Accounting 2

Quiz Basic corporate concepts

January 29, 2010
Name______________________________

Score _____

Test I TRUE OR FALSE.15 points

Instruction : Write T if the statement is true, and F, if the statement is false.
STRICTLY NO ERASURES
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A corporation can acquire properties in its own name or sue and be sued
just like a natural person.
Only natural persons can organize a corporation
A corporation can subscribed to share issues of another corporation
It is the BIR which has jurisdiction over all corporation
Shareholders have limited liability. That is, their subscription will not be
used to pay off corporate debts in the event the corporation goes
bankrupt.
In a partnership, it is the general partner who usually manage partnership
operation. In a corporation, the ordinary shareholders are the ones who
manage corporate operation.
The acts of the shareholders bind the corporation
Each incorporator is required by law to at least own one share of stock.
This is not true with the board of directors.
Majority of the incorporators are residents of the Philippines
One year from receipt of the certificate of incorporation, the corporation is
mandated by law to start business operation.
The by-laws contains provision as to the term for which the corporation is
to exist.
The officers of the corporation are elected by the stockholders in a
stockholders meeting
In the auction of delinquent shares, Mr. A bid for the offer price for 500
shares; Mr. B bid for the offer price for 400 shares. Mr. A is the highest
bidder.
The corporation code states that no share can be issued at less than par
value. Therefore, treasury shares cannot be issued at less than par value.
The concept of legal capital exists to protect the corporations assets for
the shareholders of the corporation.

TEST II MULTIPLE CHOICE. 20 points

Instruction: Encircle the letter of the correct answer. STRICTLY NO ERASURES.
1.

The following are characteristics of a corporation except

a. A corporation is a juridical person
b. It is created by operation of law
c. It is organized by natural persons
d. It has the right of succession

2. An ordinary shareholder does not possess which of the following:

a. The right to share in the earnings of the corporation when dividends are
declared
b. The right to vote in the election of the board of directors of the corporation
c. The right to direct ownership of the corporate assets
d. The right to share proportionately in corporate assets in case of liquidation if
such assets exceed the claims of creditors
3. Which of the following does not describe a corporation?
a. Continuous existence
c. limited liability of shareholders
b. Centralized authority
d. mutual agency
4. The following statement describes the advantage of a corporation from a
partnership except
a. The death of the stockholder will not dissolve the corporation because of its
power of succession
b. Its management is centralized on the board of directors
c. Shareholders have limited liability and shareholders are not general agents of
the business

d. All of the above

5. Which of the following is not a qualification of the corporate board of directors?
a. A number of natural person not less than 5 but not more than 15
b. Majority are residents and citizens of the Philippines
c. Must own at least one share of the capital stock of the corporation to be
formed
d. Majority are residents of the Philippines, not necessarily citizens.
6. They regulate the various internal matters regarding the calling and conducting
of meeting of stockholders and directors
a. By-laws
c. voting trust agreement
b. Articles of incorporators
d. none of the above
7. Which of the following statements is not correct concerning the similarities
between a partnership and a corporation?
a. Each is created under a statute and must file a copy of its certificate with the
proper government authorities
b. All corporate stockholders and all limited partners in a limited partnership
have limited liability
c. Both are recognized for national income tax purposes as taxable entities
d. Both may engage in income generating business activities
8. Choose the situation which illustrate the minimum requirement of the law for
corporate formation
Authorized capital
subscribed capital
Paid in capital
a.
P100,000
P 5,000
P 3,125
b.
P100,000
P15,000
P 5,000
c.
P 50,000
P 12,500
P3,125
d.
P 50,000
P 12,500
P 5,000
9. Which of the following is a disadvantage of the corporate form of business?
a. corporations lack mutual agency
b. there is a greater degree of government control and supervision
c. ownership shares can be easily transferred
d. owners liability is limited
10.The owners of shares in a stock corporation are called
a. incorporators
c. members
b. promoters
d. shareholders
11.The directors of a corporation are responsible for
a. declaring dividends
c.
the day to day
managing of the
business
b. maintaining shareholder records
d. preparation of accounting records and
financial statements
12.The most powerful person in a corporation is the
a. incorporator
c. vice-president
b. President
d. chairman of the board
13.Which is false concerning incorporators?
a. incorporators are natural persons
b. the number of incorporators must be five but not more than 15.
c. A corporation can be an incorporator of another corporation
d. all incorporators of a stock corporation must be stockholders.
14.What is true concerning incorporation?
a. Incorporation includes drafting and execution of the articles of incorporation
b. Once the articles of incorporation is filed with SEC, it can commence business
operation
c. By-laws are drafted after the corporation has started business operation
d. The pre-incorporation requirement must be complied with once the SEC
approves the corporate charter
15.Which one is not a correct statement?
a. Corporators are those who compose the corporation

b. Incorporators are the original corporators

c. shareholders are corporators of a stock corporation
d. members are not corporators
16.Which one is not a correct statement?
a. ordinary shares have voting rights
b. preference share have voting rights as well
c. all shares have pre-emptive rights
d. All shares share in the earnings of the corporation
17.Which one is not a correct statement?
a. A par value stock is one with a fixed amount attached to it
b. A no-par value stock is one without a fixed amount attached to it
c. All no-par value stocks have issued value or stated value
d. Banks and similar entities can issued no-par shares
18.Which one is not a correct statement?
a. The president of the corporation must also be a member of the board of
directors
b. A president of the corporation can not be a treasurer at the same time
c. The corporate secretary must be a citizen and a resident of the Philippines
d. The officers of the corporation are appointees of the chairman of the board
19.This type of corporation which extends its corporate business to other countries
a. civil corporation
c. multi-national corporation
b. de jure corporation
d. foreign corporation
20.Which one is the correct statement?
a. The articles of incorporation contains provision as to the penalties for the
violation of by-laws
b.
If a corporation is created for the purpose of manufacturing furniture, it
cannot engage in the manufacture
of cars.
c. The ordinary share enjoy preference over dividends declared
d.
The certificate of incorporation is the instrument that evidences the
ownership of a share of stock.
Test III - Prepare the stockholders equity section of KRAKOW CORPORATION
on December 31, 2009. (you can use any of the two methods). 10 points.
Authorized shares, 100,000 shares, Par value P50
Unissued shares, 60,000 shares, of which 20,000 shares have already been
subscribed. There is still an unpaid balance on the subscribed
shares amounting to P440,000.
Share premium
175,000
Donated capital
Retained earnings appropriated for contingencies
Retained earnings unappropriated

10,000
50,000
300,000

Test IV - Based on the information in test III, compute the pre-incorporation

requirement for KRAKOW CORPORATION. 5 points.