Actual Cpa Board Questions on Corporation Law

ACTUAL CPA BOARD QUESTIONS ON CORPORATION LAW 1. This is the effect of the issuance of no-par value shares to the stockholders: a) The holder of such shares shall continue to be liable to the corporation or its creditors in respect thereto b) The holder of such shares shall not be liable to the corporation or its creditors in respect thereto c) The holder of such shares shall not be entitled to stock or cash dividends d) The issuance affords greater protection to creditors A subscribed to 100 shares of Corporation X with par value of P100.00 each, paying P4,000.00 on his subscription. The subscription contract provides that the balance shall be payable to the corporation in two equal annual installments, the first to be paid not later than December 31, 2010. (Items 2 -4) 2. If A will fail to pay the required amount on December 31, 2010, then: a) 60 of the shares subscribed by him shall become delinquent b) He has thirty days from December 31, 2010 to pay P3,000 plus interest c) All the 100 shares subscribed by him shall become delinquent d) He has thirty days from December 31, 2010 to pay P6,000.00 plus interest 3. If the shares shall be declared delinquent, which of the following may be done by the corporation to collect the balance payable by A? a) The corporation may sell 60 shares at public auction b) The corporation may sell 100 shares at public auction c) He may be sued by the corporation to pay the balance plus interest d) The corporation may exercise either option b) or c) 4. The amount due to the corporation is P6,750.00 and the delinquent shares are offered for sale at the public auction. M offered P6,700.00 for 95 shares; N offered P6,750.00 for 94 shares; O offered P6,500.00 for 80 shares; and P offered P6,750.00 for 90 shares. Who is considered the highest bidder? a) M b) N c) O d) P 5. This shall constitute a quorum for the transaction of corporate business: a) Majority of the members c) Majority of the stockholders b) Majority of directors d) All of them 6. Rights which the existing stockholders of a corporation cannot be deprived without their consent to subscribe or to purchase new stock issued by the corporation; or unissued original stock, in proportion to their holdings before it can be offered to the others. a) Right of redemption c) Right to purchase b) Pre-emptive right d) Appraisal right 7. A, stockholder of X Corporation, sold his shares and delivered his certificate of stock to B for P100,000.00. A few days later, A died and his heirs adjudicated his share of stock to his son, C in the Deed of Extrajudicial Partition. X Corporation declared cash dividend and sent the notice to A’s address, A being the registered owner of the shares of stock in the book of the corporation. C received the notice and by virtue of the aforestated deed of partition, claimed payment of the dividend. B, likewise, claimed payment by virtue of the assignment made by A. Who has the better right to the dividend? a) A b) C c) A and C, equally d) None of them 8. A private corporation organized under the corporation law commences to have corporate existence and juridical personality and is deemed incorporated from: a) The date when the articles of incorporation is signed by the incorporators b) When the articles and incorporation and by laws are presented and received by the Securities and Exchange Commission and the filing fee is paid c) From the date the SEC issues a certificate of incorporation under its official seal d) When the articles of incorporation is notarized by a Notary Public 9. The following are the qualifications of incorporators. Choose the exception: a) Majority of whom must be Filipinos b) All must be subscribers of shares c) All are of legal age or legally capacitated

d) all must be natural persons, not less than five but not more than fifteen 10. In the amendment of the Articles of Incorporation of a stock corporation, the following isnecessary: a) Amendment by the majority vote of the Board of Directors plus a vote or written assent of the stockholders representing at least 2/3 of the outstanding capital stock b) Amendment by a vote of 2/3 of the stockholders c) Amendment by a majority vote of the Board of Directors d) Amendment by a majority vote of the Board of Directors plus the written consent of the stockholders representing majority of the outstanding capital stock 11. Corporations governed by special laws, aside from the requirements specified under the corporation law, in order that their articles of incorporation may be approved or accepted, must present before the SEC: a) A favorable recommendation from the Ministry of Finance b) A copy of the previous income tax return and a statement of assets and liabilities net worth c) A favorable recommendation of the appropriate government agency to the effect that such articles or amendment is in accordance with law d) An undertaking to change the name of the corporation if found that there is already registered with the SEC a name similar to the name of another corporation 12. The following are some of the requisites of a de facto corporation. Choose the exception. a) Valid law under which it is incorporated c) Assumption of corporate power b) Attempt to incorporate d) None of the above 13. Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in three of the following corporate acts. Which is the exception? a) In case of any amendment to the articles of incorporation which has the effect of changing or restricting the rights of any stockholder or class of shares b) In case of merger or consolidation c) In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the assets and property of the corporation d) In case of incurring, creating or increasing bonded indebtedness 14. The authorized capital stock of a proposed corporation is P100,000.00 divided into 1,000 shares with a par value of P100.00 each. The minimum amount of subscription that must be paid up is: a) P8,750 or 87.5 shares c) P5,000 or 50 shares b) P6,250 or 62.5 shares d) P7,500 or 75 shares 15. Watered stocks are shares of stock issued by a corporation for a consideration less than their par or issued value or for a consideration in form other than cash in excess of their fair value. In this regard: a) The issue itself is void b) The agreement to pay less than the par value cannot be enforced c) The subscriber or purchaser shall not be liable for the full par value of the shares d) The agreement has no force and effect being contrary to the corporation Code 16. The following are the requisites, except one, for the valid declaration and/or issuance of stock dividend: a) Existence of original and unissued shares b) Dividend declaration is made by the Board of Directors and approved by 2/3 of the outstanding capital stock c) It is issued to increase the authorized capital stock d) Existence of unrestricted retained earnings 17. 1st Statement: The declaration of cash dividends is a power vested only on the Board of Directors and it requires no consent from the stockholders. 2nd Statement: If the surplus profits of the stock corporation reaches the level equal to its paid up capital, the SEC may compel the corporation to declare dividends otherwise, it will be liable for a surtax on improperly accumulated surplus. a) 1st statement is false but 2nd statement is true b) Both statements are true c) Both statements are false

