carlyn cpa encode

A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo CityTel. No.: (033) 320-2728; 09106547262Email Address: [email protected]

BOARD OF CERTIFIED PUBLIC ACCOUNTANT

CERTIFIED PUBLIC ACCOUNTANT Licensure Examination

MANAGEMENT ADVISORY SERVICES

General Instructions:1. This test booklet contains 49 test questions.2. Read INSTRUCTIONS TO EXAMINEES printed on your answer sheet.3. Shade only one (1) box for each question on your answer sheets. Two or more boxes shaded will invalidate your answer.4. AVOID ERASURES.

INSTRUCTIONS: 1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.2. Write the subject title MANAGEMENT ADVISORY SERVICES on the box provided.3. Shade Set Box A on your answer sheet if your test booklet is Set A; Set Box B if your test booklet is Set B.__________________________________________________________________________________________1. The following statements characterized MAS Practice, except:A. The risk associated to multifarious ongoing changes in business, environment and conditions greatly contribute in making MAS Practice visibly important.B. CPA advisors must always maintain Independence and integrity despite so many situations that may negate their practical applicability.C. The practice of advisory services is too broad to include those outside the traditional professional services of CPAs and allow him to deviate from the general code of professional involves from problem-solving affecting the future operations of the client.2. What is one primarily benefit of an enterprise resource planning (ERP) system?A. It reduces inventory levels.B. It permits companies to be more streamlined in production.C. It replaces research and development in a company.D. It requires an increased emphasis on product quality.3. Which one of the following is classified as direct labor?A. A1 PASSERS REVIEW CENTER///211

B. Flour in a bakeryC. Wages of factory-janitorsD. Bottles of cola in a bottling companyE. Coy machine cost of a copy shop

4. What is value chain management best defined as?A. A large chain that keeps the machines from falling on the production floorB. Management decisions that affect how quickly the production run occursC. The increment value of costs associated with hiring a new production floor leaderD. All activities associated with providing a product or service5. For what reason is a production cost primarily tracked?A. To keep with current cost trends to being products to marketB. To effectively allocate the cost of products to measure profitabilityC. To determine what amounts are necessary for allocating overheadD. To keep managements bonuses increasing every year6. The following activity and cost data were provided by: Hammer Corp., which would like help in estimating its future maintenance costs:Units Maintenance Cost3P4507P53011P54015P700Using the least-squares regression method to estimate the cost formula, the expected total cost for an activity level of 10 units would be closest to;A. B. P612.50C. P581.82D. P595.84E. P601.50

7. Selected information about Buehler Corporations operations at high and at low levels of activity follow.Level of ActivityLowHighNumber of units produced25,00030,000Total manufacturing costsP575,000P680,000Direct material cost per unitP5P5Direct labor cost per unitP6P6Using the high-low method, what is the cost formula for manufacturing overhead?A. B. P50,000 per period plus P10 per unitC. P50,000 per period plus P21 per unitD. P50,000 per period plus P22 per unitE. P347,000 per period plus P0.10 per unit

8. Expected sales for next year for the Jona Division are 120,000 units. Nestor Carey the manager of Jona Division, is under pressure to improve the performance of the Division. As he plans for next year, he has decide whether to produce 120,000 units or 140,000 units. The Jona Division will have higher profit, if Nestor Carey decides toA. Produce 140,000 units if income is measured under absorption costing.B. Produce 140,000 units if income is measured under variable costing.C. Produce 120,000 units if income is measured under absorption costing.D. Produce 120,000 units if income is measured under variable costing.9. Which is not true concerning sales mix?A. Sales mix is the relative percentage in which each product is sold when a company sells more than one product.B. Sales mix is important to managers because different products often save.C. Sales mix does not affect breakeven analystsD. The computation of weighted average unit contribution margin is useful in sales mix analysis.10. During the last year, Ruth Company had profit under absorption costing that was P5.500 lower than its income under variable costing. The company sold 9,000 units during the year, and its variable costs were P10 per unit, of which Pt was variable setting expense. If fixed production cost is P5 per unit under absorption costing every year, then how many units did the company produce during the year?A. B. 7,525 units.C. 8,450 units.D. 10,100 units.E. 7,900 units.

11. Last year, Francis Company had 20,000 units in its ending inventory. During the year, Francis variable production costs were P12 per unit. The fixed manufacturing overhead cost was P8 per unit in the beginning inventory. The company profit for the year was P9,600 higher under variable costing than it was under absorption costing. Given these facts, the number of units of product in the beginning inventory last year must have been:A. B. 21,200.C. 19,200.D. 18,800.E. 19,520

Questions 12 through 13 are based on the following information:Jason Companys variable costing income statement for August appears below:Jason CompanyIncome StatementFor the month ended August: 31Sales (P15 per unit)P600,000Less variable costs:Variable cost of goods sold:Beginning inventoryP72,000Add variable CGM315,000Goods available for sale387,000Less ending Inventory27,000Variables cost of goods sold360,000Total variable costs80,000Contribution margin440,000Fixed costs:160,000Fixed manufacturing105,000Fixed selling and administrative35,000Total fixed costs140,000ProfitP20,000The company produces 35,000 units each month. Variable production costs per unit and total fixed costs have remained constant over the past several months.12. The peso value of the companys inventory on August 31 under the absorption costing method would be:A. B. P27,000.C. P42,000.D. P36,000.E. P47,000.

13. Under absorption costing for the month ended August 31, the company woul report a :A. B. P20,000.C. P5,000.D. P35,000 profit.E. P5,000.

14. ABC had P400,000 budgeted fixed costs and based its standard and normal activity of 40,000 units. Actual fixed overhead costs were P430,000, actual production was 36,000 units, and sales were 30,000 units. The volume variance wasA. B. P30,000.C. P40,000.D. P70,000.E. P77,777.

15. Myla Inc. makes a single product that sells for P50. The standard variable manufacturing cost is P32.50 and the standard fixed manufacturing cost is P7.50 based on producing 20,000 units. During the year Myla produce 22,000 units and sold 21,000 units. Actual fixed manufacturing costs were P157,000; actual variable manufacturing costs were P735,000. Selling and administrative expenses, all fixed, were P75,000. There were no beginning inventories.Which costing model, absorption or variable, has a higher profit and how much?A. B. Absorption, P7,500.C. Variable, P7,500.D. Absorption, P25,000.E. Variable, P15,000.

16. Which one of the following is true about graph of a mixed cost?A. The portion of the cost that is fixed cannot be determined from the graph.B. There are three lines on the graph for this cost-total variable cost total fixed costs, revenue.C. The fixed cost portion of the graph is the same amount at all levels of activity. D. The variable cost portion of the graph is rectangular shape.17. Company A and Company B sell their product for exactly the same sales price. Both have the same annual fixed costs, Companys A variable and fixed costs at break even total P60,000 and P30,000 respectively. Company Bs variable and fixed costs at break even total P30,000 and P60,000 respectively. Both companies have the same profit. If both companies experience as increase in sales, which company will have the higher profit?A. Company AB. Company BC. Both companies will report the same profit since total cost are the same.D. More information is needed to determine the answers.18. Jonathan Corporation sells its product for P40. The variable are P18 per unit. Fixed costs are P16,000. The company is considering the purchase of an automated machine that will result in a 2 reduction in unit variable and an increase of P5,000. In fixed costs. Which of the following is true about the break-even point in units?A. B. It will remain unchanged.C. It will decrease.D. It will increase.E. It cannot be determined from the information provided.

19. Which of the following statements is not true>A. Operating leverage refers to the extent to which a companys profit reacts to a given change in sales.B. Companies that have higher fixed costs relative to variable costs have higher operating leverage.C. When a companys sales revenue is increasing highly operating leverage is a good thing because it means that profits will increase rapidly.D. When a companys sales revenue is decreasing high operating leverage is a good thing because it means that profits will decrease at a slower pace than revenues decrease.20. Pinoy Buhay-Buhay is a nonprofit organization that captures stray deer from residential communities. Fixed costs are P10,000. The variable cost of capturing each deer is p10.00 each. How many deers can Pinoy Buhay-Buhay capture during 2012?A. B. 2,200.C. 3,200.D. 4,200.E. 2,000.

