1st Handout (1)

NIL 1-11 ALVERO ASIDO CENTENO MENDOZA REYES 4A3 1. An instrument is considered payable upon demand: a. When payable to order b. When the last indorsement is in blank c. When the drawee is fictitious d. None of them (CPA OCT. 1980) ANSWER: D 2. A holder may treat a bill of exchange as a promissory note: a. When the instrument is ambiguous b. When the drawer and drawee are the same person c. When the drawee is fictitious d. All of them (CPA OCT. 1980) ANSWER: D 3. Absence or failure of consideration is a matter of defense against any person: a. Holder in due course b. Not a holder in due course c. Who is the holder of the instrument d. None of the above (CPA OCT. 1980) ANSWER: B 4. The drawee bank is not primarily liable: a. Cashier’s check b. Certified check c. Manager’s check d. Traveller’s check (CPA MAY 1998) ANSWER: D 5. If the instrument is payable to the order of a third person, a. He is liable to all parties subsequent to the payee b. He is not liable to any party c. He is liable to the payee and to all subsequent parties d. He is liable to all parties subsequent to the maker or drawer (CPA MAY 1998) ANSWER: C 6. Which of the following is not negotiable? a. Pay to D or order 10,000 on or before December 31, 1997 (sgd. E) b. Pay to A or order 10,000 notice of dishonor waived. (sgd B) c. Pay to B or order 5,000 or deliver two horses at the option of the holder (sgd C)

d. Pay to C or order 10,000 and to deliver 10 sacks of rice. (sgd D) (CPA MAY 1998) ANSWER: D 7. A bill of exchange drawn on a bank and payable on demand is a a. Check b. Treasury bill c. Domestic bill d. Bill of lading (CPA MAY 1998) ANSWER: A 8. Which is not correct? The acceptor by accepting the instrument – a. Admits the existence of the drawer, the genuineness of his signature and his capacity and authority to draw the instrument. b. Admits the existence of the payee and his capacity to indorse. c. Engages that he will pay it according to the tenor of his acceptance. d. Admits the existence of the indorser, the genuineness of his signature and his capacity and his authority to draw the instrument. (CPA MAY 1998) ANSWER: C 9. Case 1: Angel buys a diamond ring for 50,000 for which he issued a check. Later Angel found out the diamond to be an ordinary glass. Case 2: Ben obtains the signature of C for autograph purpose. Ben writes a promissory note above Cris’ signature and endorses the note to Dan, a holder in due course. What kind of defense may be availed by the maker? a. Real defense in the first case, personal defense in the second case b. Personal defense in first case, real defense in the second case c. Real defense in both cases d. Personal defense in both cases (CPA MAY 1998) ANSWER: B 10. Maturity of an undated negotiable instrument issued payable 30 days after sight is computed from: a. Date of the first indorsement b. Date of the last indorsement c. Date of the last presentation for acceptance d. Date of issue (CPA MAY 1998) ASNWER: D 11. When is a negotiable instrument payable to order? a. When drawn payable to the order of specified person or to him or his order

b. When payable to the order of a fictitious or non-existing person, and such fact was known to the person making it. c. When the name of the payee does not purport to be the name of any person d. When the only or last indorsement is an indorsement in blank (CPA MAY 1998) ANSWER: A 12. Which of the following is not a characteristic of a bill of exchange: a. Original parties are the drawer, drawee, payee and acceptor. b. Acceptance is generally required. c. Drawer is primarily liable. d. Contains an unconditional order. (CPA May 1998) ANSWER: C 13. An instrument originally negotiable ceases to be negotiable when: a. Qualified Indorsed. b. The last and only indorsement is in blank. c. Restrictively indorsed. d. None of the Above. (CPA 1982 Board) ANSWER: C 14. Which one of the following is not negotiable for the reason that the promise or order is not unconditional: a. Pay to B or order the sum of P1, 000 and reimburse yourself out of money in your hands. Sgd. A To: X. b. Pay to B or order P1,000 on account of contract between you and the CDCP. Sgd. A To: X. c. Pay to B or order the sum of P25,000 in payment of the car I bought from him last week. Sgd. A. To: X. d. Pay to B or order the sum of P1,000 out of my money in your hands. Sgd. A. To: X. (CPA 1984 Board) ANSWER: D 15. Under the Negotiable Instrument law, a certificate of stock is not negotiable because it lacks the requisite of: a.The instrument must be in writing and signed by the maker or drawer. b. It must contain an unconditional promise or order to pay a sum certain in money. c.It must be payable on demand or at a fixed or determinable future time. d. It must be payable to order or to bearer (CPA 1985 Board) ANSWER: B 16. Which of the following is not included as a warranty of a person negotiating an instrument by delivery or by a qualified indorsement:

