UNIVERSITY OF CEBU LAPU-LAPU AND MANDAUE

JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

BUSINESS LAW AND TAXATION

NAME:_________________________________ DATE:___________

ENCIRCLE THE CORRECT ANSWER. NO ERASURES.

1. Which of the following individuals shall not be subject to the income tax under Section 24 (A)?
a. Individual citizen of the Philippines residing therein;
b. Individual citizen of the Philippines who residing outside the Philippines including overseas contract workers;
c. Individual alien who is a resident of the Philippines;
d. Individual alien who is not a resident of the Philippines.

2. Which of the following income is not from a related trade, business or activity of a domestic proprietary educational
institution?
a. Income from rent of available office spaces in one of the school buildings
b. Income from the hospital where medical graduates are trained for residency
c. Income from the canteen situated within the school campus
d. Income from bookstore situated within the school campus

3. How much is the annual community tax for individuals?

a. P 25 b. P 10
b. P 20 d. P 5

4. Under this system there is a merger of all the properties of the husband and the wife owned by them at the time of
the celebration of the marriage, or those acquired thereafter.
a. Conjugal partnership of gains
b. Absolute community of properties
c. Complete separation of properties
d. None of the choices

5. Which is not an essential characteristic of tax?

a. Limited as to amount
b. Proportionate in character
c. Payable in money
d. Regular payment

6. A contract of sale is not a

a. Principal contract c. Consensual contract
b. Nominate contract d. Real contract

7. “I promise to pay Richard or his order the sum of P 10,000.00 30 days after the death of X.” This is an instrument
payable:
a. At a determinable future time
b. On Demand
c. Upon the fulfillment of a condition
d. At an indefinite time, hence, non-negotiable

8. A corporation acquires juridical personality

a. Upon the filing of the articles of incorporation
b. Upon the filing of the by-laws
c. Upon the issuance of the certificate of incorporation
d. Within 30 days from receipt of notice of the issuance of the certificate of incorporation

9. It is the right of the mortgagor to redeem the property that was mortgaged after it was sold.
a. Equity of redemption c. Right of subrogation
b. Right of redemption d. Right of pre-emption

10. Aubrey with violence in her eyes intimidated her husband Elmer to sell his exclusive property to her. The contract
of sale is
a. Rescissible c. Unenforceable
b. Voidable d. Void

11. Which of the above will be subject to a 25% civil penalty of the tax or of the deficiency tax?
a. Willful neglect to file the return within the period prescribed by the Tax Code or rules and
regulations
b. A false or fraudulent return is willfully made
c. A person who is not VAT-registered issues an invoice or receipt showing his TIN,
followed by the word "VAT"
d. Failure to file any return and pay the tax due thereon as required under the provisions of
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the Tax Code or rules and regulations on the date prescribed

12. Which of the following statements is INCORRECT?

a. The amount of “de minimis” benefits conforming to the ceiling prescribed in the Tax
Code shall not be considered in determining the P30,000 ceiling of “other benefits”
included in the exempt 13th month and other benefits;
b. If the employer pays more than the ceiling prescribed for “de minimis” benefits, the
excess shall be taxable to the employee receiving the benefits only if such excess is
beyond the P30,000 ceiling.
c. Any amount given by the employer as benefits to its employees, whether classified as
de minimis or fringe benefits, shall constitute as deduction upon such employer;
d. Representation and transportation allowance which are fixed in amounts and regularly
received by the employees as part of their monthly compensation shall be treated as
taxable fringe benefits if received by managerial and supervisory employees.

13. Richard qualified as head of a household for 2007 tax purposes. Mr. Surita’s 2008 gross income was P200,000
inclusive of P10,000 short term capital gain. Mr. Surita had a long-term loss of P8,000 in 2008. What amount of
this capital loss could Mr. Surita deduct in 2008?
a. Zero c. P4,000
b. P3,000 d. P8,000

14. Penalties and/or interest imposed on the taxpayer may be abated or cancelled on the ground that the imposition
thereof is unjust and excessive, except when:
a. The taxpayer is declared insolvent or bankrupt.
b. The filing of the return or payment of the tax is made at the wrong venue.
c. The taxpayer’s mistake in payment of his tax is due to erroneous written official advice of
a revenue officer.
d. The assessment is brought about or a result of the taxpayer’s non-compliance with the
law due to a difficult interpretation of the said law.