21. Ruth Companys degree of operating leverage is 2.0. Myla Corporations degree of operating leverage is 0.0. If the sales of the companies are expected to increase by 10%, the increase (decrease) in the profit before interest and tax of Ruth as compared to Myla would be:A. B. 30% higher.C. 2 times higher.D. 3 times higher.E. 33% lower.

Questions 22 and 23 are based on the following information.Below are income statements that apply to ABC Companys three product lines:Product AProduct BProduct CSalesP100P100P100Variable costs(10)(20)(30)Contribution marginP90P80P70Fixed costs(30)(20)(10)Profit before taxesP60P60P60

22. Within the relevant range. If sales go up by P1 for each firm which product line will experience the greatest increase in profit?A. B. Company AC. Company BD. Company CE. Cant be determined from the information given

23. At sales of P100, what is the difference in the margin of safety rate between the two product lines having the highest profitability performance?A. B. 87.71%C. 75.00%D. 66.67%E. 10.71%

Vinzon Company produces and sells three products that, after with their relative quality and price structure as follows:De LuxePremiumEconomy

Unit sales price P400 P200 P100

Unit variable rate 150 120 75

Budget sales in units 1,000 3,000 6,000

Direct fixed costP2.5 millionP4.0 millionP1.2 million

In the next counter, the following changes are being considered.De LuxePremiumEconomy

Unit sales priceIncreased by 10%Decreased by 10%

Unit variable rateDecreased by 15%Increased by 10%

Budget sales in unitsIncreased by 20%

Direct fixed costIncreased by 40%Decreased by 10%

24. After embedding the changes, what is the difference break even point its between the two least profitable products in terms of pesos?A. B. 57,143C. 150,000D. 92,857E. 8,621

25. Which one of the following is a critical factor in budgeting for a service company?A. Coordinating professional staff needs with and operated services.B. Determining how to allocate the disproportionate costs.C. Budgeting expenditures before anticipated receipts.D. Determining client needs.26. The performance report of the Bohol Division of South Inc. showed a difference between the budget and the actual results for the year. Management determines this difference was controllable by the manager in charge. Should the division manager be held responsible?A. No, since budget difference over time.B. Yes, because managers are responsible for controllable cost for their department.C. Only if the difference is favorable.D. Yes, manages are responsible for all cost in their division.27. Which of the following includes people who make up the budget committee?A. B. Sales manager, company president treasurer.C. Company treasurer, creditors, controller.D. Sales manager, controller, investors.E. External auditors, controller, treasurer28. How does a sales forecast from states budget?A. A sales forecast includes the company, while a sales budget includes the industry.B. A sales forecast includes the company and the industry, while a sales budget includes only the industry.C. A sales forecast includes the company and the industry, while a states budget includes only the company.D. They are both the same.29. Burnham Park Company makes and sells umbrella. The company is in the process of preparing its selling and administrative Expense Budget for the last half of the year. The following budget data are based on 20,000 units:ItemVariable CostUnit SoldMonthly FixedCost

Sales commissionsP0.60P3,000ShippingP1.30AdvertisingP0.30Depreciation on office EquipmentP4,000Other Operating expensesP0.35P34,000

Expenses are paid in the month incurred. If the company has budgets to spend P90,900 for the expenses, how many unit does the company expect to sell in the last half of the year?A. B. 20,000C. 22,000D. 37,102E. 20,367

30. The production budget shows expected unit sales are 1,800. The required production units are 1,700. Which of the following represents possible inventory balance?Beginning UnitsEnding UnitsA. 200100B. 100200C. 200200D. 010031. Bayantel Companyshowed the following on its direct materials budget for June:Units to be produced50,000Total pounds needed for production4,000Total pounds of materials to be purchased5,000Increase in materials inventory400

The materials cost P2 per pound. How much is the cost of direct per unit?A. B. P 0.16C. P25D. P20E. P 0.20

32. Bajada Company reported the following information for 2012;SeptemberOctoberNovemberDecemberJanuary

Budgeted SalesP240,000P310,000P250,000P360,000P200,000

Budgeted purchasesP90,000P120,000P128,000P144,000P88,000

Cost of goods sold is 35% of sales. Bajada purchase and pays for merchandise 60% in the month of acquisitions and 40% in the following month. Account payable is used only for inventory acquisitions.How much is the budgeted balance for Accounts Payable at October 31, 2012?A. B. P48,000C. P72,000D. P102,000E. P51,200

33. All-Purpose Equipment, Inc. is planning to sell 200 buckets and produce 190 buckets during March. Each buckets requires 500 grams of plastic and one half hour of direct labor. Plastic costs P10 per 500 grams and employees of the company are paid P15.00 per hour. Manufacturing overhead is applied at a rate of 10% of direct labor costs. All-Purpose Equipment has 300 kilos of plastic in beginning inventory and wants to have 200 kilos in ending inventory. How much is the total amount of budgeted labor for March.A. B. P1,500.C. P3,000.D. P1,425.E. P2,850.

34. If a company is concerned with the potential negative effects standards, they should.A. B. Set loose standards that are easy to fulfil.C. Offer wage incentives to those meeting standards.D. Not employ any standards.E. Set tight standards in order to motivate people.

35. Which of the following statements is false?A. The overhead volume variance whether plant facilities were used efficiently during the period.B. The costs that cause the overhead volume variance are usuDurian controllable cost.C. The overhead volume variance relates solely to fixed cost.D. The overhead volume variance is favorable if standard hours allowed to output is greater than the standard hours at normal capacity.36. An unfavorable labor quantity variance may be caused by.A. B. Paying workers higher wages than expected.C. Paying workers a bonus at a year end.D. Worker fatigue or carelessness.E. Higher pay rates mandated by union contacts.

37. The standard number of hours that should have been worked for the output attained is 8,000 direct labor hours and the actual number of direct labor hours worked was 8,400. If the direct labor price variance was P8,400 unfavorable, and the standard race of pay was P16 per direct labor hour, what was the actual rate of ay for direct labor?A. B. P17.00 per direct labor hourC. P17.00 per direct labor hourD. P15.00 per direct labor hourE. P18.00 per direct labor hour

Questions 38 and 37 are based on the following information. The controller for Oriental Gravity is reviewing the production cost report for July. Ari analyst of direct materials costs reflects an unfavourable flexible budget variance of P25,000. The plant manager believes this is an excellent performance on a flexible budget for 5,000 units of direct materials. However, the production supervisor is not pleased with this result because he claims to have saved P1,200 in materials cost on actual production using 4,900 units of direct materials. The standard materials costs is P12.00 per unit. Actual materials used for the month amounted o P60,025.38. The actual average cost per unit of materials wasA. B. P12.00C. P12.01D. P12.24E. P12.25

39. If the direct materials variance is investigated further. It will reflect a price variance of:A. B. Zero.C. P1,176 favorable.D. P1,225 unfavorable.E. P1,250 unfavorable.

40. The Dongyi Company has a standard cost system. In July the company purchased and used 22,500 pounds of direct material at an actual cost of 53,000; the materials quantity variance was P1,875 UF; and the standard quantity of materials allowed for July production was 21,750 pounds. The budgeted materials for the period are 23,000 pounds for purchases and 24,000 for usage.

Also during the period, the company incurred 12,540 direct labor hours and paid 5,300,000 for plant payroll. The materials price variance for July was 24,000.A. B. P2,725 F.C. P2,725 U.D. P3,250 F.E. P3,250 U.