a. b. c. d.

That the instrument is genuine and in all respects what it purports it to be. That he has good title to it. That all prior parties had capacity to contract. That the instrument is at the time of his indorsement valid and subsisting (CPA 1984 Board)

ANSWER: D 17. An indorsement which attach no liability on the part of the indorser in case of insolvency of the person principally liable is called a a. irregular indorsement b. qualified indorsement c. conditional indorsement d. restrictive indorsement. ANSWER: B (1982 Board) 18. Which of the following is not included among the rights of an indorser in a restrictive indorsement: a. to bring any action thereon that the indorser could bring b. to receive payment of the instrument c. to transfer his right as such indorsee, where the form of the indorsement authorizes him to do so d. to strike out any indorsement prior to the restricitve indorsement. ANSWER: D 19. Defense which can be interposed not only against one who is not a holder in due course but also against a holder in due course a. defense protanto b. personal defense c. real defense d. none of the above ANSWER: C 20. Give the instrument listed herein which is not negotiable as it is beyond the scope of the negotiable instruments law a. certificate of deposit b. due bill c. post office money order d. trade acceptance

ANSWER: C 21. Method of transferring a non-negotiable instrument whereby the transferee is merely placed in the position of the transferor and acquires the instrument subject to all defenses that might have been set up against the original payee. a. negotiation b. delivery c. assignment d. none of the above ANSWER: C 22. A presented a bill to B, the drawee. B destroyed the bill. What can A do? a.A may sue B for the destruction of his property b. A may go after the drawee for the bill c.A may no longer collect since the bill was destroyed d. A may consider the bill as impliedly accepted by B ANSWER: D 23. This negotiable instrument is always drawn against a bank a. b. c. d.

Bill of exchange Check Due bill Promissory Note

ANSWER: B 24. Every person negotiating an instrument by delivery or by a qualified indorsement warrants the following. Which does not belong to the warranties? a. b. c. d.

That the person negotiating has no liability to a third person That the instrument is genuine and in all respects what it purports it to be That he has a good title to it and that all prior parties had the capacity to contract That he has no knowledge of any facts which would impair the validity of the instrument or render it valueless

ANSWER: A 25. A bill of exchange may be treated and considered a promissory note a. When the drawer and the drawee are the same person

b. When the drawer is fictitious c. When the instrument is ambiguous d. All of the above ANSWER: D 26. This instrument is negotiable a. I promise pay P20,000 Sgd. Jose Santos b. Pay Pedro Torres or order P20,000 if he marries Maria Cunanan. Sgd. Jose Santos c. Good to Mario Cruz or order P20,000 Sgd. Jose Santos d. X promise to pay Oscar Bamba or order 20 cavans of XR rica in January 1988. Sgd. Jose Santos. (CPA 1988 Exam) ANSWER: C 27. An instrument payable on demand: a. When no time of payment is expressed b. When last indorsement is in blank c. When the payee is blank d. When payable to order (CPA 1989 Exam) ANSWER: A 28. The following instrument is not negotiable: a. Pay to C or order P20,000 with exchange at 2.5% to TP, Sgd. M b. Pay to order of C within 6 months from date the sum of P20,000 with interest at 12% per anum. TP. Sgd. M c. Pay to C or bearer P20,000 6 months after date. If not paid on due date, I agree to pay collection and attorney’s fees. TP. Sgd.M. d. Pay to C or Order P20,000 in installment. TP. Sgd.M.(CPA 1989 Exam) ANSWER: D 29. This party is with primary liability a. Maker b. Drawer c. Indorser d. None of the above (CPA 1989 Exam) ANSWER: A 30. Which of the following instrument is not negotiable? a. I agree to pay to the order of A. P30,000. Sgd. X

