always personal and non-transferable.
b. Membership in a non-stock corporation and all rights arising
therefrom are personal and non-transferable, unless the
articles of incorporation or the by-laws otherwise provide.
c. Membership in a non-stock corporation and all rights arising
therefrom are commercial and therefore transferable, unless the
articles of incorporation or the by-laws otherwise provide.
d. Membership in a non-stock corporation and all rights arising
therefrom are always commercial and therefore always
transferable.
43. Which shares of stocks may be issued below its par value as long
as the price is reasonable?
a. Common stocks
b. Treasury stocks
c. Redeemable preferred stocks
d. Convertible preferred stocks
44. What is the legal capital in no-par value common stocks?

a. The total issued value of both shares issued and shares
subscribed.
b. The total issued value of shares issued only.
c. The total issued value of shares subscribed only.
d. The total consideration received.
45. When does the juridical personality of a private corporation

commence?
e. From the moment of execution of articles of incorporation by the
founders or incorporators of a private corporation.
f. From the moment of submission of articles of incorporation by the
founders or incorporators to the Securities and Exchange
Commission.
g. From the moment of receipt by the Securities and Exchange
Commission of the articles of incorporation from the founders or
incorporators of a private corporation.
h. From the moment of issuance by Securities and Exchange
Commission of the Certificate of Incorporation/Registration
under its official seal.
VIII. Cooperative Law
1. Which of the following is not a cooperative principle?

a. Education, Training and Information
b. Cooperation among Cooperatives
c. Member Economic Participation
d. Taxability of Cooperatives
2. It is a type of cooperative the members of which are natural persons.

a. Primary Cooperative
b. Secondary Cooperative
c. Tertiary Cooperative
d. Intermediate Cooperative
3. Which of the following is not a purpose of a cooperative?

a. To promote and advance the economic, social and educational
status of the members
b. To encourage and promote self-help or self-employment as an
engine for economic growth and poverty alleviation
c. To generate funds and extend credit to the members for productive
and provident purposes
d. To create monopoly or business considered as restraint of
trade
4. What is the number of cooperators or founders of a primary cooperative?

a. 15 or more natural persons
b. Not less than 5 but not more than 15 natural persons
c. 5 but not more than 10 natural persons
d. 10 or more natural persons
5. What is the maximum foreign investment or ownership in a cooperative?

a. 100%
b. 40%
c. 30%
d. 0%
6. When does a cooperative formed and organized under Cooperative Code

acquire juridical personality?
a. From the date of execution of Articles of Cooperation by the
members.
b. From the date of submission of Articles of Cooperation to CDA.
c. From the date of issuance by CDA of Certificate of
Registration under its official seal.
d. From the date of meeting of minds among the members.
7. What is a conclusive evidence of juridical personality of a cooperative and

its due registration with CDA unless it is proved that such registration
has been cancelled?
a. Articles of Cooperation signed by the members
b. Cooperative By-laws signed by the members
c. Certificate of Registration issued by CDA under its official seal
d. Certificate of Registration issued by BIR under its official seal
8. It shall be the highest policy-making body of the cooperative and shall

exercise such powers as are stated in the Cooperative Code, in the
articles of cooperation and in the bylaws of the cooperative.
a. General Assembly
b. Board of Directors
c. Board of Trustees
d. Executive Committee
9. It shall be the body in a cooperative responsible for the strategic
planning, direction-setting and policy-formulation activities of the
cooperatives.
a. General Assembly
b. Board of Directors
c. Board of Trustees
d. Executive Committee
10. What type of cooperative is absolutely exempted from all taxes and
fees imposed by national internal revenue taxes and other tax laws even
without qualification?
a. Duly registered cooperative with CDA that does not transact
business with non-members or the general public.
b. Duly registered cooperative with CDA that transacts business with
members, non-members and the general public.
c. Duly registered cooperative with CDA with accumulated reserves
and undivided net savings of not more than P10,000,000.
d. Duly registered cooperative with CDA with accumulated reserves
and undivided net savings of more than P10,000,000.
IX. Banking Laws
1. What is the government instrumentality created in 1963 by virtue of

Republic Act 3591 to insure the deposits of all banks which are entitled
to the benefits of insurance and considered as an an attached agency of
the Department of Finance?
a. Development Bank of the Philippines (DBP)
b. Landbank of the Philippines (LBP)
c. Philippine Deposit Insurance Corporation
(PDIC)
d. Bangko Sentral ng Pilipinas (BSP)
11. Which of the following deposits is not insured by PDIC?

a. Savings Deposit in Metrobank Manila Branch
b. Certificate of Time Deposit in Philippine National Bank Makati
Branch
c. Bank Deposit in Japan Bank Tokyo Branch
d. Special Savings in Bank of Philippine Islands Taguig Branch
12. What is the prescriptive period for depositors to file their deposit
insurance claims to PDIC from date of takeover by PDIC of a closed
bank?
a. Within 2 years from PDIC’s takeover of the closed bank
b. Within 1 years from PDIC’s takeover of the closed bank
c. Within 3 years from PDIC’s takeover of the closed bank
d. Within 4 years from PDIC’s takeover of the closed bank
13. The following are the exceptional cases when the BIR
Commissioner may inspect bank deposits, except
a. When there is application of tax compromise liability by a taxpayer
on the ground of financial incapacity
b. To determine the gross estate for computation of estate tax’s
liability
c. When a request for tax information of specific taxpayers made by a
foreign tax authority pursuant to a tax treaty under The Exchange
of Information on Tax Matters Act of 2009
d. To determine the taxable income of politicians
14. Which type of bank deposit of impeachable officer may be

examined by impeachment court without consent of the impeachable
officer?
a. Philippine Peso Bank Deposit
b. Foreign Currency Bank Deposit
c. Both A and B
d. Neither A nor B
15. Which government agency has the authority to reactivate an

unclaimed balance account?
a. Bureau of Internal Revenue
b. Bureau of Customs
c. Bureau of Treasury
d. Bureau of Unclaimed Balance
16. Which of the following is a predicate crime of Money Laundering

Offense?
a. Jueteng and masiao
b. Adultery
c. Rebellion
d. Libel
17. It refers to a type of transaction that shall be reported by a covered
person to the Anti-Money Laundering Council because the transaction
breaches the quantitative threshold for reporting purposes.
a. Covered transaction
b. Suspicious transaction
c. Reportable transaction
d. Exempted transaction
18. Which of the following persons is not considered covered persons

under Anti-Money Laundering Law?
a. Auditing Firm rendering audit services concerning their audit
fee
b. Insurance company
c. Banking institution
d. Stock brokers
19. What is the minimum number of days for maintaining a balance in

the checking account to cover the check he issued for the drawer to be
exempted from conviction for violation of BP 22?
a. A period of at least 90 days from the maturity date of check
b. A period of at least 120 days from maturity date of check
c. A period of at least 150 days from maturity date of check
d. A period of at least 180 days from maturity date of check
X. Other Special Laws
1. Which of the following is considered a registrable security under

Securities Regulation Code?
a. Deed of sale
b. Options and warrants
c. Deed of lease
d. Contract of loan
2. He refers to person who buys sells securities for his/her own account
in the ordinary course of business.
a. Issuer
b. Broker
c. Dealer
d. Associated person of a broker or dealer
3. It means a contract, transaction or scheme (collectively "contract")

whereby a person invests his money in a common enterprise and is led to
expect profits primarily from the efforts of others. It is presumed to exist
whenever a person seeks to use the money or property of others on the
promise of profits.
a. Investment contract
b. Share options
c. Warrants
d. Debentures
4. It refers to the framework of rules, systems and processes in the

corporation that governs the performance by the Board of Directors and
Management of their respective duties and responsibilities to the
stockholders.
a. Corporate governance
b. Corporate by-laws
c. Articles of incorporation
d. Corporate regulation
5. Who shall be the chairman of the audit committee of a corporation?

a. Chairman of the Board of Directors
b. Independent director
c. President of the Corporation
d. Secretary of the Corporation
6. Under the 1987 Constitution, which of the following industry must be

fully owned and controlled by Filipinos?
a. Educational institution
b. Mass media
c. Advertising
d. Public utility
7. This test of nationality of corporation means that corporation is a

national of the country under whose laws it has been organized and
registered.
a. Place of incorporation test
b. Control test
c. Dominancy test
d. Grandfather rule test
8. What is the legal term of a patent that gives its owner the exclusive
right to use the covered invention?
a. 20 years
b. 10 years
c. 15 years
d. 25 years
9. It is an intellectual property that refers to the name or designation

identifying or distinguishing an enterprise.
a. Distinguishing name
b. Tradename
c. Patent
d. Copyright
10. It refers to a type of right provided by a copyright which makes it

possible for the creator to undertake measures to maintain and
protect the personal connection between himself and the work.
a. Economic rights
b. Moral rights
c. Material rights
d. Intellectual rights
11. It refers to any information whether recorded in a material form or

not, from which the identity of an individual is apparent or can be
reasonably and directly ascertained by the entity holding the
information, or when put together with other information would
directly and certainly identify an individual.
a. Confidential information
b. Sensitive information
c. Personal information
d. Privileged information
12. Which of the following is not a general data privacy principle?

a. Transparency
b. Legitimate purpose
c. Proportionality
d. Immorality
13. It refers to information or the representation of information, data,

figures, symbols or other modes of written expression, described or
however represented, by which a right is established or an obligation
extinguished, or by which a fact may be prove and affirmed, which is
receive, recorded, transmitted, stored, processed, retrieved or
produced electronically.
a. Electronic document
b. Paper document
c. Manual document
d. Computerized document
14. It refers to single common site or location, or a single online website
or portal designated for the Business Permits and Licensing System
(BPLS) of an LGU to receive and process applications, receive
payments, and issue approved licenses, clearances, permits, or
authorizations.
a. Business One Stop Shop (BOSS)
b. Business Only Scope Store (BOSS)
c. Business On Site Scheme (BOSS)
d. Business Own Set Style (BOSS)
15. It refers to any individual whether or not officially involved in the

operation of a government office or agency who has access to people
working therein, and whether or not in collusion with them, facilitates
speedy completion of transactions for pecuniary gain or any other
advantage or consideration.
a. Fixer
b. Arranger
c. Backer
d. Contact
Auditing Theory
1. RA 9298 provides that the vice chairman of the Board of Accountancy shall be
chosen by the
a. President of the Philippines
b. Professional Regulatory Board of Accountancy
c. Professional Regulatory Commission
d. Philippine Institute of Certificate Public Accountants
2. Section 14 of RA 9298 enumerates the following requisites for an applicant to the

CPA Board examination, except
a. He must be of good moral character.
b. He must be a natural born Filipino citizen.
c. He must not have been convicted of any crime involving moral turpitude.
d. He is a holder of the degree BSA from any educational institution
accredited by CHED.
3. Under RA 9298, which of the following body is represented both in AASC and
FRSC?
a. Bureau of Internal Revenue (BIR)
b. Finance Executives of the Philippines (FINEX)
c. Securities and Exchange Commission
d. Bureau of Customs
4. The New Code of Ethics for Professional Accountants promulgated by the