41. The Reedy Company uses a standard costing system. The following data are available for November:Actual direct labor hours worked5,800 hoursStandard direct labor rateP9 per hourLAbor rate varianceP1,150 favorableStandard pounds per hourStandard variable rate per hourP10Normal Capacity in hours6,000The actual direct labor rate for November is:A. B. P8.80.C. P8.90.D. P9.00.E. P9.20.

42. Borden Enterprises uses standard costing. For the month of April, the company reported the following data: Standard direct labor rate: P10 per hour Standard hours allowed for actual production: 8,000. Actual direct labor rate: P9.50 per hour Labor efficiency variance: P4,800 FThe labor rate variance for April is:A. B. P3,760 U.C. P3,760 F.D. P2,850 F.E. P2,850 U.

Questions 43 and 44 are based on the following information:The Lon Company makes and sells a single product called a Grix and employs a standard costing system. The following standards have been established for one unit of Grix. Standard Quantity of HoursStandard Cost per GrixDirect Materials6 board feetP7.00Direct labor0.8 hoursP9.60There were no inventories of any kind on August. During August, the following events occurred: Purchased 15,000 board feet at the total cost of P24,000. Used 12,000 board feet to produce 2,100 Grix. Used 1,700 hours of direct labor time at a total cost of P20,060.43. To record the purchase of direct materials, the general ledger would include what entry to the Materials Price Variance Account?A. B. P1,500 credit.C. P1,500 debit.D. P6,000 credit.E. P6,000 debit.

44. To record the incurrence of direct labour cost and its use in production, the general ledger would include what entry to the Labor Efficiently Variance account?A. B. P480 credit.C. P240 debit.D. P1,200 debit.E. P1,200 credit.

Questions 45 and 46 are based on the following information:The following standards for variable manufacturing overhead have been establish for a company that makes only one product:Standard hours per unit of output1.5 hoursStandard variable overhead rateP11.55 per hourThe following data pertain to operations for the last month:Actual hours4.900 hoursActual total variable overhead costP58,310Actual output3,000 units45. What is the variable overhead spending variance for the month?A. B. P2,870 U.C. P2,870 F.D. P1,715 U.E. P1,715 F.

46. What is the variable overhead efficiency variance for the month?A. B. P1,680 F.C. P1,190 U.D. P1,155 U.E. P1,190 F.

Questions 47 through 49 are based on the following information:Durian Corporation produces a model plastic casing, TD4 for desktop computers.Summary data from its 2012 income statements are as follows:RevenuesP 5,000,000Variable cost3,000,000Fixed cost 2,160,000Operating incomeP (160,000)Aro N. Cillo, Durians president, is very concerned about Durian Corporations poor profitability. She asks Cove Yellow, production manager, and T.D Puyat, Controller, to see if there are ways to reduce costs.After two weeks, Cove returns with a proposal to reduce variable costs to 52% of revenues by reducing the costs. Durian currently incurs for safe disposal of wasted plastic. T.D Puyat concerned that this would expose the company to potential environment cost and include them in our analysis. You cant do that, Cove replies. We are not violating any laws. There is some possibility that we have to incur environmental costs in the future, but if we bring it up now this proposal will not go through because our senior management always assumes these costs to be larger than they turn out to be. The market is very tough and we are in danger of shutting down the company. We dont want all our colleagues to lose their jobs. The only reason our competitors are making money is because they are doing exactly what I am proposing.47. What is Durian Corporations breakeven revenues for 2012?A. B. P5,000,000.C. P4,900,000.D. P3,500,000.E. P5,400,000.

48. What is Durian Corporations breakeven revenues if variable costs are 32% of revenues?A. B. P4,500,000.C. P5,500,000.D. P5,000,000.E. P3,900,000.

49. What is Durian Corporations operating income for 2012 if variable costs had been 52% of revenues?A. P240,000.B. P200,000.C. P180,000.D. P260,000.

ANSWER KEY Management Advisory

1. 2. C3. A4. C5. C6. B7. C8. B9. A10. C11. D12. C13. C14. A15. B16. A17. C18. A19. C20. D21. A22. A23. A24. C25. C26. B27. B28. A29. C30. B31. 32. A33. A34. C35. D36. D37. C38. C39. D40. D41. D42. A43. B44. D45. A46. C47. A48. D49. A50. A




AUDITING THEORY

1. Which of the following defines the specific requirements of the Securities and Exchange Commission (SEC) regarding financial reporting of entitles registered with the SEC?A. SRC RuleB. SEC CircularsC. SRC Rule 68D. SEC Bulletins2. SRC Rule 68, as amended, is effective for audited financial statements covering periods ended and onwards, and for Interim financial statements starting the , and thereafter.3. Part I of SRC Rule 68, as amended, deals with the general financial reporting requirements of the SEC to the following entities: (For each covered entity, indicate the required threshold must be met.)Covered EntityThresholdsa. Stock corporations-b. Non-stock corporations-c. Branch offices of stock- foreign corporationsd. Brand offices of non-stock -corporationse. Regional operating headquarters -of foreign corporations 4. In addition to the financial reporting requirements under Part I of Rule 68, as amended, additional requirements are set forth under Part II of the Rule. The following issuers of securities to the public must comply with the requirements under this part of the Rule:a. Issuer which has sold a class of their securities pursuant to a registration under Section 12 of the Securities Regulation Code (SRC).b. Issuer with a class of securities listed for trading on an Exchange; andc. Issuer with assets of at least P50 million and has 200 or more holders each holding at least 100 shares of a class of its equity securities as of the first day of the Issuers fiscal year.5. Rule 68, as amended, deleted the term Generally Accepted Accounting principles (or GAAP) and replace it with .

6. Large and/or publicity accountable entities shall use as their financial reporting framework the

a.

b.

7. Small and medium-sized entitles (SMEs) shall use as their Financial Reporting Framework the .

8. If an SME that uses the PFRS for SMEs In a current year the floor or ceiling of the size criteria at the end of that current year, and the event that caused the change is considered significant and continuing, the entity shall transition to the applicable financial reporting framework in the next accounting period.The assessment of significant and continuing shall be based on managements judgement taking into consideration relevant qualitative and quantitative factors.As a general, rule, would be considered significant.

9. Rule 68, as amended, prescribed the wording of the Statement of Managements Responsibility (SMR) for Financial Statements that shall be attached to the financial statements filed with the SEC. All of the following shall sign the SMR:a. b. c. 10. The failure of any of the prescribed signatories to sign the SMR constitutes a .

11. In the case of branch offices or regional operating headquarters of foreign corporations, the SMR shall be signed by its who is in charge of its operations within the Philippines.

12. The SMR of the entities covered under Part II of Rule 68, as amended, shall be signed .

13. A regulated agency shall report to the SEC its action on a report of its independent auditor pertaining to the following:a. Any material findings involving fraud or error.b. Losses or potential losses the aggregate of which amounts to at least 10% of the consolidated total assets of the entity.c. Any finding to the effect that the consolidated assets of the entity, on a going concern basis, are no longer adequate to cover the total claims of creditors; andd. Material internal control weaknesses which may lead to financial reporting problems.14. A regulated agency shall submit the required report to the SEC within from the date the report is submitted by the independent auditor.

In the case regulated agency falls to submit the required report, the Independent auditor shall, within from the submission of his findings to the entity, file a report to the SEC.

15. Report of Independent Auditor when the Company Incurred Capital Deficiency.The external auditor of a company which has incurred a capital deficiency shall provide in the audit report an Indicating the following Information:a. The fact that the company has incurred a capital deficiency that raises an issue on its going concern status.b. A brief discussion of a concrete plan of the company to address the capital deficiency and reference to the note to financial statements that provides a complete disclosure of the said plan;c. A statement that the auditor conducted sufficient audit procedures for verify the validity of the aforementioned plan.

In case the company falls to present to the external auditor a concrete plan or sufficient supporting documents to address the capital deficiency, the auditor shall provide an Indicating that the company is no longer a going concern and should use liquidation basis in the preparation of its financial statements.