b. Good to A or Order P30,000. Sgd. X c. I promise to pay A or order P30,000 on June 30. Sgd. X d. I promise to pay A or order P5,000 Sgd. X. ANSWER: C 31. The promise or order is conditional , hence non-negotiable a. I promise to pay B or order P20,000 Sgd. Y b. Pay B or order P20,0000 (Addressed to Z. Sgd. By Y) c. Pay B or order P20,000 and reimburse yourself out of my money in your possession. (Addressed to Z Sgd. By Y) d. Pay B or order P20,000 out of my money in your possession (Addressed to Z Sgd. By Y) ANSWER: D 32. A promissory note as distinguished from a bill of exchange a. It contains and unconditional order b. The one who issues it is primarily liable c. The one who issues it is secondary liable d. There are 3 parties, the drawer, the payee and the drawee. ANSWER: B 33. Which one of the ff. instruments is negotiable? a. I promise to pay C or order P20,000 if he will pass the CPA Exam in October, 1990 Sgd. D. b. I promise to pay C or order P20,000 in 4 installments. Sgd. D c. I promise to pay C or order P20,000 60 days after the death of his father. Sgd. D. d. I promise to pay C P20,000 Sgd. D. ANSWER: C 34. Which one of the ff. Instruments is non-negotiable? a. Pay to C or order P20,000 out of my money in your possession. (Addressed to A, signed by D) b. Pay to C or order P20,000 and reimburse yourself out of my money in your possession (Addressed to A, Sgd. By D) c. I promise to pay C or order P20,00 (Sgd. D) d. Pay C or order P20,000 (Addressed to A, Sgd. By D.) (IDENTICAL TO NO. 7 – CPA EXAM 1992) ANSWER:

A

35.Marcelo makes a note payable to the order of Patricia who indorses it to Alfonso. Fidel obtains possession of the note fraudulently, forges Alfonso's signature and indorses it to Bartolome who in turn indorses it to Cataline. In this case, Cataline can: a. b. c. d. ANSWER:

enforce the instrument against Marcelo and Patricia enforce the instrument against Alfonso enforce the inst. against Bartolome Answer not given B

36. M makes a prom. note for P2,000 payable to the order of P. P negotiates the notes to A whp, with the consent of P, raises the amount to P20,000 and thereafter indorses it to B, B to C, C to D who is not a holder in due course. In this case: a. b. c. d. ANSWER:

D can recover P2,000 as against M P & A are liable to D for P20,000.00 B & C are not liable to D. Answer not given C

37. A check upon which the holder’s signature must appear twice, one to be affixed by him at the time it is issued and the second or counter-signature, to be affixed by him before it is paid, otherwise it is incomplete, is called:

a. b. c. d. ANSWER:

certified check stale check traveller’s check answer not given (CPA 1991 EXAM) C

38. An instrument is rendered non-negotiable if a. there is an indication of a particular fund out of which reimbursement is to be made b. there is an indication of a particular account to be debited with the amount

c. the instrument is payable out of a particular fund d. Answer not given (CPA 1991 EXAM) ANSWER:

C

39. A general indorser is distinguished from the irregular indorser in that a general indorser: a. makes either a blank or special indorsement b. indorses after its delivery to the payee c. is liable to the payee and subsequent parties unless he signs for the accommodation of the payee, in which case he is liable only to all parties subsequent to him d. Answer not given (CPA 1991 EXAM) ANSWER:

C

40. Presentment for acceptance of a bill is not necessary a. where the bill is payable at sight b. where the bill is drawn payable elsewhere than at the residence or place of business of the drawee c. where it is payable at a certain number of days after date d. Answer not given (CPA 1991 EXAM) ANSWER:

C

41. Protest is not necessary a. upon dishonor by non-acceptance of a foreign bill appearing on its face to be such b. upon dishonor by non-payment of a foreign bill appearing on its face to be such, if not having been previously dishonored by non-acceptance c. in case of inland bills and promissory notes d. answer not given (CPA 1991 Exam) ANSWER: D 42. The distinction between acceptance for honor and ordinary acceptance is that: a. In acceptance for honor, protest is not required while in ordinary acceptance,

there must be previous protest b. In acceptance for honor, the acceptor is the drawee while in ordinary acceptance, the acceptor must be a stranger to the bill c. In acceptance for honor, the consent of the holder is required while in ordinary acceptance, such consent is not required d. answer not given (CPA 1991 Exam) ANSWER: C 43. Which of the following instruments is non-negotiable? a. “Pay to C or order P20,000 out of my cash in your possession” (Addressed to T, signed by D) b. “Pay to C or order P20,000 and reimburse yourself out of my cash in your possession” (Addressed to T, signed by D) c. “I promise to pay C or order, P20,000” (Signed D) d. “Pay C or order P20,000” (Addressed to T, signed by D) (CPA 1992 Exam) ANSWER: A 44. This is not negotiation of a negotiable inst. a. Assignment b. Delivery of a bearer inst. c. Indorsement completed by delivery of an inst. payable to order d. Delivery of an inst. to the payee (CPA 1992 Exam) ANSWER: A

45. Which of the ff. Instruments is not negotiable because it lacks the requirements of an unconditional premise or order to pay a sum certain in money? a. Bill of Exchange b. Certificate of stock c. Promissory Note ANSWER: C 46. “I promise to pay bearer, Juan Dela Cruz, P20,000”(Sgd)Jose Pan. The note is

a. b. c. d.

Negotiable promissory note payable on demand Negotiable promissory note payable to order Negotiable note payable to bearer Non-Negotiable

ANSWER: D 47. “PAY TO MARIA RAMOS, NOTICE OF DISHONOR WAIVED’ is an example of a.Special endorsement b. Facultative endorsement c.Qualified endorsement d. Restrictive endorsement ANSWER: B 48. The following are functions of a negotiable instruments. Choose the exception – a. b. c. d.

It increases purchasing power in circulation It increases credit circulation as substitute of money as legal tender

ANSWER: D 49. Which of the ff. Does not discharge a negotiable instrument? a. b. c. d.

(A)Payment by maker of a promissory note before maturity date (B)Intentional cancellation of the instrument by the holder (C)Payment by party primarily liable to holder or his authorized representative (D)Voluntary surrender of the instrument by the holder to the maker without collecting

ANSWER: A 50. Which one of the ff. Promissory note is not negotiable for reason that the instrument is not payable in sum certain in money? a. A promises to pay to the order of A P10,000 payable in dollar at the rate of exchange prevailing on October 12, 1993 b. (B)X promises to pay to the order of A P10,000 with 12% interest thereon. c. (C)X promises to pay to the order of A P10,000 in instalments d. (D)X promises to pay to the order of A P10,000 in two equal instalments, the first instalment payable on September 12, 1993 and the second instalment on or before October 12, 1993. ANSWER: C

51. Antonio issues a bill to the order of Juan, ad Juan indorses it to Pedro. Pedro indorses the bill to Mario, Mario to Rodolfo and Rodolfo indorses the bill to Jose, the holder. Which of the following is not true, if Jose decides to strike out any indorsement not necessary to his title? a.If Jose cancels the indorsement of Pedro, Pedro is relieved from liability b. If Jose cancels the indorsement of Juan; Juan, Pedro, Mario and Rodolfo are relieved from liability c.If Jose cancels the indorsement of Pedro; Pedro, Mario , and Rodolfo are relieved from liability d. If jose cancels the Indorsement of Mario; Mario and Rodolfo are relieved from liability ANSWER: B 52. One of the requisites of a neg. inst. Is that it must certain and unconditional promise or order to pay a sum certain in money. Which of the ff. denotes non-negotiability? a. I promise to pay to the order of L the sum of $900 at the DBP manila b. I promise to pay to the order of Y the sum of $600 and to deliver ¼ of rice harvest in any farm c. I promise to pay N or bearer in Manila the sum of P18,000 in Philippine peso or in U.S dollars d. I promise to pay E or bearer in Manila the sum of 27,000 in the Philippine pesos or U.S dollars, at the option of the holder. ANSWER: C 53.A bill of exchange to which no document is attached when presentment for payment or acceptance is made: a. b. c. d.