15. The actual residential home of the decedent and his family at the time of his death, as certified by the Barangay
Captain of the locality where the family home is situated, has a fair market value of P3,000,000. The family home
is part of the common property of the spouses. How much is the family home deduction?
a. P1,500,000 c. P750,000
b. P1,000,000 d. P500,000

16. A negotiable instrument that is not dated will be considered dated as at the time of
a. Acceptance c. Last endorsement
b. First endorsement d. Issuance

17. A delinquent stockholder is not entitled to the following rights, except the right:
a. To be voted
b. To vote or be represented in the meetings of stockholders
c. To dividends
d. He is not entitled to all the rights of a stockholder

18. Three of the following partnership contracts are void. Which one is not?
a. A universal partnership of present property between husband and wife
b. A universal partnership of profits between a man and a woman living together as husband
and wife without the benefit of marriage
c. A particular partnership between husband and wife
d. A universal partnership between a private individual and a public officer

19. The following are modes of extinguishing an agency, except:

a. Death, civil interdiction, insanity or insolvency of the principal or agent
b. Accomplishment of the purpose of the agency
c. Expiration of the period for which the agency was constituted
d. Continued losses on the part of the principal or agent

20. Three of the following instances will render an offer ineffective before acceptance is conveyed. Which one will
not?
a. Civil interdiction of either party c. Insanity of either party
b. Insolvency of either party d. Intoxication of either party

21. The taxpayer's 2003 percentage tax return is required to be filed through the authorized agent bank under the
jurisdiction of RDO East Makati. Without prior authorization from the Commissioner, the taxpayer files the return
and pays the tax through an authorized agent bank under the jurisdiction of RDO Davao City on June 30, 2004.
The tax due per return is P100,000.

How much is the total amount due on June 30, 2004

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a. P 154,155.25 c. P 25,000.00
b. P 129,155.25 d. None of the choices

22. Which of the following shall not be subject to income tax?

I- Pedro Reyes, an official of Corporation X, asked for an “early retirement” because he
was emigrating to Australia. He was paid P2,000,000 as a separation pay in
recognition of his valuable services to the corporation.
II- Juan Cruz, another official of the same company was separated for occupying a
redundant position. He was given P500,000 as separation pay.
III- Jose Bautista was separated due to his failing eyesight. He was given P500,000 as
separation pay.
All the three (3) were not qualified to retire under the BIR-approved pension plan of the corporation.
a. I, II and III c. I only
b. I AND II d. II AND III ONLY

23. This refers to the control number issued by authorized agent bank (AAB) to the taxpayer and BIR to acknowledge
that the taxpayer's account has been successfully debited electronically in payment of his tax liability.
a. Filing Reference Number
b. Acknowledgment Number
c. Confirmation Number
d. Taxpayer's Information Number

24. A taxpayer paid excessive tax on April 15, 2000. On December 20, 2001, she filed a written claim for refund. Her
claim was denied by the BIR and she received the denial on March 15, 2002. She filed a motion for
reconsideration with the BIR on March 31, 2002. On April 10, 2002, she received the final denial of the BIR. What
will be the taxpayer’s remedy?
a. File another motion for reconsideration with the BIR within 30 days after the receipt of
the final denial
b. File an appeal with the Court of Tax Appeals on or before May 10, 2002
c. File an appeal with the Court of Tax Appeals on or before April 15, 2002
d. The taxpayer has no more remedy against the final denial

25. A VAT subject real estate dealer sold a residential lot on January 15, 2007. The following information was made
available on the terms of the sale:
Gross selling price P 3,000,000
Initial payments on January 15, 2007 750,000
Balance to be paid in equal installment,
installments starting February 15, 2007 2,250,000
The zonal value of the residual lot was P3,500,000.
How much was the output tax on January 15, 2007 using 12% VAT rate?
a. P 420,000 c. P 105,000
b. P 360,000 d. None of the choices

26. Payment made to a third person is valid to extinguish the obligation of the debtor to the creditor in the following
cases, except:
a. After payment to the creditor, the third person acquires the creditor’s right.
b. When the creditor ratifies the payment to the third person.
c. When through the creditor’s conduct, the debtor was led to believe that the third
person had authority to receive payment.
d. When the third person is subrogated to the rights of the creditor.