16. It is considered as a violation of Rule 68, as amended, If the audited financial statements covered by Part II of the Rule with an auditors opinion other than unqualified arising from the following:a. b. 17. For , a qualified opinion from the Independent auditors shall not be considered a non-compliance with Rule 68, as amended, if the qualification pertains to a deviation from the financial reporting framework adopted by the Bangko Sentral ng Pilipinas as part of its prudential reporting requirements.

18. The financial statements that may be found by the SEC to be deficient and/or misstated, the Commission shall make a determination whether such misstatement or Incompleteness is significantly material that would necessitate the of the financial statements.

19. Corporation covered by PART II of Rule 68, as amended, shall not reissue their financial statements without .

20. Under Rule 68, as amended, error means an act by one or more individual among management, employees, or third parties that results in a misrepresentation of financial statements which reduces or increases the consolidated total assets, total liabilities or income of the company by .

21. Under Rule 68, as amended, error means an unintentional mistake in the financial statements which reduces or increases the consolidated total assets, total liabilities or income of the company by _____________________.

22. The financial statement of companies not covered by SRC Rule 68 should be accompanied by a .Such financial statements should have at least a:a. Statement of Financial Position Fund Balance.b. Income Statement (or a Statement of Receipts and Disbursements) andc. Applicable explanatory notes.

23. Companies with no operation but are covered under Rule 68:a) If no operation only for 1 year, a must be submitted by the company despite its non-operation.b) If no operation for the last 2 years, the need not be included in the audited financial statements.

24. It is the responsibility of the entitys management to provide all schedules, reports, computations/projection, reconciliations, reports, analyses, and other financial Information collectively referred to as in PAPS 1000ph.

25. Which of the following procedure is Inappropriate when the entitys management is unable to provide the audit Information requirements?A. The auditor shall prepare the audit Information requirements.B. The auditor shall consider assisting the client, for example by preparing a pro forma recondition statement or schedule format for the client to complete or use as a guide.C. The auditor shall discuss with the management and/or those changed with governance the possibility of outsourcing the preparation of audit Information requirements to third party service providers.D. The auditor shall evaluate the reasons why management is unable to prepare the audit Information requirements.

26. In situations where the client provided Incomplete, and Insufficient audit Information requirements, the auditor shall consider the following except.A. Communication in writing the issues and concerns on the Incomplete and Insufficient audit Information requirements with management and/or those changed with governance.B. Discuss if the audit information requirements can be revised to meet adequacy the needs of the auditor.C. Express a qualified or an adverse opinion.D. Discuss with management and/or those charged with governance the possibility of outsourcing the completion of the information to third party service providers.

27. The term is generally used at present to refer to a set of incomplete or unaudited financial statements accompanied by a report of an external auditor who has not yet completed his audit of such financial statements.

28. The BIR accepts incomplete or unaudited financial statements to accompany tentative ITRs. (True or False)

29. To avoid any association with incomplete or unaudited financial statements, no report (even a report containing a disclaimer of opinion) shall be issued by the auditor on such incomplete or unaudited financial statements. (True or False)

30. PAPS 1001Ph (Guidance in Dealing with Tentative Financial Statements) shall be applied to situations where the auditor has completed an audit and has concluded that there are scope limitations that affected the audit giving rise to either a qualified opinion or disclaimer of opinion. (True or False)

31. The purpose of PAPS 1002Ph is to provide additional guidance on the application of the existing PSA 700, specifically on the description of the applicable Philippine financial reporting framework when this is other than Philippine Financial Reporting Standards. (True or False)

32. Which of the following types of engagements may be undertaken by an auditor in connection with a corporations application for an increase in its authorized capital stock?I. An engagement to perform agreed-upon procedures regarding-financial information.II. An engagement to report on supplementary information in connection with an audit of financial statements.III. An engagement to report on a specific element, account or item of a financial statement.

A. I and II only.B. I and III only.C. II and III only.D. I, II, and III.

33. An agreed-upon procedures engagement Is to be performed if the application for increase in authorized capital stock is filed long after (e.g., more than 120 days) the date of the most recent audited financial statements submitted to the SEC and even if the application is closed to the most recent audited financial statements submitted, the corresponding information in such financial statements is considered by the SEC to be insufficient. (True or False)34. The auditor may issue a report on supplementary information ifI. The application for increase in authorized capital shock is made on a date close (e.g., 120 days or less) to the date of the most recent audited financial statements submitted to the SEC.II. The applicable information in the audited financial statements is considered sufficient by the SEC.A. B. I only.C. Neither I nor II.D. II only.E. Both I and II.

35. Which of the following statements concerning the form and content of Inter-bank confirmations is Incorrect?A. The form and content of a confirmation request letter will depend on the purpose for which it is required, on local practices and on the requesting banks account.B. Not all information for which confirmation is usually sought will be required at the same time.C. The confirmation request should be prepared in a clear and concise manner to ensure ready comprehension by the confirming bank.D. Whenever possible, the confirmation request should be prepared in the language of the requesting bank or in the language normally used for business purposes.36. Which of the following are required to be reported by the external auditor to the BSP?I. Any material finding during the audit involving fraud or dishonesty which will reduce capital funds by at least one percent (1%).II. Adjustments or potential losses amounting to at least one percent (1%) of capital funds of the bank.III. Any finding to the effect that the total bank assets, on a going concern basis, are no longer adequate to cover the total claims of creditors.A. I and II only.B. I and III only.C. II and III only.D. I,II, and III.37. The most significant of banking risks, in terms of historical loss experience, is the risk that a customer or counterparty will not settle an obligation for full value. This risk is sometimes referred to asA. Market riskB. Liquidity and funding riskC. Credit riskD. Operational risk38. An external auditor monitors the present and future viability of banks and uses their financial statements in assessing their condition and performance. (True or False)The BSP is primarily concerned with reporting on the banks financial statements ordinarily either to the banks shareholders or board of directors (True or False)39. As defined in PAPS 1005, a is any entity in which:a. There is concentration of ownership and management in a small number of individuals (often a single individual); andb. One or more of the following are also found: Few sources of income; Unsophisticated record-keeping; Limited internal controls together with the potential for management override of controls.40. Identify the following BANKING RISKS: a. The risk of the foreign customers and counterparties falling to settle their obligations because of economic, political, and social factors of counterpartys home country and external to the customer or counterparty. Counter Riskb. The risk of loss arising from future movements in the exchange rates applicable to foreign currency assets, liabilities, rights and obligations. Currency riskc. The risk of loss arising from factors such as failure to maintain safe custody or negligence in the management of assets on behalf of other parties. Fiduciary riskd. The risk that a movement in interest rates would have an adverse effect on the value of assets and liabilities or would affect interest cash flows. Interest rate riske. The rate that contacts are documented incorrectly or are not legally enforceable in the relevant jurisdiction in which the contracts are to be enforced or where the counterparties operate. Legal and documentary riskf. The risk of loss arising from the changes in the banks ability to sell or dispose of an asset. Liquidity riskg. The risk associated with the imperfections and subjectivity of valuation models used to determine the values of assets or liabilities. Modelling riskh. The risk of direct or Indirect loss resulting from inadequate or failed internal process, people and systems or from external events. Operational riski. The risk of losses arising from adverse changes in market prices, including interest rates, foreign exchange rates, equity and commodity prices from the movements in the market prices of investments. Price riskj. The risk of loss arising from failure to comply with regulatory or legal requirements in the relevant jurisdiction in which the bank operates. Regulatory riskk. The risk of failure of a customer or counterparty to perform the terms of a contact. This failure creates the need to replace the failed transaction with another at the current market price. It is sometimes called performance risk. Replacement riskl. The risk of losing business because of negative public opinion and consequential damage to the banks reputation arising from failure to properly manage some of the above risk, or from involvement in improper or illegal activities by the bank or its senior management, such as money laundering or attempts to cover up losses. Reputation riskm. The risk that one side of a transaction will be settled without value being received from the customer or counterparty. This will generally result in loss to the bank of the full principal amount. Settlement riskn. The risk of loss of arising from the possibility of the bank not having sufficient funds to meet his obligations, or from the banks inability to access capital markets to raise required funds. Solvency risko. The risk of loss arising when a counterpartys obligations is not denominated in the counterpartys home currency. The counterparty may not obtain the currency of the obligation irrespective of the counterpartys particular financial condition. Transfer risk41. In the exercise of its power to conduct an oversight into the quality of audits, the BOA organized the Department of the Philippine Institute of Certified Public Accountant (PICPA) to conduct an independent study, appraisal, or review of the quality of audit of financial statements.A. B. Quality Assurance ReviewC. Quality Control ReviewD. Independent Quality Assurance ReviewE. Independent Quality Control Review