Trade Acceptance Bank Acceptance Clean bill of exchange Documentary bill of exchange

ANSWER : C 54. Which of the following does not discharge a negotiable instrument? a.Payment in due course by the accommodated party which the instrument’s made or accepted for his accommodation.

b. Payment in due course by the principal debtor. c.Intentional cancellation of the instrument by the maker. d. Payment in due course by the accommodation maker. ANSWER: A 55. Which of the following is an example of Real Defense? a.Acquisition of the instrument by force. b. Acquisition of the instrument for illegal consideration. c.Fraud in the endorsement. d. Fraud in factum. ANSWER: C 56. Which of the following instruments is not negotiable for the resaons that the instrument is not payable at a determinable future time? a. "One week after X passes the CPA Board Examination, I promise to pay to the order of Y P10,000. (Sgd.)Z" b. "Thirty days after demand, Drawer Z directss Drawee X to pay Y or order P10,000." c. "Ten days after the death od X, I promise to pay to the order of Y P10,000. (Sgd.)Z" d. "On or before October 31, 1993, I promise to pay Y or his order P10,000. (Sgd.Z)" (CPA 1994 Exam) ANSWER: A 57. In the renunciation of his rights against any part to the instrument, which of the following statements is false? a. If the instrument is delivered to the person primarily liable without collecting, it constitutes oral renunciation. b. If renunciation is made in favor of any party secondarily liable, all parties subsequent to him are discharged from liability. A B C E F G c. Renunciation will not affect the rights of a holder in due course without notice. d. If the renunciation is made in favor of the party primarily liable, it must be made before, at or after maturity date. (CPA 1994 Exam) ANSWER: B 58. The following are instances when a drawee bank may refuse to pay checks drawn against it, except one: a. If there is a "stop payment" issued by the drawer. b. When the bank receives notice of the drawer's death. c. If the drawer's deposit is insufficient.

d. If the drawer is insolvent. (CPA 1994 Exam) ANSWER: B 59. The following are functions of a negotiable instrument. Choose the exception. a. It increases the purchasing power in circulation. b. As legal tender c. As substitute for money d. It increases credit circulation. (CPA 1994 EXAM) ANSWER: B 60. A check drawn by the bank upon itself and payable to a third person. a. Certified check b. Manager's check c. Traveller's check d. Crossed check ANSWER: B 61. A issues a bill payable to the order of B. Later B without endorsing the bill transfer for a consideration said bill to C. The following except one, are the valid effects of the transfer: a. C acquires the right to have the endorsement of B b. The bill is merely assigned and not negotiated. c. C becomes a holder d. The transfer vests in C such title as B had thereon. ANSWER: C 62. A issued a negotiable promissory note to the order of B for P10,000 payable after 30 days after date. Later B indorsed it to C. Then X stole the note from C, forged the signature of C and negotiated it to D, and D to E, E to F, the holder. On maturity of note, which of the following statements is not correct and invalid? a. F can collect from either D or E because their signatures are genuine and the note is operative against them. b. F can collect from A because A cannot put up forgery as his defense. c. F cannot collect from C because it was C's signature which was forged. d. F cannot collect from B because B is a party prior to the forgery. ANSWER: B 63. An instrument is indorsed as follows: "PAY TO A, FOR B" (Sgd) C. Then A indorsed the instrument "PAY TO D" (Sgd) A, in payment of A's personal loan to D, the instrument was accepted by D as indorsed by A. Is D acting in good faith when he accepted the instrument as indorsed? a. Yes, because D is a holder in due course.