Professional Board of Accountancy in 2016 defines this fundamental principle as
professional accountant should not allow bias, conflict of interest or undue
influence of others to override professional or business judgments.
a. Integrity
b. Independence
c. Objectivity
d. Professional Behavior
5. The New Code of Ethics for Professional Accountant defines this as the fee
calculated on a predetermined basis relating to the outcome or result of the
transaction or the result of the work performed. This fee is prohibited by the New
Code of Ethics for Professional Accounts in engagement to render assurance
services.
a. Fixed fee
b. Compromised fee
c. Variable fee
d. Contingent fee
6. What is the overall purpose of audit of financial statements according to PSA 200
Redrafted and Revised?
a. To enhance the degree of confidence of intended users in the financial
statements.
b. To express an opinion whether the financial statements are prepared, in
all respects, in accordance with an applicable financial reporting
framework.
c. To provide reasonable assurance that the financial statements are free
from misstatements whether due to fraud or error.
d. To design the audit procedures to provide reasonable assurance that the
financial statements are free from material misstatements due to
noncompliance.
7. PSA 210 provides that the terms of the audit engagement shall be recorded in an
audit engagement letter which shall include the following, except
a. Reference to the expected form and content of any reports to be issued by
the auditor.
b. Basis for computation of materiality level.
c. Identification of the applicable financial reporting framework for the
preparation of the financial statements.
d. Billing arrangements and term of payment of the audit fee.
8. PSA 210 provides that the auditor shall consider the justification given by the
management for its request to change the terms of audit engagement agreed
upon. Which of the following may be considered by the auditor as a reasonable
basis for requesting a change in the terms of audit engagement?
a. Misunderstanding concerning nature of the service originally requested.
b. There is no change in the circumstances which may affect the entity’s
requirement.
c. Inability of the auditor to obtain sufficient appropriate evidence concerning
receivables as a result scope limitation.
d. There is non-disclosure of material information required by applicable
financial reporting framework in the notes to financial statements.
9. PSQC 1 Redrafted provides that this major element of a system of quality control
of a firm should be established to provide it with reasonable assurance that the
policies and procedures relating to the system of quality control are relevant,
adequate and operating effectively.
a. Leadership responsibilities for quality on audits
b. Monitoring
c. Engagement performance
d. Human resources
10. PSA 230 Redrafted provides for the following principles concerning audit
documentation. Which is incorrect?
a. Audit documentation may be allowed as a substitute for the entity’s
accounting records.
b. The auditor need not include in audit documentation superseded drafts of
working papers and financial statements, notes the reflect incomplete or
preliminary thinking, previous copies of documents corrected for
typographical or other errors, and duplicates of documents.
c. Audit documentation provides evidence that the audit complies with the
Philippine Standards on Auditing.
d. Audit documentation is defined as the record of audit procedures
performed, relevant audit evidence obtained, and conclusions the audit
reached.
11. The following are the purposes of audit documentation according to PSA 230,
except
a. Justifying the gross negligence committed by the auditor in the course of
the audit.
b. Assisting members of the engagement team responsible for the
supervision to direct and supervise the audit work and to discharge their
review responsibilities in accordance of PSAs.
c. Retaining a record of matters of continuing significance to future audits.
d. Enabling the conduct of quality control reviews and inspections in
accordance with PSQC1.
12. Why is it necessary to prepare sufficient and appropriate audit documentation on

a timely basis?
a. Documentation prepared after the audit work has been performed is likely
to be more accurate than documentation prepared at the time such work is
performed.
b. It helps to enhance the quality of the audit and facilitates the effective
review and evaluation of the audit evidence obtained and conclusions
reached before the auditor’s report is finalized.
c. It enables the auditor to charge higher audit fees because of the lesser
time consumed with the client.
d. It provides guarantee that the auditing firm comply with the requirements
of PSQC1:System of Quality Control and the Code of Ethics.
13. The following are examples of circumstances that may indicate the possibility
that the financial statements may contain a material misstatement resulting from
fraud, except
a. Last-minute adjustments that significantly affect financial results.
b. Evidence of employees’ access to systems and records consistent with
that necessary to perform their authorized duties.
c. Transactions that are not recorded in a complete or timely manner.
d. Unsupported or unauthorized balances or transactions.
14. Management fraud or fraudulent financial reporting may be accomplished in the

following manner, except
a. Colluding with a competitor by disclosing technological data in return for
payment.
b. Inappropriately adjusting assumptions and changing judgments used to
estimate account balances.
c. Recording fictitious journal entries particularly close to the end of the
reporting period.
d. Omitting, advancing or delaying recognition in the financial statements of
events and transactions that occurred during the reporting period.
15. PSA 260 provides that the auditor shall have the responsibility to communicate
the following matters to those charged with governance, except
a. Material weaknesses, if any, in the design, implementation or operating
effectiveness of internal control that have come to the auditor’s attention
and have been communicated to management as required by PSA 315.
b. Significant difficulties, if any, encountered by the auditor during the audit.
c. The auditor’s views about significant qualitative aspects of the entity’s
accounting practices, including accounting policies, estimates and
financial disclosures.
d. The detailed audit program including the scope, timing, procedures and
audit evidence gathered by the auditor during the audit.
16. PSA 300: Planning an Audit of Financial Statements provides that the auditor
shall establish an overall audit strategy that sets the scope, timing and direction
of the audit. In establishing the overall audit strategy, the auditor shall perform
the following, except
a. Ascertain the reporting objectives of the engagement to plan the timing of
the audit and the nature of the communications required.
b. Ascertain the type of opinion to be issued for the audit engagement.
c. Consider the factors that, in the auditor’s professional judgment, are
significant in directing the engagement team’s efforts.
d. Consider the results of the preliminary engagement activities and where
applicable, whether the knowledge gained on other engagements
performed by the engagement partner for the entity is relevant.
17. After performing risk assessment procedures, the auditor decided to perform its
inventory count at year-end. Which of the following statements is incorrect?
a. The auditor decided to set-up the level of detection risk at a low level.
b. The auditor is planning to rely on the internal control of the company
related to its inventory.
c. The combined level of control risk and detection risk is assessed at the
maximum level.
d. The internal control of the company related to the inventory appears to be
inadequate and weak.
18. After performing risk assessment procedures, the auditor determined that the
internal control design of the company is good and being implemented. Which of
the following statements is proper?
a. The auditor shall not perform test of control.
b. The auditor shall perform its substantive test at year-end.
c. The auditor shall select a smaller sample size for its substantive test.
d. The auditor shall perform test of details for its substantive test.
19. Which of the following statements concerning planning an audit of financial

statements is incorrect?
a. The purpose and objective of planning the audit are different for initial and
recurring engagement.
b. The engagement partner and other key members of the engagement team
shall be involved in planning the audit, including and participating in the
discussion among engagement team members.
c. The auditor shall document the overall audit strategy, the audit plan and
significant changes made during the audit engagement to the overall audit
strategy or the audit plan.
d. Planning an audit involves establishing the overall audit strategy for the
engagement and developing an audit plan.
20. PSA 315 defines them as procedures performed to obtain an understanding of

the entity and its environment, including the entity’s internal control, to identify
and assess the risks of material misstatements whether due to fraud or error at
the financial statement and assertion levels.
a. Test of controls
b. Substantive tests
c. Risk assessment procedures
d. Preliminary engagement activities
21. PSA 315 provides that internal control, no matter how effective, can provide an
entity with only reasonable assurance about achieving the entity’s financial
reporting objectives because of the following inherent limitations, except
a. An exception report is not effectively used because the individual
responsible for reviewing the information does not understand its purpose
or fails to take appropriate action.
b. Management may enter into side agreements with customers that alter the
terms and conditions of the entity’s standard sales contracts which may
result in improper revenue recognition.
c. Edit checks in a software program that are designed to identify and report
transactions that exceed specified credit limits may be overridden or
disabled.
d. The company has unlimited resources and funds to implement an
outstanding internal control.
22. PSA 315 defines this element of internal control as the one that includes the
governance and management functions and the attitudes, awareness, and
actions of those with governance and management concerning the entity’s
internal control and its importance in the entity.
a. Monitoring
b. Control environment
c. Entity’s risk assessment process
d. Information system
23. An auditor obtains an understanding of the entity and its environment including
its internal control through the following procedures, except
a. Inquiries of the management about the likelihood of losing in the litigation.
b. Performing analytical procedures to determine transactions which might
have effect on the financial statements.
c. Inspection of the company’s system design.
d. Observing whether the company’s personnel implement or not the system.
24. PSA 320 explains the concept of materiality in planning and performing an audit.
Which of the following statements concerning materiality is incorrect?
a. Misstatements, including omissions, are considered to be material if they,
individually or in the aggregate, could reasonably be expected to influence
the economic decisions of users taken on the basis of the financial
statements.
b. Judgments about materiality are made in light of surrounding
circumstances, and are affected by the size or nature of misstatement or
combination of both.
c. The auditor’s determination of materiality is a matter of professional
judgment and is affected by the auditor’s perception of the financial
information needs of users of the financial statements.
d. PSA 320 establishes a predetermined mathematical formula for
computation of materiality level for different industries.
25. In setting up materiality level, the auditor may use a percentage of the following
benchmarks, except
a. Financial budget or financial forecast for the year
b. Audited financial statements of the previous year
c. Audit opinion of the previous year
d. Annualized interim financial reports
26. These are audit procedures designed to evaluate the operating effectiveness of
controls in preventing or detecting and correcting material misstatements at the
assertion level.
a. Substantive tests of details
b. Tests of controls
c. Substantive analytical procedures
d. Risk assessment procedures
27. PSA 315 provides that the auditor shall design and perform tests of control under
any of the following situations, except
a. The auditor’s assessment of risk of material misstatement at the assertion
level includes an expectation that the controls are operating effectively.
b. The combined level of assessed control and inherent risk is set at a
maximum level.
c. The auditor intends to rely on the operating effectiveness of controls in
determining the nature, time and extent of substantive procedures.
d. Substantive procedures cannot provide sufficient appropriate evidence at
the assertion level.
28. The following are examples of tests of controls, except
a. Reperformance of the system design to determine its consistent
application.
b. Inspection of purchase order to determine if it is supported by purchase
requisition.
c. Observation of the company personnel to determine proper segregation of
duties.
d. Confirmation of bank balances and collateral from the client’s banks.
29. Which of the following statements concerning PSA 500:Audit Evidence is
incorrect?
a. Sufficiency of audit evidence refers to the quantity of audit evidence while
appropriateness refers to the quality of audit evidence that is its relevant
and reliability in providing support for the auditor’s conclusion.
b. Audit evidence refers to the information used by the auditor in arriving at
the conclusions on which the auditor’s opinion is based and it includes
only the information contained in the accounting records underlying the
financial statements.
c. The auditor shall design and perform audit procedures that are
appropriate in the circumstances for the purpose of obtaining sufficient
appropriate audit evidence to be able to draw reasonable conclusion on
which to base the auditor’s opinion.
d. Most of the auditor’s work in forming an opinion consists of obtaining and
evaluating audit evidence.
30. Which of the following statements pertains to the audit procedures of

