RECEIVABLE FINANCING 1 its June 30, 2011 balance sheet, what amount should

Frame report as a current asset for interest on the note

1. On December 1, 2009, MM Company assigned on a
receivable?
non-notification basis accounts receivable of P3,000,000
to a bank in consideration for a loan of 80% of the
receivables less a 5% service fee on the accounts
7. On January 1, 2009 Ott Company sold goods to Fox
assigned. The interest rate of the loan is 12% per
Company, Fox signed a non-interest bearing note
annum. The company collected assigned accounts of
requiring payment of P600,000 annually for seven
P2,000,000 and remitted the collections to the bank in
years. The first payment was made on January 1, 2009.
partial payment for the loan. The bank applied first the
The prevailing rate of interest for this type of note at
collection to the interest and the balance to the
date of issuance was 10%. How much is the sales to be
principal. The interest rate is 1% per month on the
recorded? Information on present value factors is as
outstanding balance of the loan. In its December 31,
follows:
2009 balance sheet, what amount of the note payable
should MM report as current liability? Period PV of 1 at 10% PV of ord. annuity of 1 at
10%
6 0.56 4.36
2. On October 31, 2009, Bundle Company engaged in 7 0.51 4.87
the following transactions: Obtained a P500,000, six-
month loan from City Bank, discounted at 12%. The
company pledged P500,000 of accounts receivable as
security for the loan.Factored P1,000,000 of accounts 8. Pangasinan Company is a dealer in equipment. On
receivable without recourse on a non notification basis December 31, 2009, Pangasinan Company sold an
with Help Company. Help charged a factoring fee of 2% equipment in exchange for a non-interest bearing note
of the amount of receivables factored and withheld 10% requiring five annual payments of P500,000. The first
of the amount factored. What is the total cash received payment was made on December 31, 2010. The market
from the financing of receivables? interest for similar notes was 8%. The relevant present
value factors are: PV of 1 at 8% for 5 periods, 0.68; PV
of an ordinary annuity of 1 at 8% for 5 periods, 3.99. In
3. XYZ Company factored P6,000,000 of accounts its December 31, 2009 balance sheet, what amount
receivable to ABC Company on October 1. Control was Pangasinan report as note receivable?
surrendered by XYZ. ABC accepted the receivables
subject to recourse for nonpayment. ABC assessed a fee
of 3% and retains a holdback equal to 5% of the 9. Using the data in no. 8, what amount of interest
accounts receivable. In addition, ABC charged 15% income should be reported for the year 2010?
interest computed on a weighted-average time to
maturity of the receivables of 54 days. The fair value of
the recourse obligation is P90,000. XYZ will receive and 10. On July 1, 2014, AWIT Inc. received a 180-day
record cash of (assume 365 days) P1,000,000 note receivable from its customer with 10%
interest. Due to financial difficulties, AWIT Inc.
discounted the said notes receivable to RCBC Inc. on
4. On July 1, Mazda Company sold P5,800,000 in August 15, 2014 at a 15% discount rate. What is the net
accounts receivable for cash of P5,000,000. The factor proceeds from the note discounting to be received by
withheld 10% of the cash proceeds to allow for possible AWIT Inc.? (Assume 360-day)
customer returns and other adjustments. An allowance
for bad debts of P600,000 had previously been
established by Mazda in relation to these accounts.
What was the loss on factoring recognized by Mazda
Company?

5. Roth Company received from a customer a one-year,

P500,000 note bearing annual interest rate of 8%. After
holding the note for six months, Roth discounted the
note at Regional Bank at an effective interest rate of
10%, What amount of cash did Roth receive from the
bank?

6. Frame Company has an 8% note receivable dated

June 30, 2009, in the original amount of P1,500,000.
Payments of P500,000 in principal plus accrued interest
are due annually on July 1, 2010, 2011, and 2012. In
 5.650. In its December 31, 2009 balance sheet, Park
should report the carrying amount of the note at
RECEIVABLE FINANCING 2
7. On January 1, 2009, Emme Company sold equipment
1. Mills Company factored P800,000 of accounts
with a carrying amount of P4,800,000 in exchange for a
receivable to Boon Company on July 1, 2009. Mills
P6,000,000 non-interest bearing note due January 1,
surrendered control. Boon accepted the accounts
2012. There were was no established exchange price for
receivable subject to recourse for non payment. Boon
the equipment. The prevailing rate of interest for a note
assessed a fee of 2% and retains a holdback equal to 5%
of this type on January 1, 2009, was 10%. The present
of the accounts receivable. In addition, Boon charged
value of 1 at 10% for three periods is 0.75. In Emme’s
15% interest computed on a weighted average time to
2009 income statement, what amount should be
maturity of the receivables of 41 days. The fair value of
reported as interest income?
the recourse obligation is P16,000.What is the amount
of cash received? (ASSUME 365 DAYS)