b. No, because D knew by prior indorsement that A is merely a trustee for B and has no right to negotiate the instrument. c. Yes, because D acquired the instrument for value. d. No, because D did not get the consent of B. ANSWER: B 64. Which of the following is non-negotiable? a. I bind myself to pay B or bearer P10,000.00 (Sgd) A. b. I acknowledge being indebted to B in the amount of P10,000.00. (Sgd) A. c. I promise to pay to the order of B P10,000. (Sgd) A. d. I agree to pay B or order P10,000.00 on demand. (Sgd) A. (CPA MAY 1995) ANSWER: B 65. X obtains the signature of Y for autograph purpose. X writes a negotiable promissory note above Y’s signature. The note was validly negotiated to Z who is a holder in due course. What kinds of defense can Y avail against Z? a. Personal defense b. Real defense c. Equitable defense d. Qualified defense(CPA May 1995) ANSWER: B 66. Which of the following is not a personal defense? a. Absence of consideration b. Forgery of a signature c. Non-delivery of a complete instrument d. Failure of consideration (CPA May 1995) ANSWER: B 67. A issued a promissory note to the order of B for P10, 000 payable on September 30, 1996 in payment of a TV set sold by B to him. B failed to deliver the TV set to A and instead transferred the note to C for value but without indorsement. Which of the effects of the transactions listed below is valid? a. b. c. d.

C is deemed a holder in due course when B transferred the note to him. becomes a holder in due course when B indorsed the note to C on October 4, 1996 C has no right to compel B to make the proper indorsement to him. C cannot collect from A because A’s defense of lack of consideration. (May 1995)

ANSWER: D 68. Manuel makes a promissory note for P33, 000 payable to the order of Pedro. Pedro negotiates the note to Antonio who with the consent of Pedro raises the amount to P30,

000 and thereafter endorses it to Boy, Boy to Cris, and Cris to Doy, who is a holder in due course. In this case: a. Doy can recover P30, 000 as against Manuel. b. Doy can recover P3, 000 from Manuel. c. Pedro and Antonio are liable to Doy for P3, 000. d. Boy and Cris are not liable to Doy. (CPA May 1995) ANSWER: B 69. Atoy issued a bearer note to Boy. The note is negotiated by delivery by Boy to Cris, by Cris to Doc, Doc to Ely, by Ely to Fe, the holder. Fe can hold liable: a. Cris

b. Atoy

c. Doc

d. Boy

(May 1995)

ANSWER: B 70. A holder for value is an endorsee who has both the legal title and the beneficial interest to the instrument and is subject to both real and personal defenses available against him. A holder in due course is one who possesses both the legal and beneficial interest to the instrument but is subject to personal defenses only. a. b. c. d.

Both statements are false. First statement is false, second statement is true. Both statements are true. First statement is true, second statement is false.

ANSWER: D 71. Which of the following is not a secondary party? a. Acceptor for honor b. Drawer Oct. 1995)

c. Payor for honor

d.Endorser

(CPA

ANSWER: B 72. “I promise to pay to the order of B P10, 000 30 days after sale” (Sgd) A. Which of the following indorsement of the above promissory note is not valid? a. b. c. d.

“Pay to C and D” (Sgd) B. “Pay to C P5, 000, balance of this Note” (Sgd) B if P5, 000 has been paid by A. “Pay to C P5, 000 to D P5, 000” (Sgd) B. “Pay to C and D, are partners. “ (Sgd) B.

ANSWER: C 73. “PAY TO MARIA IN TRUST FOR JESUS” (Sgd) Jose is the example of – a.Conditional endorsement b. Qualified endorsement c.Facultative endorsement d. Restrictive endorsement (CPA Oct. 1995) ANSWER: D 74. M makes a P10, 000 note payable to the order of O who indorses it to A. F obtains possession of the note fraudulently, forger A’s signature, alters the amount to P70, 000 and endorses it to B who in turn endorses to C. In this case: a.C can enforce the note against A. b. C cannot enforce the note against any person. c.C can enforce the note against M and O. d. C can enforce the note against B. (CPA Oct. 1995) ANSWER: D 75. “I promise to pay to the order of X P10, 000 30 days after date” (Sgd) Y, dated blank. “Pay to the order of X P10, 000 30 days after sight” to Y (Sgd) Z, dated 10/15/95. First rule: The maturity of the above promissory note will be counted 30 days from the date of the instrument. Second rule: The maturity of the above bill of exchange will be counted 30 days from the date the instrument is accepted by Y. a. b. c. d.