reperformance?
a. It involves the auditor’s independent execution of procedures or controls
that were originally performed as part of the entity’s internal control.
b. It encompasses the investigation of identified fluctuations and
relationships that are inconsistent with other relevant information or
deviate significantly from predicted amounts.
c. It consists of looking at process or procedure performed by others.
d. It involves examining records or documents whether external or internal in
paper or electronic form.
31. Which of the following generalizations regarding the reliability of audit evidence is
correct?
a. Audit evidence obtained from inquiry regarding the application of internal
control is more reliable that audit evidence obtained from observation
made by the auditor regarding the application of internal control.
b. A subsequent oral representation of the matters discussed in a meeting is
more reliable than the written minutes of meetings contemporaneously
written.
c. Account receivable confirmation from the client’s customer is more reliable
than the sales invoice provided by the client.
d. Audit evidence provided by original documents and that provided by
photocopies or facsimiles or documents that have been filled or digitized
have the same weight of reliability.
32. Which of the following statements concerning the generalizations about the
reliability of audit evidence is correct?
a. The reliability of audit evidence is increased when it is obtained from
sources related to the entity.
b. The reliability of audit evidence that is generated internally is increased
when the related controls, including those over its preparation and
maintenance, imposed by the entity are ineffective.
c. Audit evidence obtained directly by the auditor (for example, observation
of the application of a control) is less reliable than audit evidence obtained
indirectly or by inference (for example, inquiry about the application of a
control).
d. Audit evidence in documentary form, whether paper, electronic, or other
medium, is more reliable than evidence obtained orally.
33. It refers to the ability of the management’s expert to exercise the nature and level
of his expertise in the circumstances.
a. Competence
b. Capability
c. Objectivity
d. Independence
34. Which of the following audit evidence is generally most objective?

a. Auditor’s bank reconciliation prepared using monthly bank statement
b. Confirmation reply from the client’s external legal counsel
c. Recomputed employee benefit expense using management’s expert
actuarial valuation
d. Written representation from management concerning related party
relationship and transaction
35. In which of the following instances is negative confirmation request inapplicable?

a. The auditor has assessed the risk of material misstatement at maximum
and has not obtained sufficient appropriate audit evidence regarding the
operating effectiveness of controls relevant to the assertion.
b. The population of items subject to negative confirmation procedures
comprises a large number of small, homogeneous, account balances,
transactions or conditions.
c. A very low exception rate is expected.
d. The auditor is not aware of circumstances or conditions that would cause
recipients of negative confirmation requests to disregard such requests.
Solution in Auditing Theory Final Preboard
1. B
2. B
3. C
4. C
5. D
6. A
7. B
8. A
9. B
10. A
11. A
12. B
13. B
14. A
15. D
16. B
17. B
18. C
19. A
20. C
21. D
22. B
23. A
24. D
25. C
26. B
27. B
28. D
29. B
30. A
31. C
32. D
33. B
34. A
35. A
AFAR
1. It encompasses the process of analyzing, classifying, summarizing and communicating all

transactions that are involved in the receipt and disbursement of all government funds
and properties, and interpreting the results thereof.
a. Responsibility accounting
b. Government accounting
c. Financial accounting
d. Management accounting
2. It refers to the newest system adopted by the Commission on Audit for the analyzing,
classifying, summarizing and communicating all transactions that are involved in the
receipt and disbursement of all government funds and properties, and interpreting the
results thereof.
a. New government accounting system
b. Government accounting manual
c. Fund accounting
d. Public fund accounting
3. Which of the following cash in bank accounts is used by national government agencies
for disbursement?
a. Cash Treasury/Agency Deposit Regular
b. Cash – Modified Disbursement System – Regular
c. Cash in Bank Land Bank of the Philippines
d. Cash in Bank Bangko Sentral ng Pilipinas
4. Which of the following cash in bank accounts is used by national government agencies
for cash remittances to Bureau of Treasury?
a. Cash Treasury/Agency Deposit Regular
b. Cash – Modified Disbursement System – Regular
c. Cash in Bank Land Bank of the Philippines
d. Cash in Bank Bangko Sentral ng Pilipinas
5. The receipt of notice of cash allocation by a national government agency shall be credited
by the said agency to
a. Cash – Modified Disbursement System – Regular
b. Cash Treasury/Agency Deposit Regular
c. Subsidy income from national government
d. Advances from national government
6. On December 31, 2020, the Department of Finance billed its lessee on one of its
buildings in the amount of P10,000. On January 31, 2017, the Department of Finance
collected all of the accounts receivable. On February 28, 2017, the Department of
Finance remitted the entire collected amount to the Bureau of Treasury. What is the
journal entry to record the remittance by to the Bureau of Treasury?
a. Debit – Accounts Receivable P10,000 and Credit – Rent Income P10,000

b. Debit – Accounts Receivable P10,000 and Credit – Retained Earnings P10,000
c. Debit – Cash Collecting Officers P10,000 and Credit – Accounts Receivable P10,000
d. Debit – Cash – Treasury/Agency Deposit, Regular – P10,000 and Credit Cash –
Collecting Officer – P10,000
7. On January 1, 2016, the Department of Public Works and Highways (DPWH) received a
P10,000,000 appropriation from the national government for the acquisition of
constructionmachinery. On February 1, 2016, DPWH received the allotment from the
Department of Budget and Management. On March 1, 2016, DPWH entered into a
contract with CAT Inc. for the acquisition of the machinery with a price of P8,000,000.
On April 1, 2016, DPWH received the Notice of Cash Allocation from Department of
Budget and Management net of 1% withholding tax for income tax of supplier and 5%
withholding of Final Tax on VAT of supplier. On May 1, 2016, CAT Inc. delivered the
machinery to DPWH. On June 1, 2016, DPWH paid the obligation to CAT Inc. On July
1, 2016, DPWH remitted the withheld income tax and final VAT to BIR. What is the
journal entry on March 1, 2016?
a. No entry but just posting to appropriate RAPAL
b. No entry but just posting to appropriate RAPAL and to RAOD
c. No entry but just posting of ORS (Obligation Request and Status) to appropriate
RAOD
d. Debit Machinery P8,000,000 and credit Accounts Payable P8,000,000
8. Using the same data in number 115, what is the journal entry on April 1, 2016?
a. Debit Cash-MDS, Regulary P7,520,000 and Credit Subsidy Income from National
Government P7,520,000.
b. Debit Machinery P8,000,000 and Credit Accounts Payable P8,000,000
c. Debit Accounts Payable P8,000,000 and Credit Due to BIR P480,000 and Cash-MDS,
Regular P7,520,000.
d. Debit Due to BIR P480,000 and Credit Subsidy Income from National Government
P480,000.
9. Department of Health (DOH) received Notice of Cash Allocation in the amount of