42. The operation of the Quality Assurance Review Department (QARD) of the PICPA shall be supervised by a /anA. B. Executive CommitteeC. Supervisory BoardD. Oversight CommitteeE. Accountability Board

43. Which of the following is an Incorrect statement concerning of office of the Executive Committee members?A. The term of office of the Chairman and members shall be co-terminus with their respective term in the BOA or PICPA unless replaced earlier by the Board or ICAB. The terms of office of the chairman and members in no case shall be more than 3 years.C. The chairman and members may continue to be in active practice of public accountancy during their term subject to certain restrictions imposed by the Board.D. The chairman of the Executive Committee shall be from the Boards appointees.44. The head of the QARD who will be appointed by the Executive Committee is the A. B. Chief InspectorC. Chief of AdministrationD. Chief AuditorE. Chief Quality Assurance Reviewer

45. Who is responsible for the non-technical aspect of the QAR program?A. B. Chief InspectorC. Chief of AdministrationD. Assistant to the Chief InspectorE. Chairman of the Executive Committee

46. The QAR program covers all CPAs inA. B. Public AccountingC. GovernmentD. Commerce and IndustryE. Education/Academic

47. CPAs in public practice required to register with the QAR program under the prescribed category. Those whose clients are public-interest entities (listed and not-listed but with public accountability) should register underA. B. Category AC. Category BD. Category CE. Category D

Section 19 provides that CPA practitioners should be registered in accordance with the following categories: Category A registration for CPA practitioners handling clients that use the full IFRS or their Philippine equivalents. These would cover CPA practitioners auditing public-interest entities (listed and not-listed but with public accountability) Category B - registration for CPA practitioners handling clients that use the full IFRS or their Philippine equivalents for Small and Medium-sized enterprises.48. What is the effectivity date of the BOA Resolution No. 88 (Series of 2008) prescribing the rules and regulations for the accreditation of accounting teachers?A. B. June 4, 2008C. June 20, 2008D. December 30, 2008E. June 30, 2008

49. Which of the following requirements for the accreditation of accounting teachers shall not apply to those CPAs already engaged in teaching as of the effectivity date of the Rules and Regulations?I. Possession of relevant Masters degree.II. Completion of 12 units of relevant education subjects from the CHED recognized schools.III. A total of 3 years meaningful experience in actual accounting work either in Public Practice, Commerce & Industry or Government sector.IV. Proof that the CPA has undergone Continuing Professional Education (CPE).A. B. I and II onlyC. II and III onlyD. I and IV onlyE. II only50. 51. The following statements relate to the complete 12 units of relevant education subjects for the accreditation of accounting teachers. Which is correct?A. For purposes of compliance, the 12 units may be earned from the undergraduate education program or from a graduate degree program of any Higher Education Institution (HEI) duly recognized by CHED.B. The 12 units may be earned from In-service or In-house trainings on relevant education subjects offered by schools or training centers.C. The 12 units may be a combination of In-service trainings and units earned in an undergraduate or graduate education programs.D. CPAs who have passed the Teachers Board Exams and are licensed Professional Teachers should earn the 12 units through in-service or in-house service.52. Which of the following shall be considered proof of compliance with the CPE requirement for accreditation of accounting teachers?I. Certification of CPE units from accredited CPE providers issued by the PICPA.II. Certificate of Attendance or other proofs of meaningful participation in other CPE programs as approved by the PRC/CPE Council upon recommendation of the PICPA of the individual CPA of a minimum of sixty (60) credit units earned for the past immediate 3 years.A. B. I only.C. II only.D. Either I or II.E. Neither I nor II.53. 54. The Certification of Accreditation issued by the PRC to an accounting teacher shallA. Be valid for 2 years and renewable every 2 years.B. Be valid initially for 3 years and renewable annually.C. Remain in full force and effect unless revoked, cancelled or withdrawn.D. Be valid for 3 years and renewable every 3 years.55. According to the Transitory Provisions of the BOA Resolution No. 88, any tenured/full time/full load faculty member who doest not meet the accreditation requirements as of the effectivity date of the Rules and Regulations may be issued a Provisional Accreditation. Choose the correct statement.I. The Provisional Accreditation will be valid for a period not exceeding 3 years unless earlier withdrawn, revoked, or cancelled for cause by the BOA.II. The Provisional Accreditation may be Issued only once and is not renewable.III. The transitory provision shall also apply to returning teachers who have not been teaching for the last 5 years.A. B. I only.C. I and II only.D. II and III only.E. I, II, and III56. 57. Issuance of exposure drafts on proposed Philippine Standards or Practice Statements requires the approval byA. B. A majority of the AASC members.C. At least 10 members of the AASC.D. At least 5 members of the AASC.E. All members of the AASC.58. 59. The time allowed for each exposure draft to be considered by the organizations and persons to whom the exposure draft is sent for comment is generally not shorter than A. 60 daysB. 90 daysC. 30 daysD. 120 days60. The AASC considers the comments and suggestions received as a result of the exposure of Philippine Standards and Practice Statements and revises the exposure draft when deemed appropriate. Such exposure draft is then issued as a final Philippine Standard or Practice Statement after meeting the approval ofA. B. A majority of the AASC members.C. At least 10 members of the AASC.D. At least 5 members of the AASC.E. All the AASC members.61. 62. In case of an initial public offering (IPO) of securities by a company, the interim financial statements to accompany the Registration Statement (SEC Form 12-1, as amended) shall be audited by an external auditor accredited by theA. Board of Accountancy (BOA)B. Professional Regulation Commission (PRC)C. BOA/PRCD. BOA/PRC and SEC (Securities and Exchange Commission)63. The COA chairman and the two (2) commissioners shall be appointed by the president of the Philippines with consent of the Commission on Appointments for a term ofA. B. 5 yearsC. 6 yearsD. 7 yearsE. 9 years64. 65. The Code states that when a financial statements audit client becomes a listed entity, the length of time the engagement partner or the individual responsible for the engagement quality control review has served the audit client in that capacity should be considered in determining when the individual should be rotated. Before rotating off the engagement, the person is allowed to continue to serve as the engagement partner or as the individual responsible for the engagement quality control review forA. B. 3 additional yearsC. 1 additional yearsD. 2 additional yearsE. 4 additional years66. 67. The established of an overall audit strategy involvesI. Determining the characteristics of the engagement that define its scope.II. Ascertaining the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required.III. Considering the important factors that will determine the focus of the engagement teams effort.A. B. I and II only.C. II and III only.D. I and III only.E. I, II, and III.68. 69. In an initial public offering of securities, a written communication from the independent accountant to be underwriter about procedures the accountant performed on the unaudited financial statements and schedules accompanying a clients registration statement .70. Refers to a companys maintaining a steady rate of earnings growth over a series of years, thereby providing no reason for the financial markets to impute unexpected risk in the company or in expected stock prices.71. All the components whose financial information is included in the group financial statements .72. Financial statements that include the financial information of more than one component. It also refers to combined financial statements aggregating the financial information prepared by components that have no parent but are under common control. 73. Historical financial information that is derived form financial statements but that contains less detail than the financial statements, while still providing a structured representation consistent with that provided by the financial statements of the entitys economic resources or obligations at a point in time or the changes therein for a period of time. 74. A third-party organization (or segment of a third-party organization) that provides services to user entities that are part of those entities information systems relevant to financial reporting. 75. An auditor established a P180,000 tolerable misstatement for an asset with an account balance of P3,000,000. The auditor selected a sample of every 20th item from the population that represented the asset account balance and discovered a net overstatement of P10,500 (P11,100 overstatement minus P600 understatements). Under these circumstances, the auditor most likely would conclude thatA. The asset account is fairly states because the tolerable misstatement exceeds the net of projected actual overstatement and understatement.B. The assets account is fairly stated because the total projected misstatement is less than the tolerable misstatement.C. There is unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement exceeds the tolerable misstatement.D. There is an unacceptable high risk that the tolerance misstatement is more than the sum of actual overstatements and understatements.