Both rules are wrong. Both rules are correct. First rule correct, second rule wrong. First rule wrong, second rule correct.

ANSWER: B 76. The following, except one, are requisites of acceptance for honor on a bill: a.The bill must be previously protested for dishonor by non- acceptance or protested for better security. b. The bill is overdue. c.The holder must give his consent. d. The acceptor for honor must be a stranger to the bill. (CPA Oct. 1996) ANSWER: B

77. Which of the following is not a real defense? a.Fraud in factum b. Incomplete and undelivered instrument c.Insertion of the wrong date. d. Forgery of a signature. ANSWER: C 78. Under the Negotiable Instruments Law, a certificate of stock is not a negotiable instrument because it lacks the requisites of: a. It must contain an unconditional promise or order to pay a sum certain in money. b. It must be payable on demand or at a fixed or determinable future time. c. It must be payable to order or bearer. d. It must be in writing signed by the maker or drawer. (CPA Oct. 1996) ANSWER: A 79. A makes a promissory note payable to B or order. B indorses the note to C, then C to D, D to E, E to F, the holder in whose hands the note is dishonored. F notifies B, C, D and E about the dishonor of the note and subsequently indorses it to G. Which is not correct? a. b. c. d.

The notice to C inures to the benefit of D, E and G. The notice given by F to B inures to the benefit of C, D, E and G. The notice to E inures to the benefit of D. The notice to D inures to the benefit of F and G (CPA Oct. 1996)

ANSWER: C 80. The holder is required to give notice of dishonor to the drawer to make him liable on the instrument in one of the following cases: a. Where the drawer is the person to whom the instrument is presented for payment. b. Where the drawer and the drawee are the same person. c. Where the drawer has countermanded payment d. Where the instrument was made or accepted for his accommodation. (CPA 1997) ANSWER:A 81. When is a negotiable instrument not discharged? a. When the holder thereof intentionally cancel the instrument. b. When the principal debtor becomes the holder of the instrument before, at or after maturity in his own right. c. When it is paid in due course by the principal debtor.

d. When it is paid in due course by the party accommodated where the instrument is made or accepted for accommodation. (CPA 1997) ANSWER: B 82. A holder not in due course has the following rights, except: a. He may receive payment and if the payment is in due course the instrument is discharged. b. He may sue on the instrument, in his own name. c. He cannot recover on the instrument. d. He is entitled to the instrument but holds it subject to the same defense as if it were non-negotiable. (CPA Oct. 1997) ANSWER: C 83. Which is not correct? The acceptor by accepting a negotiable instrument: a. Admits the existence of the payee and his capacity to endorse. b. Admits the existence of the drawer, the genuineness of his signature and his capacity to draw the instrument. c. Admits the existence of the endorser, the genuineness of his signature and his authority to draw the instrument. d. Admits that he will pay it according to the tenor of his acceptance (CPA Oct. 1997) ANSWER: C 84. FIRST STATEMENT:

A check must be presented for payment within reasonable time after its issue or the drawer will be discharged from liability thereon. SECOND STATEMENT: Where the holder of a check procures it to be accepted or certified, the drawer and all indorsers are discharged from liability. a. Only the first statement is TRUE c. Both statements are NOT TRUE b. Only the second statement is TRUE d. Both Statements are TRUE (CPA Oct. 1997)

ANSWER: D 85. A makes a note payable to B or order. The following are the indorsers of the note in the order of their indorsements: B, C, D, E, F (Holder) and G (sub-sequent holder). The note is dishonored in the hands of F who notifies B, C, D and E. Which is not correct? a. The notice given by F to B operates to the benefit of C, D, E and G. b. The notice to C inures to the benefit of D, E, and G. c. The notice to C inures to the benefit of B. d. The notice to D inures to the benefit of E and G. (CPA Oct. 1997)