P100,000 from Department of Budget and Management. DOH made a total cash
disbursements in the amount of P95,000. What is the journal entry to recognize reversion
of unused Notice of Cash Allocation by DOH in its books?
a. Debit Subsidy Income from National Government P5,000 and credit Cash-MDS,
Regular P5,000.
b. Debit Retained Earnings of DFA P5,000 and credit Cash-MDS, Regular P5,000.
c. Debit Expenses of DFA P5,000 and credit Cash-MDS, Regular P5,000.
d. Debit Investment of DFA P5,000 and credit Cash-MDS, Regular P5,000.
10. The Bureau of Treasury received P20,000 cash remittance from Department of Agrarian
Reform (DAR) from its miscellaneous income. What is the journal entry of the Bureau of
Treasury in its accounting books to record the receipt of cash remittance from the income
of a national government agency?
a. Debit Cash in Bank, Local Bank or BSP P20,000 and Credit Cash-Treasury/Agency
Deposit, Regular P20,000.
b. Debit Cash in Bank, Local Bank or BSP P20,000 and Credit Miscellaneous Income of
DA P20,000.
c. Debit Cash in Bank, Local Bank or BSP P20,000 and Credit Savings of DA, Regular
P20,000.
d. Debit Cash in Bank, Local Bank or BSP P20,000 and Credit Cash-Collecting Officer, DA
P20,000.
11. Which of the following funds shall be classified as temporarily restricted net asset in
statement of financial position of nonprofit organization?
a. Board designated plant fund
b. Term endowment fund
c. Regular endowment fund
d. Current operation fund
12. Which of the following funds shall be classified as unrestricted net asset in statement of
financial position of nonprofit organization?
a. Internally restricted fund
b. Plant endowment fund
c. Annuity fund
d. Life income fund
13. In the statement of activities, expenses of nonprofit organization shall be recorded only as
reduction from
a. Temporarily restricted net assets
b. Unrestricted net assets
c. Permanently restricted net assets
d. Current liability
14. Last year, a nonprofit organization received a contribution with a donor restriction for
educational scholarship of its members. In the current year, the nonprofit organization
fully spent the said contribution for the intended purpose. What is the effect of this
expenditure to current year’s change in net assets?
a. It will increase the temporarily restricted net assets.
b. It will not affect the unrestricted net assets.
c. It will not affect the total net assets.
d. It will decrease the permanently restricted net assets.
15. In the statement of cash flows of nonprofit organization, how shall the following cash
flows be presented?
I. Cash receipts from other income and gain
II. Cash payments for the acquisition of equipment
III. Cash receipts from donor who imposed term restriction
a. Operating, Investing, Financing
b. Investing, Financing, Operating
c. Financing, Operating, Investing
d. Operating, Financing, Investing
For Numbers 16 – 18
On the first year of operations of a non-profit organization, the following transactions occurred:
 The non-profit organization received P1,000,000 fund from a donor who stipulated that it
shall be invested indefinitely and the dividend from such investment shall be used for
research project of the organization. Dividend amounting to P150,000 was received
during the year but only P50,000 was spent for the research project.
 The non-profit organization received P300,000 fund from a donor who stipulated that it
shall be used for the acquisition of service car. P100,000 of the fund was used for the
acquisition of a service car with useful life of 5 years. The car was acquired at the middle
of the year.
 The non-profit organization received P500,000 fund from a donor who stipulated that it
shall be used based on the discretion of the Board of Trustees of the non-profit
organization. P100,000 was used by the organization for the acquisition of souvenir items
which were sold by the non-profit organization for P150,000. The remaining P400,000
was designated by the Board of Trustees for future fundraising projects.
16. What is the amount of permanently restricted net assets at the end of the first year?
a. P1,100,000
b. P1,300,000
c. P1,200,000
d. P1,000,000
17. What is the amount of temporarily restricted net assets at the end of the year?
a. P100,000
b. P300,000
c. P200,000
d. P700,000
18. What is the amount of unrestricted net assets at the end of the year?
a. P640,000
b. P540,000
c. P590,000
d. P630,000
Non-profit Organization – Statement of Activities and Statement of Cash Flows
For Numbers 19 - 22
On January 1, 2020, a non-profit organization, received P1,000,000 cash donation from a donor
who stipulated that the amount should be invested indefinitely in revenue producing investment.
The deed of donation also provides that the dividend income shall be used for the acquisition of
computers of the non-profit organization.
On December 31, 2020, the non-profit organization received P100,000 cash as dividend income
from the investment of the fund.
On January 1, 2021, the non-profit organization acquired a computer at a cost of P20,000 with a
useful life of 5 years without residual value.
19. In the statement of activities of the statement the NPO for the year ended December 31,
2020, which of the following is the proper effect of the transactions?
a. Increase in temporarily restricted net assets by P100,000.
b. Increase in unrestricted net assets by P10,000,000.
c. Increase in unrestricted net assets by P16,000.
d. Decrease in temporarily restricted net assets by P20,000.
20. In the statement of activities of the statement the NPO for the year ended December 31,
2021, which of the following is the proper effect of the transactions?
a. Increase in temporarily restricted net assets by P100,000.
b. Increase in unrestricted net assets by P1,000,000.
c. Increase in unrestricted net assets by P16,000.
d. Decrease in temporarily restricted net assets by P100,000.
21. How shall the cash flows be reported in NPO’s Statement of Cash Flows for the year
ended December 31, 2020?
a. Cash receipts from operating activities by P100,000.
b. Cash receipts from financing activities by P1,100,000.
c. Cash disbursements for investing activities by P50,000.
d. Cash disbursements for financing activities by P1,000,000
22. How shall the cash flows be reported in NPO’s Statement of Cash Flows for the year
ended December 31, 2021?
a. Cash receipts from operating activities by P100,000.
b. Cash receipts from financing activities by P1,100,000.
c. Cash disbursements for investing activities by P20,000.
d. Cash disbursements for investing activities by P100,000.
23. IAS 21 defines it as the currency of the primary economic environment in which the
entity operates.
a. Foreign currency
b. Presentation currency
c. Functional currency
d. Legal tender
24. IAS 21 defines it as the currency other than the functional currency of the entity.
a. Foreign currency
d. Legal tender
25. Under IAS 21, what is the initial measurement of foreign currency transaction?
a. Historical rate for monetary items and closing rate for nonmonetary items
b. Historical rate for nonmonetary items and closing rate for monetary items
c. Historical rate for both monetary items and nonmonetary items
d. Closing rate for both monetary items and nonmonetary items
26. Under IAS 21, what is the subsequent measurement of foreign currency denominated
monetary items?
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate
27. Under IAS 21, what is the subsequent measurement of foreign currency denominated
nonmonetary items?
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate
28. Under IAS 21, in which of the following items will foreign currency gain or loss be
recognized?
a. Income tax payable
b. Prepaid asset
c. Depreciation expense
d. Inventory
29. Under IAS 21, in which of the following items will foreign currency gain or loss not be
recognized?
a. Accounts receivable
b. Interest payable
c. Sales
d. Dividends payable
30. Under IAS 21, foreign exchange differences arising from translating foreign currency
denominated transactions to functional currency shall be recognized in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
c. Retained earnings
d. Profit or loss
31. IAS 21 defines it as the currency in which the financial statements are presented.
a. Foreign currency
d. Legal tender
32. Under IAS 21, items of assets and liabilities at functional currency shall be translated into
presentation currency at
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate
33. Under IAS 21, items of equity other than retained earnings at functional currency shall be
translated into presentation currency at
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate
34. Under IAS 21, than retained earnings at functional currency shall be translated into
presentation currency at
a. Historical rate
b. Closing rate
c. Average rate
d. It shall not be translated
35. Under IAS 21, items of income and expenses at functional currency shall be translated
into presentation currency at
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate
36. Under IAS 21, adjustments arising from translating functional currency into presentation
currency shall be presented in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
d. Profit or loss
37. Under IAS 21, translations adjustments arising from translating functional currency into
presentation currency if realized shall be reclassified in
a. Other comprehensive income
b. Share premium
d. Profit or loss
On November 1, 2020, an entity acquired on account goods from a foreign supplier at a cost of
$1,000. The accounts payable are paid on January 30, 2021.
On December 1, 2020, an entity sold on account the said goods to a foreign customer at a selling
price of $1,500. The accounts receivable are collected on February 28, 2021.
The entity is operating in Philippine economy wherein the functional currency is the Philippine
Peso.
The following direct exchange rates are provided:

11/1/2020 12/1/2020 12/31/2020 1/30/2021 2/28/2021
Buying spot P40 P39 P45 P43 P42
rate
Selling spot P42 P40 P47 P46 P45
rate
38. What is the sales revenue to be reported by the entity for the year ended December 31,
2020?
a. P58,500
b. P60,000
c. P67,500
d. P72,000
39. What is the cost of sales to be reported by the entity for the year ended December 31,
2020?
a. P40,000
b. P42,000
c. P45,000
d. P47,000
40. What is the book value of account receivable on December 31, 2020?
a. P58,500
b. P60,000
c. P67,500
d. P72,000
41. What is the book value of accounts payable on December 31, 2020?
a. P40,000
b. P42,000
c. P45,000
d. P47,000
42. What is the net foreign currency gain or (loss) for the year ended December 31, 2020?
a. P4,000
b. P5,000
c. P3,000
d. P6,000
43. What is the net foreign currency gain or (loss) for the year ended December 31, 2020?
a. (P3,500)
b. (P2,000)
c. (P1,500)
d. (P4,000)
For Numbers 44 - 45
Entity A owns majority of the outstanding ordinary shares of Entity B which is operating in
United States of America wherein the functional currency is the USA $. However, the
presentation currency of Entity B is the Philippine Peso because that is the presentation currency
of Entity A. For the year ended December 31, 2020, Entity B presented its Statement of
Financial Position in its functional currency of USA $:
Current assets $10,000 Current liabilities $10,000

Noncurrent assets 40,000 Noncurrent liabilities 20,000
Total Assets $50,000 Ordinary share 5,000
Preference share 8,000
Retained earnings 7,000
Total Liab. and SHE $50,000
The following additional data are provided:

 The ordinary shares are issued on January 1, 2019 while the preference shares are issued
on July 1, 2020.
 B reported $1,000 net income during 2020 and distributed dividends in the amount of
$200 on December 1, 2020.
 The translated retained earnings on December 31, 2019 is P300,000.
The following direct exchange rates are provided:
January 1, July 1, 2019 Dec. 31, 2019 Dec. 1, 2019 Dec. 31, 2020 2020 Average
2019
P40 P42 P43 P41 P45 P44
44. What translation gain or loss to be presented in the other comprehensive income of
statement of comprehensive income for the year ended December 31, 2020?
a. P38,600
b. P39,200
c. P40,400
d. P41,800
45. What is the cumulative translation credit or (debit) to be presented in the other
comprehensive income of statement of financial position as of December 31, 2020?
a. P25,400
b. P28,200
c. P26,800
d. P24,600
46. What is the cumulative translation credit or (debit) to be presented in the other
comprehensive income of statement of financial position as of December 31, 2020?
a. (P11,000)
b. (P13,600)
c. (P10,400)
d. (P17,200)
On December 1, 2020, Entity A imported goods at a price of $1,000 payable on March 1, 2021.
In order to hedge this foreign currency denominated importation, Entity A entered into a forward
contract with a bank to purchase $1,000. Entity A is operating in Philippine economy where the
functional currency is Philippine peso. The following direct exchange rates are given:
December 1, 2020 December 31, 2020 March 1, 2021
Buying spot P43 P40 P41
Selling spot P45 P44 P49
90-day forward P41 P43 P44
buying
selling
buying
selling
buying
selling
47. What is the foreign currency gain or (loss) on the hedged item for the year ended
December 31, 2020?
a. (P2,000)
b. P1,000
c. P3,000
d. P4,000
48. What is the foreign currency gain or (loss) on the hedging instrument for the year ended
December 31, 2021?
a. P4,000
b. (P2,000)
c. (P1,000)
d. P3,000
For Numbers 49-50
On November 1, 2020, Entity A entered into a firm commitment for the exportation of goods at a
price of $2,000. Delivery will happen on January 31, 2020. In order to hedge this foreign
currency denominated firm commitment, Entity A entered into a forward contract with a bank to
sell $2,000. Entity A is operating in Philippine economy where the functional currency is
Philippine peso. Entity A elects to use fair value hedge to account this hedge of firm
commitment. The following direct exchange rates are given:
November 1, 2020 December 31, 2020 January 30, 2021
Buying spot P43 P40 P44
Selling spot P45 P44 P49
buying
selling
buying
selling
buying
selling
49. What is the book value of firm commitment asset or liability on December 31, 2020?
a. P4,000 liability
b. P10,000 liability
c. P2,000 liability
d. P6,000 liability
50. What is the foreign currency gain or (loss) on hedging instrument for the year ended
December 31, 2021?
a. P4,000
b. (P2,000)
c. (P6,000)
d. P8,000
MAS
1. Which of the following source of financing in capital budgeting is the
cheapest?
a. Bonds Payable
b. Preferred Stocks
c. Retained Earnings
d. Common Stocks
e.
2. If the incumbent current ratio of the company is 3:1, which of the

following transactions will decrease the said ratio?
a. Collection of accounts receivable without prompt discount
b. Payment of accounts payable
c. Acquisition of inventory on account
d. Cash purchase of inventory
3. This working capital management financing policy involves conducting

operation with too much working capital whereby almost all current
assets are financed by long-term capital such as bonds payable and
shares of stocks.
a. Aggressive or restricted policy
b. Conservative or relaxed policy
c. Matching policy
d. Balanced policy
4. It involves careful selection of data from financial statements in order to

assess and evaluate the firm’s past performance, its present condition,
and future business potentials.
a. Capital budgeting
b. Working capital management
c. Financial statements analysis
d. Transfer pricing
5. It refers to the comparison of figures shown in the financial statements of

two or more consecutive periods.
a. Horizontal analysis
b. Vertical analysis
c. Ratio Analysis
d. Cash flow analysis
6. Which of the following is a liquidity ratio?

a. Debt to equity ratio
b. Dividend payout ratio
c. Return on equity ratio
d. Current ratio
7. Which of the following is a profitability ratio?

a. Dividend yield ratio
b. Return on investment ratio
c. Inventory turnover ratio
d. Equity multiplier ratio
8. Which of the following is not a reason for holding cash?

a. For transaction purpose
b. For compensating balance requirements
c. For precautionary reserves
d. For tax evasion
9. Which is an effective cash management strategy?