76. A purpose of a management representation letter is to reduceA. The possibility of a misunderstanding concerning managements responsibility for the financial statements.B. The scope of an auditors procedures concerning related party transactions and subsequent events.C. Audit risk to an aggregate level of misstatement that could be considered material.D. An auditors responsibility to detect material misstatements only to the extent that the letter is relied on.77. To which of the following matters would materiality limits not apply in obtaining written management representations?A. Reductions of obsolete inventory to net realized value.B. The disclosure of compensating balance arrangements involving related parties.C. Losses from purchase commitments at prices in excess of market value.D. The availability of minutes of stockholders and directors meetings.78. An entitys management is responsible for the preparation and fair presentation of the financial statements. Its responsibility includes the following exceptA. Designing, implementing, and maintaining internal control relevant to the preparation and presentation of financial statements.B. Making accounting estimates that are reasonable in the circumstances.C. Selecting and applying appropriate accounting policies.D. Assessing the risks of materials misstatement of the financial statements.79. Sam, CPA was engaged to audit the financial statements of Mantha Corp. after its fiscal year had ended. The timing of Sams appointment as auditor and the start of field work made confirmation of accounts receivable by direct communication with the debtors ineffective. However, Sam applied other procedures and was satisfied as to the reasonableness of the account balances. Sams auditors most likely contained a/anA. Qualified opinion because of a scope limitation.B. Qualified opinion because of a departure from GAAS.C. Unmodified opinion.D. Unmodified opinion with an emphasis of matter paragraph.80. Under which of the following circumstances would a disclaimer of opinion not be appropriate?A. The financial statements fall to contain adequate disclosure concerning party transactions.B. The auditor is engaged after fiscal year-end is unable to observe the physical inventories or apply alternative procedures to verify their balances.C. The auditor is unable to determine the amounts associated with fraud committed by the clients management.D. The client refuses to permit its attorney to furnish-information requested in a letter of audit inquiry.81. Comparative financial statements include the prior years statements that were audited by a predecessor auditor whose report is not presented. If the predecessors report was unqualified, the incoming auditor shouldA. Indicate in the auditors report that the predecessor auditor expressed an unqualified opinion.B. Express an opinion on the currents years statement alone and make no reference to the prior years statements.C. Obtain a letter of presentations from the predecessor auditor concerning any matters that might affect the incoming auditors opinion.D. Request the predecessor auditor to reissue the prior years report.82. An auditor expressed a qualified opinion on the prior years financial statements because of a lack of adequate disclosure. The financial statements are properly restated in the current year and presented in comparative from with the current years financial statements. The auditors updated report on the prior years financial statements should.A. Make no reference to the type of opinion expressed on the prior years financial statements.B. Express an unmodified opinion on the restated financial statements of the prior year.C. Be accompanied by the auditors original report on the prior years financial statements.D. Continue to express a qualified opinion on the prior years financial statements.83. PSA 800 applies toA. B. Review engagementsC. Agreed-upon procedures engagementsD. Compilation engagementsE. Audit of financial statements prepared in accordance with a special purpose framework.84. 85. In an audit of special financial statements, the auditor shall obtain an understanding ofI. The purpose for which the financial statements are prepared.II. The interior users.III. The steps taken by management to determine that the applicable financial reporting framework is acceptable in the circumstances.A. B. I and II only.C. II and III only.D. I,II, and III.E. I and II only.86. 87. Whenever a report, filed on a printed designed by authorities, calls upon the independent auditor to make an assertion that the auditor believes is not justified, the auditor shouldA. Withdraw from the engagement.B. Submit the form with questionable items clearly omitted.C. Reword the form or attach a separate report.D. Submit a standard report with explanations.88. An auditor may express an opinion on an entitys accounts receivable balance event if the auditor has disclaimed an opinion on the financial statements taken as a whole provided theA. Report on the accounts receivable is presented separately from the disclaimer of opinion on the financial statementsB. Auditor also reports on the current asset portion of the entitys balance sheetC. Use of the report on the accounts receivable is restrictedD. Report on the accounts receivable discloses the reason for the disclaimer of opinion on the financial statement89. An auditor may accept an engagement to report on summary financial statements in accordance with PSA 810 on whenA. The auditor has been engaged to conduct an audit in accordance with PSAs of the financial statements from which the summary financial statements are derivedB. Summary financial statements are distributed only to management and the board of directorsC. Auditor describes the additional review procedures performed on the summary financial statementsD. Summary financial statements are presented in comparative from with the prior years summary financial statement90. In the auditors report on summary financial statements that are derived from an entitys audited financial statements, a CPA should indicate that theA. CPA has audited and expresses and opinion on the complete financial statementsB. CPA expresses limited assurance that the financial statements conform with another comprehensive basis of accountingC. Summary financial statements are not fairly presented in all material respectsD. Summary financial statements are prepared in conformity with another comprehensive basis of accounting91. Which of the following procedures should a practitioner perform during an engagement to review an entitys financial statements?A. Examining cash disbursements in the subsequent period for unrecorded liabilitiesB. Sending bank confirmation letter to the entitys financial institutionsC. Obtaining a client representation letter from members of managementD. Communicating material internal control weakness during the assessment of control risk92. During an engagement to review the financial statements of an entity, a practitioner becomes aware of a material departure from GAAP. If the practitioner decides to modify the review report because management will not revise the financial statements the practitioner shouldA. Express negative assurance on accounting principles not conforming with Philippine Financial Reporting Standards.B. Express positive assurance on accounting principle conforming with Philippine Financial Reporting StandardC. Express a qualified opinionD. Express a qualification of the negative assurance provided or give an adverse statement that the financial statements are not presented fairly in all material respects in accordance with Philippine Reporting Standard93. If there has been a significant limitation on the practitioners review of an entitys fincial statements the practitioner should describe the limitation andI. Express a qualification of the negative assuranceII. Provide no assuranceA. B. I onlyC. II onlyD. Either I or IIE. Neither I nor II94. 95. An agreed-upon procedures engagement may involve the accountant in performing certain procedures concerningI. Individual items of financial dataII. A financial statementIII. A complete set of financial statements A. B. I and II onlyC. II and III onlyD. I and III onlyE. I, II and III96. 97. In performing a compilation of financial statements of an entity, the accountant decides that modification of the report is not adequate to indicate deficiencies in the financial statements taken as a whole and the client is not willing to concert the deficiencies. The accountant should thereforeA. Express an adverse audit opinionB. Express a qualification of the negative assuranceC. Withdraw from the engagementD. Perform a review of the financial statements