27. N, R and J solidarily bound themselves to deliver to S a Honda motorcycle valued at P 60,000. The obligation was
not fulfilled through the fault of J. Thereupon, S filed an action in court against N and the court awarded P 72,000
to S representing the value of the motorcycle plus damages. Which of the following situation is valid?
a. If N pays S the P 72,000, N can collect R and J P 24,000 each
b. S has to collect P 24,000 each from N, R and J to satisfy the court’s award of P 72,000
c. N can refuse to pay the penalty because it should be charged against J, the guilty
party
d. If S succeeds in collecting the P 72,000 from N, N in turn can collect from R P 20,000
and from J P 32,000

28. P authorized A, a minor, to sell his car for P 1,000,000 in cash. A sold the said car to X on installment at a lesser
price of P 900,000. P is now repudiating the contact with X on the ground that he is not bound to since X
contracted with a minor who exceeded his authority. Decide.
a. P is liable under the contract because it is enough that the principal is capacitated
since he is the one entering into the contract.
b. P is not liable for the sale on installments since it is unenforceable because his agent
acted beyond his powers.
c. P is not liable because the agent is a minor with whom X contracted
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d. P is liable provided the sale is in cash for P 1,000,000.

29. A gets a loan of P 1,000,000 from B which becomes due on October 1, 2008 and mortgaged his house as security
for the debt. On June 30, 2008, the mortgaged house completely destroyed the fire through the fault of C. A week
later, B demanded payment from A. Is B’s demand valid?
a. No, the destruction of the house was not thru the fault of A.
b. No, the obligation is one with a definite period which is deemed intended for the
benefit of both the debtor and creditor
c. Yes, the debt becomes demandable unless A can give another security equally
satisfactory
d. Yes, the debt becomes demandable even if A can give another security equally
satisfactory

30. One of the following characteristics of dacion en pago is also a characteristic of a contract of sale. Which is it?
a. There is a pre-existing credit
b. Obligations are extinguished
c. There is less freedom in fixing the price
d. Ownership of the object transferred to the other party

31. An obligation where various prestations are due but the performance of all of them is required in order to extinguish
the obligation is known as:
a. Alternative obligation c. Conjunctive obligation
b. Facultative obligation d. Simple obligation

32. It is an affirmation of fact or any promise by the seller relating to the thing which has a natural tendency to induce
the buyer to purchase the same, relying on such promise or affirmation.
a. Condition c. Warranty
b. False representation d. Seller’s talk

33. Which of the following contacts is rescissible?

a. Contracts entered into during a hypnotic spell
b. Contracts entered into in a state of drunkenness
c. Contracts entered into to defraud creditors when the latter cannot collect the claims due them
d. Contracts where both parties are incapable of giving consent

34. Which among the following contracts is void?

a. A contract of barter between S, insane, and B, 17 years old
b. A contract of sale where B, the buyer, twisted the arm of S, the seller, so that S would sign
the deed of sale
c. A contract of sale where B, the buyer, aimed a gun at the wife of S, so that S would sign the
deed of sale
d. A contract for the sale of a cow which is suffering from a contagious disease

35. Who among the following is the holder of a negotiable instrument originally payable to order?
a. The original payee who has negotiated the instrument
b. The endorsee who is in possession of the instrument
c. The possessor of the instrument to whom the instrument was delivered without any
endorsement
d. The endorsee who has negotiated the instrument

36. An instrument payable to bearer may be negotiated through any of the following means, except:
a. Special endorsement plus delivery
b. Mere delivery
c. Blank endorsement plus delivery
d. No delivery is required as long as there is an endorsement, whether blank or special

37. One of the following is not a characteristic of contract of partnership.

a. Real, in that the partners must deliver their contributions in order for the partnership
contract to be perfected
b. Principal, because it can stand by itself
c. Preparatory, because it a means by which other contracts will be entered into
d. Onerous, because the parties contribute money, property, industry to the common fund

38. Recording in the Registry of Property in the appropriate book is required for the validity of the contract of:
a. Chattel mortgage c. Conventional pledge
b. Real mortgage d. Antichresis