ANSWER: C 86. Which of the following instruments is negotiable? a. Pay to bearer C P10,000. Reimburse yourself out of the rental of my house in Manila. To B; (Sgd.) A. b. Pay to C P10,000 and reimburse yourself out of the rental of my house in Manila. c. Pay to C P10,000 and reimburse yourself out of the rental of my house in Manila. To ; (Sgd.) A. d. Pay to the order of C P10,000. Reimburse yourself out of the rental of my house in Manila. To B (Sgd.) A. (CPA Oct. 1997) ANSWER: D 87. Which of the following is a negotiable bill of exchange? a. Pay to the order of Y the sum of P30,000. (Sgd. X) To A or in his absence, to B. b. Pay to the order of X the sum of P20,000. (Sgd. X) To A or B. c. Pay to the order of X or Y the sum of P40,000 (Sgd. C) To A or B. d. Pay to the order of Y the sum of P50,000. (Sgd. X) To A and B. (CPA Oct. 1997) ANSWER: D 88. When the endorser waives the presentment and notice of dishonor, he increases his liability. His indorsement is: a. Alternative indorsement c. Facultative Indorsement b. Qualified Indorsement d. Restrictive Indorsement (CPA May 1997) ANSWER: C 89. Which of the following instrument is not negotiable? a. b. c. d.

“I promise to pay A or order ₱20,000.” (Sgd. D) “I promise to pay A or order ₱20,000 on June 30.” (Sgd. E) “I agree to pay to the order of A ₱30,000.” (Sgd. B) “Good for ₱20,000 to A or order.” (Sgd. A) (CPA May 1997)

ANSWER: B 90. Which of the following is not a characteristic of a bill of exchange? a. b. c. d. ANSWER: C

Original parties are the drawer, drawee, payee and acceptor Acceptance is generally required Drawer is primarily liable Contains an unconditional order (CPA May 1998)

91. Classify a note which reads as follows: “I promise to pay Juan de la Cruz or bearer the sum of ₱50,000 25 days before the death of Juana dela Cruz.” a. b. c. d.

Negotiable Non-negotiable Payable on demand Payable upon contingency (CPA Nov. 1971)

ANSWER: B 92. The following statement in an instrument is not a promise to pay: a. b. c. d. e.

Good for P xxxx To pay to cause to be paid Pxxxx Value received Holder for P xxxx None of the above (CPA Oct. 1974)

ANSWER: C 93. A presented a bill to B, the drawee. B destroyed the bill. What can A do? a. b. c. d.

A may no longer collect since the bill was destroyed. A may go after the drawer of the note. A may consider the note as impliedly accepted by B. A may sue B for destruction of his property. (CPA May 1977)

ANSWER: C 94. Three of the following are necessary in order to make an instrument negotiable. Which is the exception? a. b. c. d.

It must be in writing and signed by the maker. It must contain an unconditional promise to pay a sum certain in money. It must be payable on demand or at a fixed future time. It must be payable only to a specified person (CPA Oct. 1977)

ANSWER: D 95. An instrument is negotiated when it is transferred from one person to another in 3 of the following ways. Which is the exception? a. b. c. d. ANSWER: A

By assignment By delivery alone By payment By indorsement completed by delivery (CPA Oct. 1977)

96. This indorsement was written on the negotiable instrument itself: “Pay to Juan dela Cruz, or order, provided he passes the CPA examination. (Sgd.) Jose Santos.” This kind of indorsement is called: a. b. c. d.

Special indorsement Restrictive indorsement Conditional indorsement Qualified indorsement (CPA Oct. 1978)

ANSWER: C 97. This party to the instrument admits the existence of the payee and his then capacity to indorse; and engage that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary proceeding on dishonor be duly take, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. This liability refers to: a. b. c. d.

The maker The drawer The acceptor The payee (CPA Oct. 1978)

ANSWER: A

98. Which one of the following is not a personal or equitable defense? a. b. c. d.

Fraud in factum Fraud in the inducement Want or failure of consideration Duress in the absence of physical pressure (CPA May 1980)

ANSWER: D 99. An instrument originally negotiable ceases to be negotiable when: a. b. c. d.

Restrictively indorsed Qualifiedly indorsed The last and only indorsement is in blank None of the above (CPA Oct. 1980)

ANSWER: A 100. Defense which can be interposed not only against one who is not a holder in due course but also against a holder in due course:

a. b. c. d. ANSWER: B

Personal defense Real defense Defense pro tanto None of the above (CPA Oct. 1980)