BUSINESS LAW

1. In an obligation to give a determinate thing, what is rights are available to the creditor?First Answer- To compel specific performanceSecond Answer- To record damages in case of breach of the obligationThird Answer- To ask that the obligation be complied with at the expenses of the labior.a. b. All answers are correctc. Only the first and second answers are correctd. Only the first answer is correcte. All answers are wrong2. 3. The following contacts, except one, are void an initio. 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.4. S, minor, owns a specific property valued at P50,000. B capacitated, by means of fraud induced S to sell his property to him for P30,000, which S did so. The contact is in writing. Which is correct?a. the contract is valid and binding from the startb. 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 of the value.d. The contract is voidable and B can ask for annulment within the period prescribed by law.5. Legal compensation is allowed when one of the debtsa. Arises from a sale of real property made by a minor to a capacitated personb. Arises from the obligation of a depositaryc. Consist in civil liability arising from a penal offensed. Arises from a claim for support by gratuitous title6. This is not a characteristics of a void or inexistent contract.a. The right to raise a defense of illegality cannot be waivedb. The action or defense for declaration of the nullity or inexistent of the contract does not prescribedc. Not subject to ratificationd. Defense of illegality of the contract is available to third persons whose interest are not directly affected7. Reformation is not the proper remedy ifa. The mutual mistake of the parties causes the failure of the instrument to disclose their real agreementb. 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 mistake, fraud, inequitable conduct or accident which prevented the meeting of the minds of the contracting partiesd. The true intention of the contracting parties in not expressed in the instrument purporting to embody the agreement by reason of mistake, fraud, inequitable conduct or accident8. The following contracts 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 courtb. Contract of sale by which a city mayor acquires a portion of the city part pursuant to a city ordinance enacted by the City Councilc. Contracts whose object is outside the commerce of mand. Those were both parties are incapable of giving consent to a contract9. Which of the following is not a requisite of fraud?a. There must be a misrepresentation or concealmentb. The fraud must be seriousc. A party is induced by fraud to enter into contractd. The fraud is employed by both parties upon each other

10. I agreed to paid his debt and in case of non-payment, to render free service as a servant. Is the obligation valid.a. No, the obligation to pay and to render service as a servant is contrary to law and moralsb. Yes, if the service will be rendered in satisfaction of the debt and in case of non-performance, the proper remedy is specific performancec. No, the nullity of the condition carries with the nullity of the principal obligationd. Yes, in so far as the obligation to pay but not as undertaking to render domestic services for free.11. E, a manufacturer of locks, hired a for 2 years, on the condition that for 5 years, A should not engage in competitive locks business. After one year, A left for reasons of health. Shortly afterwards, after regaining his health, A competed with E, who now seeks to restrain him for such competition, will the action prosper?a. No, the restriction is void, because it is an unreasonable restrain of trade.b. Yes, it is a reasonable restrain, considering that it was only 5 years.c. No, the contract of employment for 2 years was not completed because of a justifiable reasond. Yes, if E will allow a to complete the 2 years services agreed upon.12. Which of the following is not correct in rescission?a. Cannot be availed when the party who has been damage has other legal remedyb. The person who seeks rescission must be able to return what he ought to returnc. The object of the contract in not in the possession of the third persons who have acquired it in good faithd. Can be demanded by any of the contracting parties13. A owes B p10,000 with 12% interest B owes C P1,200. It was agreed between A and B that A would give the interest of P1,200 to C and C communicated his acceptance of the stipulation between A nd B. there isa. b. Stipulation pour atruic. Pactum commissoriumd. Compensatione. Assignment14. 15. -A donated to B a real property, the donation is made orally-A sold to B a real property, the sale is made orally.a. b. Both contracts are validc. Both contracts are voidd. Only the first is valide. Only the second is valid16. 17. If an obligation is with a penal clauseStatement A- Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be demanded.Statement B- When the debtor is guilty of fraud in the fulfilment of the obligation, the creditor can demand payment of damages and interest in addition to the penalty.a. b. True, Truec. False, trued. False, Falsee. True, False

18. A, B, and C solidarity owe D and E P30,000. D remitted the entire obligation in favor of A without the consent of E. the effect isa. A cannot recover from B and C because remission in her favor extends to the benefit of B and Cb. A can recover from B and C their respective share of the debtc. The obligation is not extinguish until a collects from B and Cd. The obligation is not yet extinguished until E is paid by D of her share of the credit.19. In quasi-delict, the liability of a person who is held liable for the fault or negligence of another person who is under his care or responsibility shall case if.a. There was contributory or responsibility shall cease if.b. He was not present at the time of the act, hence it was not possible to him to prevent the damage.c. He observed ordinary diligence to prevent the damage.d. He observed the diligence of a father of a good family.20. What is the effect of the loss of the prestations in alternative obligation where the right of choice belongs to the creditor and the loss is due to the fault of the debtor?First Answer; If only one remains the obligation still subsist, but it ceases to be alternative as it becomes a simple obligation.Second answer; If 2 more objects remain, the obligation still subsist and the choice is limited to the remaining objects. Third Answer; If none remains, the obligation is extinguished because the debtor chose not to give anything.a. b. All answers are correctc. Only the first and second answers are correctd. Only one of the answers is correcte. All answers are wrong21. 22. A owes b P20,000 which became due on December 20,2011. On that date, a offered P10,000, the only money he then had, but B refused to accept the payment. Thereafter A met, C, Bs 23 year old daughter, to whom she gave the P10,000 with the request that she turn the money over to her mother. The money was stolen while in Cs possession. How much may B still recover from A?a. b. P20,000c. P10,000d. P15,000e. P023. 24. A wife, of B and daughter of C, while employed in a jewelry store owned by d embezzled P100,000 belonging to said jewelry store. In order to prevent her criminal prosecution for estafa, B and C signed a document obligating themselves jointly and severally to pay D the amount embezzled plus interest. Because of their failure to comply with their promise, d brought an action against B and C. will the action prosper?a. Yes, both knowingly and voluntarily agreed to assume the obligation of A.b. No, C should not have been included because A is no longer under his authority.c. Yes, but only in so far as B is concerned because husband and wife are required by law to support each other.d. No, it is considered contrary to public policy to allow parties to make an agreement designed to prevent prosecution for crimes. 25. A contract in which a person literally contracts with himself isa. b. Adhesion contractc. Auto contractd. Accessory contracte. Unilateral contract26. 27. The statement Contracts shall be obligatory in whenever from they have been entered into provided all the requisites for their validity are present refers toa. b. Real contractc. Consensual contractd. Formal contractse. Solemn contracts