39. A, B, C and D, joint debtors, are obliged to give V, W, X, Y and Z, solidary creditors, P 20,000.00
a. V may collect from B P 20,000 c. V may collect from B P 5,000
b. V may collect from B P 4,000 d. V may collect from B P 1,000

40. The following are modes of extinguishing an agency, except:

a. Death, civil interdiction, insanity or insolvency of the principal or agent
b. Accomplishment of the purpose of the agency
c. Expiration of the period for which the agency was constituted
d. Continued losses on the part of the principal or agent

41. In an obligation to give a determinate thing, what rights are available to the creditor?
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First Answer: To compel specific performance

Second Answer: To recover damages incase of breach of contract.
Third Answer: To ask that the obligation be complied with at the expense of the debtor.

a. All answer are correct c. Only First Statement.

b. First and Second Statement d. All answers are wrong.

42. The following contracts, except one, are void ab nitio. Which is the exception?
a. That whose object is outside the commerce of men.
b. That whose object did not exist at the time of the transaction.
c. That which contemplates an impossible service.
d. That which is undertaken in fraud of creditors.
43. Key Mae, minor owns a specific property valued at P50,000. Richard capacitated, by means of fraud induced Key Mae
to sell her property to him for P30, 000, which Key Mae did so. The contract is in writing. Which is correct?
a. The contract is valid and binding from the start.
b. The contract remains unenforceable because it falls under the Statute of Frauds.
c. The contract is rescissible because the ward suffered lesion by more than ¼ of the value.
d. The contract is voidable and Richard can ask for annulment within the period prescribed by law.
44. Legal compensation is allowed when one of the debts is
a. Arises when the sale of real property made by a minor to a capacitated person.
b. Arises from the obligation of a depositary
c. Arises when the sale of real property made by a minor to a incapacitated person.
d. Arises when the sale of movable property by a minor to a capacitated person.
45. This is not a characteristic of void or inexistent contract.
a. Defense of legality of the contract is available to third persons whose interest are not directly affected.
b. The right to raise a defense of illegality cannot be waived.
c. The action or defense for declaration of the nullity or inexistense of the contract does not prescribe.
d. Defense of illegality of the contract is available to third persons whose interest are not directly affected.

46. Reformation is not proper remedy if.

a. The mutual mistake of the parties causes the failure of the instrument to disclose their real agreement.
b. One party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does
not show their true intention.
c. There was a mistake, fraud, inequitable conduct or accident which prevented the meeting of the minds of the
contracting parties.
d. The true intention of the contracting parties is not expressed in the instrument purporting to embody the
agreement by reason of mistake, fraud, inequitable conduct or accident.

47. The following contract are defective. Which one is unenforceable?

a. Contract of sale by which a guardian acquires the property of his ward without the approval of the court.
b. Contract of sale by which a city mayor acquires a portion of the city part pursuant to a city ordinance enacted by
the City Council.
c. Contract whose objects is outside the commerce of men.
d. Those were both parties are incapable of giving consent to a contract.

48. Statement # 1: The actual cost of other property which is destroyed by order of authorities may be claimed as a
gain by a farmer.
Statement # 2: If an individual owns and operates a farm, in addition to being engaged in another trade, business
or calling, and sustains a loss from such operation of the farm, then the amount of loss sustained may be deducted
from gross income received from all sources, provided the farm is not operated for recreation or pleasure.
Statement # 3: Any net loss incurred in a taxable year during which the taxpayer was exempt from income tax
shall not be allowed as a net operating loss carryover deduction.
Statement # 4: NOLCO shall be not allowed only if there has been no substantial change in the ownership of the
business or enterprise.
Which of the following statement/s is/are true? ___2 and 3________

49. The following are essential requisites of a negotiable promissory note except
a. must be written and signed by the drawer
b. must contain an unconditional promise to pay a sum certain in money
c. must be payable upon fixed determinable future time.
d. must be payable to order or bearer
50. Which of the following is not an essential element of a bill of exchange?
a. must be written and signed by the drawee
b. must contain an unconditional promise to pay a sum certain in money
c. must be payable to order or bearer
d. drawee must be named therein
51. The following are negotiable except
a. “Pay to bearer Jose Cruz P 10,000 upon demand”, signed by A and addressed to B
b. “Pay to Jose Cruz or bearer P 10,000 upon demand”, signed by A and addressed to B
c. “I oblige myself to pay Pedro Reyes or order P 3,000 ten days after day signed by M as maker.
d. “Good to L or order P 5,000 July 1, 2009 signed by M as maker