a. Pay obligations using legal tender
b. Use automatic fund transfer for collection of receivables
c. Offer cash discounts for a longer credit term
d. Prevent customers from making direct payments to the firm’s
depositary bank
10. What is the effect of a very high amount of cash transfer?

a. It will increase the total transferring costs.
b. It will increase the total carrying cost of cash.
c. It will decrease the total carrying cost of cash.
d. It will neither increase nor decrease the total transferring costs.
11. Which is not an effective way of accelerating collection of

receivables?
a. Shorten credit terms
b. Speed up the mailing item of payments from customers to the firm
c. Offer special prompt discounts to customers who pay their
accounts within a specific period
d. Accept mercantile documents as a mode of payment from its
customers
12. It refers to the level of quantity to be ordered, which minimizes the
sum of the total ordering costs and total carrying costs.
a. Economic order quantity
b. Reorder point
c. Safety stock
d. Lead time quantity
13. Which of the following is considered an ordering cost of inventory?

a. Insurance of goods in warehouse
b. Spoilage or obsolescence of inventory
c. Storage costs of goods
d. Transportation costs of goods
14. It refers to the date to be used for the computation of the present
value of cash flows of a capital budgeting investment.
a. Internal rate of return
b. Return of investment
c. Weighted average cost of capital
d. Accounting rate of return
15. It refers to financing a portion of the firm’s assets, bearing
financing charges in hopes of increasing the return to the common
stockholders.
a. Operating leverage
b. Financial leverage
c. Variable leverage
d. Fixed leverage
16. Which of the following will decrease the net investment in a capital
budgeting project?
a. Acquisition cost of the project
b. Increase in working capital requirement by the project
c. Income tax savings from the loss on disposal of replaced
project
d. Other directly attributable cost for the construction of the project
17. Which of the following is a profitability technique in capital

budgeting?
a. Accounting rate of return
b. Net present value
c. Payback period
d. Profitability index
18. If the internal rate of return is used to discount the cash flows of
the project in a capital budgeting technique, which is correct?
a. The net present value index will be negative.
b. The profitability index will be equal to 1.
c. The net present value will be positive.
d. The return on investment will be higher than cost of capital.
19. Which of the following is a capital budgeting decision?

a. Application of economic order quantity
b. Use of cash float
c. Acquisition of investment property
d. Offering sales discount for prompt collection
20. It refers to the correlation of the volatility of the price of an

individual stock with the volatility of the price of the stock market.
a. Beta coefficient of stock
b. Market return of stock
c. Risk premium of stock
d. Regression of stock
21. It is an inventory management method whereby materials or goods

are scheduled to arrive or be replenished exactly when needed in the
production process.
a. Economic order quantity model
b. Reorder point
c. Just-in-time system
d. Baumol model
22. Which one of the following ratios would provide a best measure of
liquidity?
a. Sales minus returns to total debt.
b. Total assets minus goodwill to total equity.
c. Current assets minus inventories to current liabilities.
d. Net profit minus dividends to interest expense.
23. What ratio of analytical measurements measures the productivity

of assets regardless of capital structure?
a. Current ratio
b. Debt ratio
c. Acid test ratio
d. Return on total assets ratio
24. ABC Co. has a high sales to working capital ratio. What would this
indicate?
a. The firm is undercapitalized.
b. The firm is likely to have liquidity problems.
c. Working capital is not profitably utilized.
d. The firm is not profitable.
25. In which of the following is capital budgeting techniques least

likely to be used?
a. Acquisition of new aircraft by a cargo company.
b. Design and implementation of a major advertising program.
c. Trade for a star quarterback by a football team.
d. Adoption of a new method of allocating non-traceable costs to
product lines.
26. Which of the following is irrelevant in estimating operating costs in

capital expenditure decision?
a. Future costs
b. Cash costs
c. Differential costs
d. Historical costs
27. Which of the following is not a rate to be used by a firm in capital

budgeting decision?
a. Hurdle rate
b. Required rate of return
c. Opportunity cost
d. Opportunity cost of capital
28. Ignoring income tax considerations, which of the following will

affect the project's net present value?
a. Proceeds from the sale of the asset to be replaced
b. Book value of the asset to be replaced
c. Annual depreciation of the asset to be replaced
d. Amount of annual depreciation on fixed assets used directly on the
project
29. When ranking two mutually exclusive investments with different

initial amounts, which project shall be prioritized?
a. Project that generates cash flows for the longer period of time
b. Project that has the greater profitability index
c. Project that has greater accounting rate of return
d. Project whose net after-tax cash inflow equal to initial investment
30. What does a bank lockbox system do?

a. It reduces the need for compensating balance.
b. It provides security for late night deposits.
c. It reduces the risk of having checks lost in the mail.
d. It accelerates the inflow of funds.
31. What is the goal of credit policy?

a. To extend credit to the point where marginal profits equal marginal
costs
b. To minimize bad debt losses
c. To minimize collection costs
d. To maximize sales
32. When a company analyzes credit applicants and increases the

quality of the accounts rejected, the company is attempting to
a. Maximize sales
b. Increase bad debt losses
c. Maximize profits
d. Increase the average collection period
33. Which of the following would increase the risk of a company?

a. Increase the level of working capital
b. Change the composition of working capital to include more liquid assets
c. Increase the amount of short-term borrowing
d. Increase the amount of equity financing
34. When calculating the cost of capital, the cost assigned to retained
earnings should be
a. Zero
b. Lower than the cost assigned to external common equity
c. Equal to the cost assigned to external common equity
d. Higher than the cost assigned to external common equity
35. In which of the following is management knowledge of the cost of

capital not useful?
a. Managing capital investment decisions
b. Managing working capital
c. Evaluating performance
d. Setting the maximum rate of return of new investments
36. The following data are provided by the company:

Net Sales P1,800,000
Cost of goods sold (1,080,000)
Operating expenses 315,000
Earnings before interest and tax 405,000
Net income 195,000
Total stockholder's equity 750,000
Total assets 1,000,000
Cash flow from operating activities 25,000
What is the return on investment?
a. 22.5%
b. 26.5%
c. 19.5%
d. 40.5%
37.Using the same data in number 36, if the company has a current assets of
P200,000 including inventory of P80,000 and a quick asset ratio of 2:1, what is
the value of the company's current liabilities?
a. P100,000
b. P140,000
c. P240,000
d. P60,000
38. If the company has a return on asset ratio of 24% and asset turnover ratio
of 1.6 times, what is the profit margin ratio of the company?
a. 15%
b. 38.4%
c. 6%
d. 24%
39. The asset turnover ratio last year of ABC Company was 3. This year, the
company's sales increased by 25% and average total assets decreased by 5%.
What is this year's asset turnover?
a. 3.6
b. 3.9
c. 3.4
d. 3.1
40. What is the company's dividend yield on common stock if its asset turnover
is 0.90, payout ratio is 0.60 and price earnings ratio is 12?
a. 7.2%
b. 10.8%
c. 5%
d. 7.5%
41. If the average age of accounts payable is 15 days, the average of accounts
receivable is 60 days, and the average age of inventory is 10 days, what is the
number of days in the operating conversion cycle?
a. 70 days
b. 85 days
c. 60 days
d. 55 days
42. For the coming year, the expected cash disbursements of a company total
P432,000. The interest rate on marketable securities is 5% per annum. The
fixed cost of selling marketable securities is P8 per transaction. What is the
company optimum cash balance under Baumol cash management model?
a. P11,757.55
b. P5,878.78
c. P142,000
d. P1,175.76
43. Flint company's average collection period is 20 days. The average daily
sales is P5,000. All of the company's customers pay by credit card. How much
is the company's average accounts receivable balance?
a. P10,000
b. P100,000
c. P50,000
d. P5,000
44. ABC Company is planning to change its credit policy. The proposed change
is expected to:
 Shorten the collection period from 50 days to 30 days
 Increase the ratio of cash sales to total sales from 20% to 30%
 Decrease the total sales by 10%
If projected sales for the coming year is P40,000,000, what is the peso impact
on the average accounts receivable balance of the proposed change in credit
policy? (Use 360 days in a year)
a. P2,344,444 decrease
b. P2,100,000 decrease
c. P6,800,000 decrease
d. P18,889 decrease
45. Using the same data in number 44, what is the impact of the proposed
credit policy on the company's accounts receivable turnover ratio?
a. Decrease by 7.2
b. Increase by 4.8
c. Decrease by 20 days
d. Increase to 4.8 times
46. ABC Company sells cellphone cases which it buys from a local
manufacturer. ABC sells 24,000 cases evenly throughout the year. The cost of
carrying one unit in inventory for one year is P11.52 and the cost per order is
P38.40. What is the economic order quantity?
a. 400
b. 283
c. 200
d. 625
47. Using the same data in number 46, what is the total ordering costs using
economic order quantity?
a. P921,600
b. P2,304
c. P76,800
d. P460,800
48. The following data are provided:

Annual usage 12,600 units
Working days per year 360 days
Normal lead time 20 days
What is the reorder point?
a. 35 units
b. 20th day
c. 700 units
d. 630 units
49. Using EOQ Model, ABC Company determined the economic order quantity
for a merchandise item to be 800 units. To avoid stockout costs, it maintains
200 units in safety stock. What is the average inventory of the company?
a. 400 units
b. 600 units
c. 500 units
d. 1,000 units
50. What is the equivalent annual interest rate of a credit term of 3/10, net 30
if the company foregoes the discount and pays on the 30th day?
a. 56.57%
b. 36%
c. 60%
d. 63.33%
51. ABC Company currently sells its common stocks for P50 per share.
Flotation cost is 5%. In the past, the company paid dividends at P4.50 per
share. The expected dividend growth rate is 10%. What is the cost of capital of
common stocks using dividend growth rate?
a. 19.47%
b. 19.90%
c. 20.42%
d. 10.42%
52. Using the same data in number 51, what is the cost of capital of retained
earnings?
a. 19.47%
b. 19.90%
c. 20.42%
d. 10.42%
53. What is the cost of capital of a bonds with face value of P20M and stated
rate of 12% and effective interest rate of 10% when the corporate income tax is
30%?
a. 12%
b. 8.4%
c. 10%
d. 7%
54. What is the cost of capital of preferred stocks with par value of P50 and
market price of P80 when its fixed rate is 10% and the corporate income tax is
30% assuming the floatation cost is 5%?
a. 10%
b. 5%
c. 6.25%
d. 6.579%
55. ABC Company is planning to buy a new equipment costing P600,000. The
equipment will be depreciated using the straight line method over a period of 5
years. It is expected to have a salvage value of P10,000 at the end of its life.
The equipment will produce annual cash flows from operations, net of income
taxes, of P180,000 per year. The income tax rate is 32%. The company's hurdle
rate is 12%. What is the net present value of the new equipment?
a. P48,900
b. P84,950
c. P54,570
d. P42,210
56. A new machine is expected to produce the following after tax-cash inflows
for a period of 5 years:
Year After-tax cash inflows
1 16,000
2 12,000
3 20,000
4 8,000
5 6,000
What is the payback period of the new machine?
a. 3.20 years
b. 4.50 years
c. 2.60 years
d. 1.85 years
57. ABC Company is planning to buy a vending machine costing P50,000. The
machine will be depreciated over a five-year period using straight line method.
It is estimated that the machine will yield annual cash inflow net of
depreciation and income tax of P14,000. The weighted average cost of capital of
the machine is 10%. What is the accounting rate of return of the machine?
a. 8%
b. 10%
c. 48%
d. 28%
58. Using the same data in number 57. what is the payback period of the
machine?
a. 5 years
b. 0.28 year
c. 12.5 years
d. 3.6 years
59. Using the same data in number 57, what is the internal rate of return of
the machine?
a. more than 12% and more than 14%
b. less than 14% and less than 12%
c. less than 12% and more than 14%
d. more than 12% and less than 14%
60. If a company's hurdle rate is 10%, a proposed investment project which