d) 1st statement true but 2nd statement is false 18. Under this test, the corporation is a national of the country pursuant to whose laws it is incorporated: a) Nationality test c) Control test b) Capitalization test d) Incorporation test 19. Which of the following statements is not correct? a) A stockholder is entitled to cast such number of votes as the number of shares outstanding entitled to vote in his name times the total number of directors to be elected shall equal. b) Outstanding shares although with voting rights but have not been fully paid cannot be voted. c) All the rights of a dissenting stockholder who opted to exercise his appraisal right are suspended except the right to receive the payment for his shares d) Directors cannot attend and vote in the meetings of the board through their appointed proxies 20. The corporation has a nine-member board. Two of the members of the board have sold their shares while the two others are abroad. To have a quorum, this number is required: a) seven c) three b) five d) four 21. This a written acknowledgment of an interest of a stockholder in the corporation. a) Proxy c) Certificate of stock b) Share of stock d) Capital stock 22. Choose the minimum requirement of the Corporation Law to corporate formation: Authorized capital Subscribed capital Paid-up capital a) P100,000.00 P20,000.00 P5,000.00 b) 100,000.00 20,000.00 4,000.00 c) 100,000.00 25,000.00 5,000.00 d) 100,000.00 25,000.00 6,250.00 23. They provide and regulate the internal matters of the corporation.. a) Board of Directors c) By-laws b) Majority of Stockholders d) Articles of Incorporation 24. One of the following is a ground for the suspension or revocation of the certificate of incorporation by the SEC: a) If the corporation has commenced its business transactions and afterwards ceased operation continuously for a period of at least five years b) If the corporation fails to commence and start to operate and the failure is due to causes beyond the control of the corporation c) If the corporation does not formally commence its business transactions within a period of two years d) If the corporation does not formally commence its business transactions within a period of five years 25. Corporations organized by private persons performing public functions and for profit to private parties are: a) Public corporations c) Quasi-public corporations b) Government controlled corporations d) Private corporations 26. One of the following is not true regarding the financial statements of a corporation. a) Within ten days from the receipt of a written request of any stockholder, the corporation shall furnish to him the most recent financial statement b) At the regular stockholders meeting, the board of directors shall present to such stockholders an audited financial statement c) At the regular stockholders meeting, upon request of the stockholders and within ten days from such meeting the board of directors will submit to the stockholders the audited financial statement d) If the paid-up capital of the corporation is P50,000,00 or more, the financial statement may be certified under oath by the corporate treasurer 27. A corporation created in strict or substantial conformity with the statutory requirements for incorporation and whose right to exist as a corporation cannot be successfully attacked even in a direct proceeding for that purpose by the State is known as: a) De jure corporation c) Corporation by estoppel b) De facto corporation d) Answer not given

28. Persons, corporations, partnerships or associations engaged in the business of carrying or transporting goods or passengers or both by land, air or water for a compensation, offering their services to the public are called: a) public transport b) common carrier c) public convenience d) motor vehicles 29. One of the characteristics of treasury shares is that: a) They have the status of outstanding shares b) They may not be re-issued or sold again c) They have neither voting rights or rights to dividends d) They can be issued as stock dividends 30. Which of the following will not qualify as incorporator or a corporation? a) A minor who is emancipated by voluntary concession or by marriage b) A married woman without the consent of her husband where the property involved in the act of incorporation is paraphernal c) A duly existing corporation d) A non-resident alien