52. Which of the following is negotiable?

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a. “ I promise to pay Jose Cruz or order P 10,000 or deliver 1 cow 20 days after date at the option of the holder”
signed by M as maker
b. “Pay to Pedro Reyes or bearer P 10,000 or deliver 1 cow on 4-4-10 at the option of the drawee”, signed by A
and addressed to B
c. “Pay to Pedro C. Cruz or order P 5,000 out of fund I deposited with you” signed by A and addressed to B
d. I promise to pay K. KHO or order P 10,000 in 5 installments, first installment August 1, 2009 and every month
thereafter, signed by M as maker

53. The following are functions of negotiable instrument; except:

a. used as substitute for money b. medium of credit transactions
c. medium of exchange for commercial transactions d. none of them.

54. Which of the following is no an incident in the life of negotiable instrument?

a, Issue b. notice of dishonor c. Preparation d. Negotiation

55. Which of the following is negotiable?

a. Postal Money order b. Certificate of stock c. Treasury warranty d. None of them

56. A promissory note is payable to bearer when:

a. It is payable to a person named therein or bearer
b. the only endorsement is blank
c. the name of payee does not support to be the name of a person
d. all of the above

57. The following are considered negotiation except

a. issue b. endorsement plus delivery c. delivery d. none of them

58. This endorsement constitutes the endorser as a mere assignor of the title of the instrument:
a. Special b. Blank c. qualified d. restrictive

59. The following are requisites in order that a person can be considered a holder in due course; except
a. that the instrument is complete and regular upon its face.
b. the instrument is not yet overdue or no notice of dishonor
c. holder for value and in good faith
d. none of them.

60. Which of the following is not false?

a. a holder for value is not necessarily a holder in due course
b. only person whose signature appear in the instrument can be held liable therein
c. forgery is both real and personal defense
d. an accommodation party is liable only to a holder in due course

61. Real defenses are those that attached to the instrument itself and can be set up even against holder in due course.
Which of the following is not considered real defense?
a. fraud in factum b. forgery c. absence or failure of consideration d. minority
62. The existence of the payee and his then capacity to indorse is a warranty of:
a. the maker b. acceptor c. drawer d. all of them
63. Which of the following is not a warranty of a qualified indorser?
a. the instrument is genuine b. he has a good title
c. prior parties have capacity to contact d. instrument is valid and subsisting

64. Notice of dishonor is not required to be given by a drawer when:

a. The drawer and the drawee are the same person b. the drawee has countermanded payment
c. the drawee is fictitious d. all of the above

65. Which of the following is not considered material alternation

a. changing the date b. changing the amount
c. changing the relation of the parties d. none of them

66. A negotiable instrument is discharged by:

a. payment in due course by or on behalf of the party primarily liable
b. payment in due course by the party accommodated
c. intentional cancellation thereof by the holder
d. none of them

67. Who of the following is party with primary liability?

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a. Maker b. endorser c. drawer d. person negotiating by mere delivery

68. A check is not presented for payment within a reasonable length of time after issue is called
a. certified b. Stale c. memorandum d. crossed

69. Signification by the drawee of his assent to comply with the order of the drawer is:
a. Indorsement c acceptance
b. delivery d. presentment for acceptance

70. Presentment for acceptance is required when

a. the bill is payable after sight

b. the bill requires it
c. the bill is drawn payable elsewhere than the residence of the drawee
d. all of them

71. Protest is required when this bill is dishonored:

a. domestic/local c. trade acceptance

b. foreign d. all of the above

72. The following are promissory notes except:

a. due bill c. certificate of deposit

b. bond d. none of them

73.Which of the following is false?

a. the acceptor is primarily liable

b. the drawer is secondarily liable
c. the issue is not negotiation
d. when the drawer and drawee are the same person the holder consider the bill was a note

74. I promise to pay Jose Reyes or order P 10,000 ten days after the date signed by M as maker. The note is undated.
Which of the following is correct?