28. The pre-nuptial agreement of H and W, husband and wife, provides for complete separation of property. Later, H, with violence and intimidation forced W to sell to him (H), Ws pieces of jewelry. The sale isa. Rescissible, if W suffered a lesion of more than of the value of the propertyb. Voidable, because the consent of W is vitiatedc. Unenforceable, if the value is at least P500d. Void, because husband and wife are not allowed to sell property to each other.29. This obligation is dencandable at oncea. b. With a suspensive conditionc. With a period in diemd. When my means permit me to do soe. When it depends on the happening of a specified event30. 31. This contract is without effect unless ratifieda. b. Marriage between first degree cousinsc. Contract of sale between two insane personsd. Contract of sale between a guardian and his evente. Donation between husband and wife32. 33. One of the following is voida. b. Policitationc. Pactum commissoriumd. Stipulation pour atruie. Walver intentionada34. 35. To be valid and enforceable, the following contracts should be in writing, except:a. Contract to pay interest on loanb. Contract of donation of real propertyc. Contract of giving authority to an agent to sell a piece of landd. Contract made in consideration of marriage.36. A condition which if imposed on an obligation will be disregarded and will therefore make the obligation immediately demandablea. b. If Lala kills Lelec. If Lili passes the CPA board examsd. If Lolo commits suicidee. If Lulu will not rise from the dead37. 38. If the law or contract does not state the diligence which is to be observed in the performance of an obligation, the obligor is expected to observed.a. b. Ordinary diligencec. Extraordinary diligenced. Diligence of a father a good familye. Utmost care39. 40. Facultative as distinguished from alternative obligationa. The right of choice id given only to the debtorb. Various things are due, but the giving of one is sufficientc. If one of the prestations is illegal, the other may be valid and the obligation remains.d. If it is impossible to give all except one, that last one must still be given41. Within what period must recovery be made if the debtor did not know that payment was not yet due?a. Before maturity with regard to both was aid and the interestb. Even after maturity with regard to both the interest and what was paidc. Before maturity with regard to what was and even after maturity with regard to the interestd. Before maturity with regard to interest and even after the maturity with regard to what was paid42. Which of the following is wrong in alternative obligations?a. The obligor shall completely perform one of themb. The oblige cannot be compelled to receive part of one and part of the other undertakingc. The right of choice belongs to the creditor, unless it has been expressly granted to the debtord. The debtor shall have no right to choose those prestations which are impossible43. A remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committeda. b. Rescissionc. Annulmentd. Reformatione. Consideration44. 45. Payment by cession as distinguished from dation in paymenta. The debtor is not necessarily in a state of financial difficultyb. The effect is to release the debtor for the net proceeds of the things ceded or assigned.c. The property is alienated by the debtor to the creditor in satisfaction of a debt in money.d. What is delivered by the debtor is merely a thing to be considered as the equivalent of the performance of the obligation46. If a third person pays an obligation. What are the rights, which are available to him if he pays the obligation which the knowledge and consent of the debtor?First Answer- He can recover from the debtor the entire amount, which he has paid.Second Answer- He is subrogated to all of the rights of the creditora. b. True, Truec. True, Falsed. False, Truee. False, True47. 48. I. The loss or determination of the thing intended as a substitute through the negligence of the obligor, does not render him liableII. A person alternatively bound by different prestations shall completely perform one of thema. b. True, truec. True, Falsed. False, Truee. False, True49. 50. There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be madea. At the domicile of the debtorb. At the domicile of the creditorc. Wherever the thing might be at the moment the obligation was constitutedd. Wherever the thing might be at the moment the obligation is to be fulfilled51. Which of the following statements is not correct?a. The validity and compliance of a contract cannot be left to the will of one of the partiesb. In case of foreclosure and the price of the sale is less than the amount due the pledge cannot recover any deficiencyc. Persons who are prohibited by law to enter into construct of donation cannot from universal partnershipd. Actions for fraud cannot be waived52. The right of the creditor to exercise all the rights of his debtor to satisfy his claims, except rights which are inherent and personal on the part of the debtora. b. Actor subrogatoriac. Action redhibitoriad. Action paulianae. Action quanti minoris53. 54. An assignor of credit warrantsa. b. Solvency of the debtorc. Collectibilityd. Assurance of paymente. Existence and legality of credit55. 56. A, B, and c executed a promissory note binding themselves to pay P9,000 to X, and Y and Z. the note is now duo and demandable. Can the creditors proceed against A alone fro the payment of the entire debt?a. No, each creditors can collect only P3,000 from A.b. Yes, either X, y or z can collect P9,000 from A.c. No, each creditor can collect only P1,000 from A.d. Yes, since the promissory note is silent with respect to the right of the creditors, the oblibation is resumed to be solidary.57. Using the preceding number, suppose that C is insolvent, can A and B be held liable for Cs share in the obligation?a. Yes, the debt shall be presumed to be divided into as many equal share as there are debtors.b. Yes, but A and B will be liable proportionatelyc. No, the debts are considered distinct from one another.d. No, only either a and B but not both will be liable58. Using No.40, suppose that the obligation was about to prescribed, but X wrote a letter to A demanding for payment of the entire debt. Will this have the effect of interrupting the running of the period of prescription?a. Yes, because the demand by X covers the entire debt and will therefore it was to the benefit of the other creditorsb. Yes, insofar as A is concerned nut not with regard to B and C.c. No, because the demand should have been made to all the debtors.d. No, all the creditors should have made the demand.59. Using the preceding number, and prescription sets in, how much can y collect from A?a. b. P9,000c. P3,000d. P1,000e. P060. 61. Using the preceding number, how much can X collect from A?a. b. P9,000c. P3,000d. P1,000e. P062. 63. Indivisibility as distinguished from solidarity.a. Plurality of subject is indivisible.b. When the obligation is converted into one of indemnity for damages because of breach, the character of the obligation remainsc. Refers to the legal or vinculumd. Refers to the prestation which constitute the object of the obligation64. I. When one of the parties has brought an action to enforce the instrument, he cannot subsequently ask for its reformationII. The injured party may seek rescission, even after he has chosen fulfilment if the latter should become impossible.a. b. True, truec. True, falsed. False, truee. False, false65. 66. Culpa aquiliana as distinguished from culpa contractuala. Proof of due diligence in the selection and supervision of employees is not available as a defenseb. Proof of the contract and of its breach is sufficient prima facle to warrant recovery.c. The negligence of the defendant is merely an incident in the performance of the obligationd. The source of liability is the defendants negligent act or omission itself67. A assenger on a bus was hurt, but in a criminal case against the driver, said driver was acquitted. The victim now sues the owner of the truck for culpa contractual. May the suit still prosper?a. No, this will constitute double jeopardyb. No, the acquittal means that the guilt of the accused was proven by proof beyond reasonable doubtc. Yes, it is sufficient fro him to prove the existence of the contract of carriage and the injuries suffered.d. Yes, provided he can prove the negligence of the driver.68. A owes B P11,000 due on July 2, 2011. B owes A P6,000 due on July 3, 2011 and P4,000 due on July 10, 2011. B owes C P11,000 due on July 3, 2011. On July 3, 2011 B cannot pay C so B assigns to C her credit P11,000 against A, without the knowledge of A. on July 10, 2011, C tries to collect from A the P11,000. How much can C compel A to ay?a. b. P11,000c. P9,000d. P5,000e. P1,000

Questions 50-52: A, B, C ad D owe W,Y and Z P9,000. On maturity, how much can W collect from A?69. If debtors are joint and creditors are jointa. b. P2,250c. P3,000d. P9,000e. P75070. If debtors are joint and creditors are solidarya. b. P9,000c. P750d. P3,000e. P2,25071. If debtors are joint solidary and creditors are jointa. b. P750c. P2,250d. P9,000e. P3,00072. Using the same data in No.28, but the share of debtors A, B, C and D in the indebtedness is 1:2:3:4 and creditors W, Y and Z is 2:3:5. How much can Y collect from b if debtors are joint and creditors are joint?a. b. P1,800c. P2,700d. P675e. P54073. How much can Z collect from d, if debtors are solidary and creditors are joint?a. b. P1,800c. P1,125d. P3,600e. P4,50074. How much should A pay W, if debtor are joint and creditors are solidary?a. b. P180c. P9,000d. P2,250e. P90075. A lost P100,000 in a card game called pusoy, but he had no more cash to apply in full the winner at the time session ended. A promised to pay B, the winner, two weeks thereafter. A failed to pay despite the lapse, of two months, so B filed in court a suit to collect the unpaid amount. Will the collection suit against A prosper?a. Yes, if A made a negotiable promissory note was made by A.b. Yes, whether or not a negotiable promissory note was made by A.c. No, if A has no property to pay the obligationd. No, because pusoy is fundamentally game of chance.76. A filed a suit for ejectment against B for non-payment of condominium rentals amounting to P150,000. During the pendency of the case, B offered and A accepted the full amount due as rentals from B who then filed a motion to dismiss the suit. Is b correct?a. Yes, the acceptance of the payment constitutes a waiver of the ejectment caseb. Yes, because there is a novationc. No, the payment should first result to benefit to A.d. No, the payment by B of the rentals in arrears is not an abandonment of the ejectment case.77. A was employed as professional driver B Transit Bus owned by C. in the course of his work, a hit a pedestrian who was seriously injured and later died in the hospital as a result of the accident. The victims heirs sued the driver and the owner of the bus for damages. Which of the following statements is not correct?a. There is a presumption of negligence on the art of the employer C if a passenger is injuredb. The conviction of A in a criminal case makes C liable for the damages arising from the criminal actc. The presumption that C is negligent is rebuttable by proof of observance of ordinary diligenced. The liability of C shall cease when he proves that he observed ordinary diligence to prevent damage to passengers and pedestrians.78. N

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