has a negative net present value will result to
a. internal rate of return less than 10%
b. internal rate of return greater than 10%
c. accounting rate of return less than 10%
d. payback period longer than the life of the project
36. Which of the following factory overhead variances is irrelevant for

evaluating the performance of the managers in a production process?
a. Spending variance
b. Efficiency variance
c. Volume variance
d. Controllable variance
37. Which of the following responsibility centers has the widest scope
of control?
a. Cost center
b. Revenue center
c. Profit center
d. Investment center
38. Which of the following is not a characteristic of a sound company

goal and objective?
a. Indeterminate
b. Realistic
c. Measurable
d. Time-bound
39. Which of the following scenarios will increase the break-even point
of the company?
a. Decrease in the number of units manufactured by the company
b. Decrease in total fixed cost of the company
c. Decrease in contribution margin per unit of the product
d. Decrease in variable cost per unit of the product
40. Which of the following cost accounting method uses different cost
drivers to for the application of factory overhead?
a. Relevant Costing
b. Activity-Based Costing
c. Traditional Costing
d. Peanut Butter Costing
41. Which cost relationship is valid within the relevant range?

a. Variable production cost per unit is directly proportional to units
produced.
b. Total production cost is inversely proportional to units produced.
c. Fixed production cost per unit is inversely proportional to
units produced.
d. Total variable production cost is constant regardless of units
produced.
42. Which of the following is a relevant cost?

a. Avoidable fixed cost
b. Obsolete inventory
c. Depreciation of factory equipment
d. Amortization of patent
43. It refers to the maximum productive capacity of a plant reduced by

the predictable and unavoidable interruption pertaining to internal
causes.
a. Ideal capacity
b. Theoretical capacity
c. Normal capacity
d. Practical capacity
44. Which source of financing increases the operating leverage of the

company?
a. Heavy reliance on fixed production cost
b. Employment of sales commission as a percentage of sales
c. Consumption of direct materials in the production
d. Incurring of salary of factory workers which is fixed per unit
produced
45. In case the company has scarce or limited machine hours

available, which product shall the company maximize in its production to
optimize profit?
a. Product with the highest selling price per unit
b. Product with the highest contribution margin per machine
hour
c. Product with the highest contribution margin
d. Product with the lowest variable cost per unit
46. In determining which among the joint products shall be sold as is

or shall be processed further, which data is irrelevant?
a. Total joint production cost of the joint products
b. Additional processing cost of the joint products
c. Incremental selling price per unit of the joint products
d. Incremental margin of the joint products
47. Cost-volume-profit analysis is a key factor in many decisions,

including choice of product-lines, pricing of products, marketing
strategy, and utilization of productive facilities. A calculation used in
CVP analysis is the break-even point. Once the break-even point has
been reached, operating income will increase by the
a. Contribution margin per unit of each additional unit sold.
b. Sales price per unit for each additional unit sold.
c. Fixed cost per unit for each additional unit sold.
d. Gross margin per unit for each additional unit sold.
48. Management scrutinizes variances because

a. Management desires to detect such variances to be able to plan for
promotions.
b. Management needs to determine the benefits forgone by such
variances.
c. It is desirable under conventional knowledge on good management.
d. Management recognizes the need to know why variances happen
to be able to make corrective actions and fairly reward good
performers.
49. NBA Corporation is considering to keep or dispose P1,000,000

obsolete inventory acquired several years ago. This cost is considered as
a. Discretionary cost
b. Sunk cost
c. Relevant cost
d. Prime cost
50. In analyzing whether to build another regional service office, the
salary of the Chief Executive Officer at the corporate headquarters is
a. Relevant because salaries are always relevant.
b. Relevant because this is future cost and will probably change if the
regional service office is built.
c. Irrelevant because it is future cost that will not differ between
the alternatives under consideration.
d. Irrelevant since other imputed costs for the same will be considered.
51. In a profit-volume graph, the cost/volume/profit relationships are

represented. The vertical axis is the profit in pesos and the horizontal
axis is the volume in units. The diagonal life is the contribution margin
line. The point at which the contribution margin line intersects the zero
profit line is the point
a. At which the volume level is zero.
b. At which the total costs equal the total sales.
c. At which sales increase.
d. At which total variable costs equal total sales.
52. The Purchasing Manager of XY Company decided to buy 65,000

bags of flour with a quality rating two grades below that which the
company normally purchased. This purchase covered about 90% of the
flour requirements for the period. As to the material variances, what will
be the likely effect?
a. Unfavorable price variance, favorable usage variance
b. Favorable price variance, unfavorable usage variance
c. No effect on price variance, unfavorable price variance
d. Favorable price variance, favorable usage variance
53. What is the opportunity cost of making a component part in
factory given no alternative use of the capacity?
a. There is no opportunity cost.
b. The total manufacturing cost of the component.
c. The fixed manufacturing cost of the component.
d. The variable manufacturing cost of the component.
54. The use of activity-based costing normally results in

a. Substantially lower unit costs for low-volume products than is
reported by traditional product costing.
b. Substantially greater unit costs for low-volume products than is
reported by traditional product costing.
c. Decreased set-up costs being charged to low volume products.
d. Equalizing set-up costs for all product lines.
55. In analyzing company operations, the controller of the FM
Corporation found a P250,000 favorable flexible budget revenue
variance. The variance was calculated by comparing the actual results
with the flexible budget. This variance can be wholly explained by
a. The total flexible budget variance.
b. The total static budget variance.
c. Changes in unit selling prices.
d. Changes in the number of units sold.
56. An entity provided the following data concerning its water bills for
the past five months:
Month Water Costs Cubic Meters Consumption
January P200,000 3,000
February P180,000 2,400
March P100,000 1,000
April P140,000 2,000
May P120,000 1,200
Using high-low method of separating mixed cost, what is the water costs
for the month of June if the water consumption is 1,500 cubic meters?
a. P125,000
b. P115,000
c. P105,000
d. P135,000
57. The following data are provided by the accountant of an entity for
its current year:
Sales Revenue P1,000,000
Breakeven profit ratio 80%
Cost of goods sold ratio 70%
Variable cost ratio 60%
What is the net profit of the entity for the current year?
a. P60,000
b. P120,000
c. P80,000
d. P150,000
58. The following data are provided by the entity for the current year:
Budgeted fixed factory overhead P1,000,000
Budgeted variable overhead per labor hour P4
Normal capacity in direct labor hours 200,000
Unfavorable uncontrollable variance P100,000
Actual variable overhead costs P525,000
Favorable variable spending variance P315,000
What is the factory overhead efficiency variance?
a. P40,000 favorable
b. P80,000 unfavorable
c. P100,000 favorable
d. P120,000 unfavorable
59. The following information is available from the Faith Company:

Actual factory overhead P 15,000
Fixed overhead expenses, actual 7,200
Fixed overhead expenses, budgeted 7,000
Actual hours 3,500
Standard hours 3,800
Variable overhead rate per direct labor hours P2.50
Assuming that Faith uses a three-way analysis of overhead variances,
what is the spending variance?
a. P200 favorable
b. P250 unfavorable
c. P750 favorable
d. P950 unfavorable
60. Picnic Items, Inc. manufactures coolers of 10,000 units that

contain a freezable ice bag. For an annual volume of 10,000 units, fixed
manufacturing costs of P500,000 are incurred. Variable costs per unit
amount are direct materials – P80; direct labor – P15, and variable
factory overhead – P20. Bags Corp. offered to supply the assembled ice
bag for P40 with a minimum order of 5,000 units. If Picnic accepts the
offer, it will be able to reduce variable labor and overhead by 50%. The
direct materials for the freezable bag will cost Picnic P20 if it will produce
it. Considering Bags Corp. offer, Picnic should
a. Buy the freezable ice bag due to P150,000 advantage.
b. Produce the freezable ice bag due to P25,000 advantage.
c. Produce the freezable ice bag due to P50,000 advantage.
d. Buy the freezable bag due to P50,000 advantage.
61. Ysabelle Industries, Inc. has an opportunity to acquire a new

equipment to replace one of its existing equipments. The new equipment
would cost P900,000 and has a five-year useful life, with a zero terminal
disposal price. Variable operating costs would be P1 million per year.
The present equipment has a book value of P500,000 and a remaining
life of five years. Its disposal price now is P50,000 but would be zero
after five years. Variable operating costs would be P1,250,000 per year.
Considering the five years in total, but ignoring the time value of money
and income taxes. Ysabelle should
a. Replace due to P400,000 advantage.
b. Not replace due to P150,000 disadvantage.
c. Replace due to P350,000 advantage.
d. Not replace due to P100,000 disadvantage.
62. Wheels Corp. employs 45 sales personnel to market its sedan cars.
The average car sells for P690,000 and a 6% commission is paid to the
sales person. It is considering changing the scheme to a commission
arrangement that would pay each person a package of P30,000 plus a
commission of 2% of the sales made by the person. What is the amount
of total monthly car sales at which Wheels Corp. would be indifferent
(answer may be rounded off) as to which plan to select?
a. P45,000,000
b. P36,500,000
c. P33,750,000
d. P22,500,000
63. The Kabayan Company manufactures and sells Batik handbags to

assorted prints. Data for the previous year were as follows:
Selling price per piece P 8.00
Variable cost per piece 2.00
No. of pieces to breakeven 25,000
Profit last year P5,850
For the coming year, the company estimates that the selling price will be
P9.50 per piece, variable cost to manufacture will increase by 25%, and
fixed costs will increase by 10%. Income tax rate of 35% will not change.
What is the selling price per piece that would give the same contribution
margin rate as previous year?
a. P10.00
b. P9.50
c. P8.00
d. P10.50
64. Using the same data in preceding number, if sales for the coming
year are expected to exceed last year’s by 1,800 pieces, what would be
the expected sales volume for the coming year?
a. 28,300 units
b. 27,775 units
c. 26,800 units
d. 26,500 units
65. Asian Corporation, a manufacturing company, is operating at 90%