a. the note is non negotiable

b. the payee can require payment 10 days after issue
c. the payee can require payment at any time
d. the payee cannot negotiate the note

75. The negotiable promissory note signed by M as maker for P 10,000 is payable to Jose Cruz or bearer on May 10,
2009. M however issued the note to the payee May 15, 2009. In this case:
a. The instrument is considered non-negotiable because the date of issue is later than the date of payment.
b. Cruz can ask for payment at anytime
c. Cruz can require payments only on May 15, 2009
d. Cruz cannot negotiate the note

76. “Pay to Maria or order P 20,000 upon demand”, signed by A as drawer and addressed to B. Maria negotiated the
bill to C, C to D, E stole the bill from D and indorsed it to F by forging the signature of D. F in turn indorsed the bill to G & G
to H. Which of the following is false?

a. all indorsers prior to the forgery are discharged

b. the drawer is liable to H
c. F is liable to H
d. Forgery is real defense

77. M is the maker of a note payable to J. Cruz or order for P 5,000 due July 30, 2009. Cruz borrowed P 2,000 from C
payable July 31, 2009 and pledged the note by indorsing it to C. Which of the following is correct?

a. a promissory note cannot be pledged without the consent of the maker

b. On July 30, 2009 C can collect from M only P 2,000
c. on July 30, 2009 C can collect from M P 5,000
d. partial indorsement is allowed

78. A is the drawer of a bill addressed to B, payable to C or order 10 days after acceptance for P 8,000. C negotiated
the bill to D, to E and E to F. The bill was accepted by B when presented by F. If the signature of A is forge, which of the
following is false?

a. B is required to pay F even if the signature of A is a forgery

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b. B is not required to pay F since he has the defense of forgery

c. Forgery is considered a real defense
d. If B dishonors the bill by non-payment F may give to any indorse

79. M is the maker of a note, payable to C or order for P 10,000. C negotiated the note to D, D to E, E to F, F to G and
G to H. M dishonored the note when presented by H for payment. H gave notice of dishonor to F. Which of the following is
true.

a. all indorsers prior to F are discharged

b. only G is discharged
c. H is required to notify M
d. F in turn can give notice to G

80. “ Pay to Pedro Reyes or order P 20,000 ten days after sight

SIGNED
By A drawer as agent of B

To: B

Pedro Reyes negotiated the bill to C, C to D and D to E. B dishonored the bill by non payment. E gave notice of
dishonor to all prior parties except B. Which of the following is not correct?

a. The drawer is not liable to E

b. The drawer is liable to E since he was duly notified of the dishonor
c. if D paid E , C becomes liable to D
d. this bill maybe considered as a note

81. M signed a promissory note payable to C or order for P 5,000 ten days after date. C indorsed the note to D, D to E
and E to F. F, without authority from the prior parties, altered the amount to P 15,000 then indorsed the note to G.

a. the unauthorized alteration renders the note void

b. G cannot require M to pay anything
c. G can require M to pay only P 5,000 if G is a holder in due course
d. G can require M to pay P 25,000 if G is a holder in due course

82. Drawer A addressed a bill to B for P 20,000 payable to C or order 20 days after acceptance. B made a conditional
acceptance in this case:

a. the bill becomes non-negotiable

b. it is still negotiable notwithstanding the conditional acceptance
c. the holder cannot refuse to take a conditional acceptance
d. B is considered a constructive acceptor

83.M is the maker of a note for P 30,000 payable to C or bearer. C negotiated the note to D, D to E, E to F and F to M.
Which is correct?

a. the note is discharged

b. the noted is not discharged since there is no payment
c. M cannot re-issued the note
d. The indorsers are not dischaged

84. Drawer A addressed a bill to B payable to C or bearer for P 60,000 upon demand. C negotiated the note to D, D to
E, E to F and F to G. Upon proper presentment, B paid the bill. Which of the following is true?

a. the bill is discharged

b. persons secondarily liable are likewise discharged
c.the bill is not required to be presented for acceptance
d. all of the above

85. For the donation to be considered valid, acceptance of the donation must be made.
a. during the lifetime of the donor only.
b. during the lifetime of the donee only
c. during the lifetime of the donor and the donee
d. none of the choices