capacity. Since there is no other use of the 10% idle capacity, an offer for
a new order at P8.20 per unit requiring 15% capacity is being
considered. If the order will be accepted, the 5% additional capacity will
be sub-contracted at the cost of P7.80 per unit. The variable cost per
unit of production of Asian Corporation follows:
Materials P4.00
Labor 1.75
Variable overhead 1.75
Total P7.50
What is the expected contribution margin per unit on the new order?
a. P0.40
b. P0.60
c. P0.50
d. P0.55
66. Crest Company has the opportunity to increase annual sales by
P1,000,000 by selling to new riskier customers. It has been estimated
that uncollectible expenses would be 15% and collection costs, 5%. The
manufacturing and selling costs are 70% of sales and corporate tax is
35%. If they pursue this opportunity, the after-tax profit will:
a. Increase by P35,000.
b. Increase by P97,500.
c. Decrease by P35,000.
d. Increase by P65,000.
67. Chow Inc. has its own cafeteria with following annual costs:
Food P 400,000
Labor 300,000
Overhead 440,000
Capital P 1,140,000
The overhead is 40% fixed. Of the fixed overhead, P100,000 is the salary of the
cafeteria supervisor. The remainder of the fixed overhead has been allocated
from total company overhead. Assuming the cafeteria supervisor will remain
and that Chow will continue and pay said salary, what is the maximum cost
Chow will be willing to pay an outsider firm to service the cafeteria?
a. P1,140,000
b. P1,040,000
c. P700,000
d. P964,000
68. Information on Dean Company’s direct-material costs for the
month of January 2013 was as follows:
Actual quantity purchased
18,000 units
Actual unit purchase price P3.60
Materials purchase price variance - unfavorable
P3,600
Standard quantity allowed for actual production
16,000 units
Actual quantity used
15,000 units
For January 2013, what is the direct material usage variance?
a. P3,360 Unfavorable
b. P3,375 Favorable
c. P3,400 Favorable
d. P3,800 Unfavorable
69. Mela Corporation has a contribution margin ratio of 26%. It aims
to have a profit of P320,000 with a sales volume of P2,000,000. What is
the total fixed costs of Mela Corporation?
a. P83,200
b. P200,000
c. P230,777
d. P520,000
70. The Axle Division of LaBate Company makes and sells only one
product. Annual data on the Axle Division's single product follow:
Unit selling price P50
Unit variable cost P30
Total fixed costs P200,000
Average operating assets P750,000
Minimum required rate of return 12%
If Axle sells 15,000 units per year, the residual income should be:
a. P30,000.
b. P50,000.
c. P100,000
d. P10,000.
71. Information concerning product X of Paradise Corporation for the

year ended 2012 is as follows:
Sales P1,850,000
Margin 10%
Return on investment 20%
Minimum required rate of return on investment 15%
What is the residual income for product X?
a. P138,750
b. P92,500
c. P185,000
d. P46,250
72. Pinoy Company temporarily has excess production capacity, the

idle plant facilities can be used to manufacture a low-margin item. The
low-margin item should be produced if it can be sold for more than its
a. Variable costs plus opportunity cost of idle facilities.
b. Indirect costs plus any opportunity cost of idle facilities.
c. Fixed costs.
d. Variable costs.
73. A manager is attempting to determine whether a segment of the

business should be eliminated. The focus of attention for this decision
should be on
a. the net income shown on the segment's income statement.
b. sales minus total expenses of the segment.
c. sales minus total direct expenses of the segment.
d. sales minus total variable expenses and avoidable fixed
expenses of the segment.
74. In equipment-replacement decisions, which one of the following

does not affect the decision-making process?
a. Current disposal price of the old equipment.
b. Operating costs of the old equipment.
c. Original fair market value of the old equipment.
d. Cost of the new equipment.
75. Which of the following costs are relevant to a make-or-buy

decision?
a. original cost of the production equipment
b. annual depreciation of the equipment
c. the amount that would be received if the production
equipment were sold
d. the cost of direct materials purchased last month and used to
manufacture the component
76. Idle capacity in the interim (normally temporary) will generate

short-term benefit in accepting sales at price that
a. Positively motivate employees.
b. Result in less than normal contribution margin.
c. Increase total fixed costs.
d. Reduce the overall operating income to sales ratio.
77. Which of the following decision making activity is not a non-

routine short term decision?
a. Capital budgeting
b. Make or Buy
c. Sell as is or process further
d. Shut down or continue operation
78. Which of the following costs shall be considered as relevant?

a. Committed fixed cost
b. Obsolete inventory
c. Avoidable fixed cost
d. Allocated common cost
79. Which of the following costs shall be considered irrelevant?

a. Opportunity cost
b. Variable production cost
c. Joint cost of production
d. Avoidable fixed cost
80. Which of the following should not be considered in a decision of

whether to drop a product line?
a. Unavoidable cost
b. Avoidable cost
c. Revenue that would be lost
d. Nonfinancial impacts of the decision
81. The goal in deciding whether to add or drop products, services or

department is to obtain the greatest
a. Reduction in total cost
b. Contribution possible to cover unavoidable cost
c. Increase in sales revenue
d. Decrease in direct fixed cost
82. A useful device for solving production problems involving multiple

products and limited resources is
a. Gross sales per unit of product
b. Contribution per unit of scarce resource
c. Total benefit
d. Net profit per unit of product
83. Which of the following qualitative factors favors the buy choice in a
make or buy decision for a component?
a. Maintaining a long-term relationship with suppliers
b. Quality control is critical
c. Utilization of idle capacity
d. The component is critical to the product
84. In analyzing whether to build another regional service office, the

salary of the Chief Executive Officer (CEO) at the corporate headquarters
is
a. Relevant because salaries are always relevant.
b. Relevant because this will probably change if the regional service
office is build.
c. Irrelevant because it is future cost that will not differ between
the alternatives under consideration.
d. Irrelevant since another imputed costs for the same will be
considered.
85. Assume a company produces three products: A, B, and C. It can

only sell up to 3,000 units of each product. Production capacity is
unlimited. The company should produce the product (or products) that
has (have) the highest
a. contribution margin per hour of machine time.
b. gross margin per unit.
c. contribution margin per unit.
d. sales price per unit.
51. Information on Dean Company’s direct-material costs for the month of

January 2013 was as follows:
Actual quantity purchased 18,000
units
Actual unit purchase price P3.60
Materials purchase price variance - unfavorable P3,600
Standard quantity allowed for actual production 16,000
units
Actual quantity used 15,000
units
For January 2013, what is the direct material usage variance?
a. P3,360 Unfavorable
b. P3,375 Favorable
c. P3,400 Favorable
d. P3,800 Unfavorable
52. G Corporation, which sells a single product, provided the following data
from its income statements for the calendar years 2012 and 2011:
2012 2011 (Base Year)
Sales (150,000 units) P750,000 Sales (180,000 units)
P720,000
Cost of goods sold 525,000 Cost of goods sold 575,000
Gross profit P225,000 Gross profit P145,000
In an analysis of variation in gross profit between the two years, what would be
the effects of changes in sales price and sales volume?
Sales Price Sales Volume
a. P150,000 FP120,000 UF
b. P130,000 UF P150,000 F
c. P180,000 F P150,000 UF
d. P180,000 UF P150,000 F
For Numbers 53 - 61
A company produces a single product that has the following standard costs:
Direct Materials 5 pieces at P4 per piece P20
Direct Labor 3 hours at P10 per hour P30
Variable overhead 3 hours at P15 per hour P45
Fixed overhead 3 hours at P5 per hour P15
Total manufacturing cost per product P110
The total budgeted fixed overhead is P15,000. This is for the budgeted
production (the normal capacity level) of 1,000 units requiring total budgeted
time of 3,000 hours.
During the period, the company produced 1,100 units and incurred the
following costs:
Direct Materials Used 5,600 pieces at P3.80 per piece
P21,280
Direct Labor 3,250 hours at P11 per hour
P35,750
Variable overhead 3,250 hours at P14.50 per hour P47,125
Fixed overhead P16,000
Actual total production cost P120,155
53. What is the material price variance?

a. 1,120 F
b. 360 UF
c. 680 F
d. 540 UF
54. What is the material quantity variance?
a. 200 F
b. 400 UF
c. 600 F
d. 800 UF
55. What is the direct labor rate variance?

a. 2,250 UF
b. 1,250 F
c. 3,250 UF
d. 4,250 F
56. What is the direct labor efficiency variance?

a. 700 UF
b. 300 UF
c. 100 F
d. 500 F
57. What is the controllable variance?

a. 1,375 F
b. 2,175 UF
c. 3,275 F
d. 5,475 UF
58. What is the volume variance?

a. 2,500 UF
b. 1,500 F
c. 3,500 UF
d. 4,500 F
59. What is the efficiency variance?

a. 350 UF
b. 250 F
c. 750 F
d. 450 UF
60. What is the variable spending variance?

a. 2,325 UF
b. 3,125 F
c. 4,235 UF
d. 1,625 F
61. What is the fixed spending variance?

a. 1,000 UF
b. 3,000 F
c. 2,000 UF
d. 4,000 F
62. The following information is available from the Faith Company:
Actual factory overhead P 15,000
Fixed overhead expenses, actual 7,200
Fixed overhead expenses, budgeted 7,000
Actual hours 3,500
Standard hours 3,800
Variable overhead rate per direct labor hours P2.50
Assuming that Faith uses a three-way analysis of overhead variances, what is
the spending variance?
a. P200 favorable
b. P250 unfavorable
c. P750 favorable
d. P950 unfavorable
63. The management accountant determined unfavorable direct labor

rate variance. Which department shall be reprimanded for this variance?
a. Human resource department
b. Production or engineering department
c. Purchasing department
d. Marketing department
64. The management accountant determined unfavorable direct

material usage variance as a result of an acquisition of low-quality
materials. Which department shall be reprimanded for this variance?
a. Human resource department
b. Production or engineering department
c. Purchasing department
d. Marketing department
65. Direct labor price variance shall be computed using the

a. Actual materials requested
b. Actual materials purchased
c. Actual materials used
d. Actual materials remaining
66. Which of the following factory overhead variances shall be the

responsibility of the engineering department?
a. Efficiency variance
b. Variable spending variance
c. Fixed spending variance
d. Volume variance
67. Which of the following costs pertains to theoretical or ideal cost?
a. It is the absolute cost that would be possible under the best
operating conditions.
b. It is the target cost that employees are expected to attain under an
efficient conditions.
c. It is the long-term average unit of produced used in the calculation
of fixed overhead rate.
d. It indicates the most realistic level of production performance
given that the conditions shall be unchanged.
68. Which of the following statements concerning standard costing is

correct?
a. It is used to motivate employees and to evaluate and control
cost.
b. It eliminates the need for subjective decisions by management.
c. It cannot be used together with a process costing system.
d. Only unfavorable variances shall be investigated but not favorable
variances.
69. The best basis upon which standard cost should be set to measure
controllable production inefficiencies is
a. Engineering standards based on ideal performance
b. Normal capacity
c. Engineering standards based on attainable performance
d. Practical capacity
70. Which of the following statements is incorrect?

a. Ideal standards also called theoretical or maximum-efficiency
standards make no allowance for waste spoilage and machine
breakdowns.
b. A firm using practical standards has reason to make any midyear
adjustment to the production standard if an old machine is
replaced by a newer, faster machine.
c. Ideal standards make provisions for workers with different
degrees of experience and skill levels while practical standards
are hard to be obtained by working making diligent efforts.
d. Practical standards are better to be used than ideal standards for
cash budgeting and product costing.
71. If the computation resulted to a favorable material variance, why

must this variance be further evaluated as a price and usage?
a. There is no need to further evaluate the total materials variance if
it is favorable.
b. GAAP requires that all variances by analyzed in three stages.
c. All variances must appear in the annual report.
d. Determining price and usage variance allows management to
evaluate the efficiency of the purchasing and production
functions.
72. Which of the following favorable variances is directly affected by

the relative position of a production process on a learning curve?
a. Material mix variance
b. Materials price variance
c. Labor rate variance
d. Labor efficiency variance
73. By using a predetermined overhead rate for application of factory

overhead, there is substantial difference between the actual factory
overhead and applied overhead. Production data indicated that volumes
were lower than the planned production by a large difference. The net
overhead variance may due to
a. Overhead being substantially composed of fixed cost
b. Overhead being substantially composed of variable cost
c. Overhead cost being recorded as planned
d. Products being simultaneously manufactured in single runs
74. Which of the following variances is of least significance from a
behavioral control perspective?
a. Unfavorable variable overhead efficiency variance due to increased
in actual direct labor hours
b. Unfavorable variable spending variance due to increased in price of
indirect materials and rate of indirect labor
c. Unfavorable fixed spending variance due to increase in price of
fixed overhead
d. Unfavorable fixed factory overhead variance resulting from
management decision midway through fiscal year to reduce its
budgeted output.
75. Which of the following statements concerning management by

exception is false?
a. It requires the use of flexible budgets.
b. Managers take action when there is a significant variance between
planned and actual results.
c. Management investigates only variances of a certain size or scope.
d. Management investigates only unfavorable variances.
76. Which of the following should be least concerned when deciding

whether to investigate a variance?
a. Whether the variance is favorable or unfavorable
b. Significance of the variance
c. Cost of investigating the variance
d. Trend of the variances over the time
77. Which of the following is a valid reason for unfavorable overhead

spending variance?
a. Decrease in the price of actual direct materials
b. Increase in the actual direct labor hours
c. Decrease in the normal capacity of the company
d. Increase in the price of indirect material and rate of indirect
labor
78. Which of the following is not an advantage of using a standard

costing system?
a. It eliminates the need for analysis of variance.
b. It facilitates establishing an effective system of responsibility
accounting.
c. It requires an analysis of all aspects of operations.
d. It helps management control costs.
79. Which of the following unfavorable variances would be the least

relevant in evaluating the performance of a production supervisor?
a. Materials price variance and labor rate variance
b. Overhead efficiency variance
c. Direct labor usage variance
d. Material usage variance
80. Overhead Variance results because

a. Standard cost must be determined after the budget is completed.
b. Standard cost represent what cost should be whereas budgeted
cost represents expected actual cost.
c. Budgeted cost is historical cost whereas standard cost is based on
engineering studies.
d. Cannot exist because they should be the same amounts.
81. The following are reasons for material efficiency or usage variance,
except
a. Performance of the workers using the materials
b. Actions of the purchasing department
c. Design of the product
d. Sales volume of the product
82. What are controllable costs?

a. Only those discretionary costs
b. Only differential costs
c. Incremental and fixed costs
d. Costs that can be influenced by a manager in the current
period
83. What is a cost center?

a. It is a unit of product for which costs are ascertained.
b. It is amount of expenditures attributable to various activities.
c. It is a function for which costs are ascertained for control
purposes.
d. It is a section of an organization for which budgets are
prepared and control exercised.
84. Which of the following ratio shall be best for evaluating the
management performance of a department that is operated as a cost
center?
a. Return on asset ratio
b. Net profit ratio
c. Percentage of increase in sales
d. Variance analysis
85. Which of the following costs shall not be subject to the control of a
supervisor in a factory?
a. Materials
b. Repairs and maintenance
c. Supervisor’s salary
d. Direct labor
86. It is a center that is evaluated on the basis of their fixed costs and
contribution margin but does not have control over idle fund for
investment purposes.
a. Cost center
b. Profit center
c. Revenue center
87. Which of the following responsibility centers have control to both

revenue and expenses?
a. Profit center and investment center
b. Cost center and revenue center
c. Cost center and profit center
d. Revenue center and investment center
88. What is the major problem in comparing profitability measures

among the companies?
a. Lack of general agreement over profitability
b. Differences in the size of the companies
c. Differences in the accounting methods used by the companies
d. Differences in the dividend policies of the companies
89. Which of the following is not a goal of a profit center?

a. To increase return on investment
b. To increase sales revenue
c. To decrease expenses
d. To increase profit
90. Which of the following centers is considered as an independent

business with the biggest responsibility?
a. Cost center
b. Profit center
c. Revenue center
91. Which of the following is not a goal of an investment center?
a. To increase return on investment
b. To increase sales revenue
c. To increase expenses
d. To increase profit
92. Which of the following will decrease the return on investment?
a. Increase in profit
b. Increase in sales revenue
c. Decrease in expenses
d. Increase in average investment
93. Which is an advantage of residual income over return on
investment?
a. Residual income is a measure over time while ROI represents the
results for one year.
b. Residual income concentrates on maximizing absolute pesos
of income rather than a percentage return as with ROI.
c. The imputed rate used in calculating residual income is more
easily derived than the target rate compared to the calculated ROI.
d. Average investment is employed with residual income while year
end investments is employed with ROI.
94. Residual income is a better measure for performance evaluation of

a investments center manager than return on investment because
a. The problems associated with measuring the assets base are
eliminated.
b. Desirable investments decisions will not be neglected by high-
return divisions.
c. Only gross book value of assets needs to be calculated.
d. The arguments about the implicit cost of interest are eliminated.
95. Which of the following is pure variable factory variance?
b. Controllable variance
c. Volume variance
d. Efficiency variance
96. Which of the following is pure fixed factory variance?

b. Controllable variance
c. Volume variance
d. Efficiency variance
97. It is a system that reflects the company’s decentralization of

decision making. It contains the variances of the actual budget from the
standard budget together with the responsible officer.
a. Cost accounting
b. Responsibility accounting
c. Management accounting
d. Financial accounting
98. What is the best performance measure of a manager of profit

center?
a. Rate of return on investment
b. Success in meeting budgeted goals for controllable costs
c. Amount of controllable margin generated by the profit center
d. Amount of contribution margin generated by the profit center
99. In order to promote goal congruence a manager of an investment

center is best evaluated using
a. Standard variable costing income statements
b. Return on investments
c. Budgets and standard cost
d. Residual income
100. Which is a problem associated with the use of Return of

Investment as performance evaluation measure?
a. Managers may be encouraged to purchase more operating assets
that they otherwise should.
b. Managers may be discouraged from purchasing operating asset
that could improve overall profitability.
c. Managers may be discouraged from reducing their division’s costs
d. Managers may be discouraged from paying off debt in order to
reduce interest costs.
-Nothing follows-
-Nothing follows-
-END-

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Level 3 MCQs

1. Which of the following fringe benefits is subject to fringe benefit tax?

7. In which type of sales transaction by a VAT-registered taxpayer may it claim tax

10. Which sale of a VAT-registered taxpayer is subject to output VAT?

11. Which of the following is subject to final withholding tax?

15. Which share in net income of commercial or business partnership is subject to

28. Which of the following is not a characteristic of value added tax?

30. In which of the following transactions is a non-VAT registered taxpayer-seller not

32. Which of the following fees is subject to value-added tax?

38. Which of the following lease shall be subject to VAT?

39. Which of the following sale of medicine is subject to VAT?

48. Which of the following shall be considered transactions deemed sale to be

50. Which of the following sale is subject to 12% VAT?

51. Which of the following is subject to VAT?

52. Which rendition of services is not subject to VAT?

53. Which of the following sales of electricity is subject to VAT?

54. Which of the following is subject to VAT?

68. The share of a partner in the income of a commercial partnership exceeding

70. As a general rule, to whom shall the income of a co-ownership be taxed?

71. Which distributable income of a general professional partnership to its partners is

74. Which type of trust is considered an income taxable entity?

1. In which of the following types of obligation will delay not exist?

2. In which of the following negligence is the defense of exercise of diligence

3. A, B and C wrote a promissory note which states “I promise to pay

5. It refers to the remedy available to unpaid creditor to ask for the

6. In which of the following sources of civil obligation is meeting of minds

7. What is the quantum of evidence necessary to recover civil damages for

9. What is the degree of diligence to be observed by the common carrier in

12. A, B and C are liable to D in the amount of P60,000. C voluntarily

13. It refers to the promise or particular conduct to be performed in

14. What is the source of an obligation when a stranger gives support

17. When is demand necessary for debtor’s delay to exist?

19. It refers to a type of damages awarded by the court by way of

20. Which of the following obligations is immediately demandable?

22. Which of the following statements concerning is correct?

23. In case both parties in a reciprocal obligation have committed a

24. Which of the following obligations in not enforceable by a court

26. They refer to fruits produced by lands of any kind through

27. Advanced waiver of an action for which of the following is valid?

29. It refers to a right of a person to demand of another, as a definite

32. Which of the following modes of extinguishment of obligation is

34. A is indebted in the amount of P10,000 to B. A failed to pay his

35. Who has the right of choice in application of payment?

37. A, B and C are liable in the amount of P6,000 to D and E, solidary

38. D borrowed P3,000 from C as evidenced by a promissory note. To

39. In which of the following cases is tender of payment mandatory

42. D made a bank deposit under a savings account to BDO in the

43. Which of the following is not considered a novation?

44. When is payment of the obligation by the debtor to a third person

45. When will check, promissory note, bill of exchange or other

46. What law shall govern dacion en pago?

49. When is payment made by the debtor to an incapacitated creditor

50. This equitable doctrine is based on the principle that a person

51. D is indebted in the amount of P10,000 to C. T, D and C agreed

52. D is indebted in the amount of P4,000 to C guaranteed by G. At

54. Where shall the payment of an obligation be made?

55. In observance of right to procedural due process of the creditor,

56. It is a compensation which can be claimed by one of the parties