8. Using the data in No. 7, in Emme’s 2009 income

statement, what amount should be reported as gain or
2. Camia Company sold accounts receivable without
loss on sale of equipment? (Indicate whether gain or
recourse for P5,300,000. Camia received P5,000,000
loss)
cash immediately from the factor. The remaining
P300,000 will be received once the factor verifies that
none of the accounts receivable is in dispute. The
9. On January 1, 2009, Mill Company sold a building and
accounts receivable had a face amount of P6,000,000.
received as consideration P1,000,000 cash and a
Camia had previously established an allowance for bad
P4,000,000 non-interest bearing note due on January 1,
debts of P250,000 in connection with these accounts.
2012. There are no established exchange price for the
What is the loss on factoring that will be recognized by
building, and thee note had no ready market. The
Camia Company?
prevailing rate of interest for a note of this type at
January 1, 2009, was 10%. The present value of 1 at 10%
for three periods is 0.75. What amount of interest
3. On February 1, 2009, New York Corp. factored
revenue should be included in Mill’s 2009 income
receivables with a carrying amount of P2,000,000 to
statement?
Chicago Corporation. New York Corp. assesses a finance
charge of 3% of the receivables and retains 5% of the
receivables. Relative to this transaction, you are to
10. On July 1, 2014, AWIT Inc. received a 180-day
determine the amount of loss to be reported in the
P1,000,000 note receivable from its customer with 10%
income statement of New York Corp. for February.
interest. Due to financial difficulties, AWIT Inc.
discounted the said notes receivable to RCBC Inc. on
August 15, 2014 at a 15% discount rate. What is the
4. On June 1, 2009, Hero Company assigned P400,000 of
gain/(loss) on note receivable discounting to be
accounts receivable to Halo Company as a security for a
recognized by AWIT Inc.? (Indicate whether gain or loss)
loan of P335,000. Hero Company charged a 2%
commission on the amount of the loan; the interest rate
on the note was 10%. During the first month, Hero
collected P110,000 on assigned accounts after
deducting P380 of discounts. Hero accepted returns
worth P1,350 and wrote off assigned accounts totaling
P2,980. How much cash did Hero receive from Halo at
the time of the transfer?

5. On July 1, 2009, Lee Company sold goods in exchange

for P2,000,000, 8-month, noninterest-bearing note
receivable. At the time of the sale, the note’s market
rate of interest was 12%. What amount did Lee receive
when it discounted the note at 10% on September 1,
2009?

6. On December 31, 2009, Park Company sold used

equipment and received a noninterest bearing note
requiring payment of P500,000 annually for ten years.
The first payment is due December 31, 2010 and the
prevailing rate of interest for this type of note at date of
issuance is 12%. Present value factors arre as follows:
Present value of 1 at 12% for 10 periods, 0.322; Present
value of ordinary annuity of 1 at 12% for 10 periods,
 December 31, 2014 statement of financial position,
What interest income should be reported for 2015?

a) 140,000
ACCA104
b) 111,720
POSSIBLE EXAM QUESTIONS c) 223,440
d) 128,800
1. If receivables are hypothecated against borrowings,
the amount of receivables involved should be 8. On June 30, 2015, Wayne Company discounted at the
bank a customer’s P6,000,000, 6-month, 10% note
a) Disclosed in the notes receivable dated April 30,2015. The bank discounted
b) Excluded from the total receivables with the note at 12% without recourse. What is the loss on
disclosure note receivable discounting?
c) Excluded from the total receivables with no
disclosure a) 152,000
d) Excluded from the total receivables and a gain b) 48,000
or loss is recognized between the face amount c) 252,000
and the amount of borrowings d) 52,000

2. Accounts receivable shall be recognized initially at 9. Slytherin Company factored P4,000,000 of accounts
receivable to Ravenclaw Company on October 1.
a) Face value Control was surrendered by Slytherin. Ravenclaw
b) Discounted value assessed a fee of 3% and retains a holdback equal to 5%
c) Maturity value of the accounts receivable. Slytherin will receive and
d) Current value record cash of
3. When the direct write-off method of recognizing bad a) 3,880,000
debt expense is used, the entry to write off a specific b) 3,680,000
customer account would c) 3,800,000
a) Increase net income d) 4,000,000
b) Have no effect on net income 10. Credit balances in accounts receivable shall be
c) Decrease accounts receivable and decrease net classified as
income
d) Increase accounts receivable and increase net a) Current liabilities
income b) Part of accounts payable
c) Long term liabilities
4. Subsequent to initial recognition, a loan receivable d) Deduction from accounts receivable
shall be measured at
11. Under this form of bank reconciliation, the book
a) Cost balance is reconciled with the bank balance or the book
b) Amortized cost using the straight line method balance is adjusted to equal the bank balance
c) Amortized cost using the effective interest
method a) Adjusted balance method
d) Fair value b) Book to bank method
c) Bank to book method
5. When accounts receivable are factored d) Proof of cash
a) Payable to factor is credited 12. It is a financing arrangement that is usually done on
b) Accounts receivable shall be credited a “without recourse, notification basis”.
c) A contingent liability is ordinarily created
d) The factoring is accounted for as a borrowing a) Factoring
b) Discounting
6. Accounting for the interest in a noninterest bearing c) Assignment
note receivable is an example of what aspect of d) Pledge
accounting theory?
13. Which is false concerning measurement of cash and
a) Form over substance cash equivalents?
b) Matching
c) Substance over form a) Cash is measured at face value.
d) Verifiability b) Cash in foreign currency is measured at the
current exchange rate.
7. Princess Sophia Company is a dealer in equipment. c) If a bank or financial institution holding the
On December 31, 2014, Princess Sophia Company sold funds of the entity is in bankruptcy or financial
an equipment in exchange for a noninterest bearing difficulty, Cash should be written down to
note requiring five annual payments of P350,000. The estimated realizable value.
first payment was made on December 31, 2015. The d) Cash equivalents should be measured at
market interest for similar notes was 8%. The PV of an maturity value, meaning face value plus
ordinary annuity of 1 at 8% for 5 periods is 3.99. In its interest.
14. Which of the following would require an adjusting d) Percent of accounts receivable method
entry on the depositor’s books?
21. Accounts Receivable usually are factored
a) Outstanding checks
a) With recourse on a notification basis
b) Bank service charge
b) Without recourse on a notification basis
c) Deposits in transit
c) With recourse on a non-notification basis
d) Bank error
d) Without recourse on a non-notification basis
15. The statement of financial position is useful for
22. On December 31, 2009, the “Receivables” account
analyzing all of the following except
of Con Company shows a debit balance of P2,000,000.
a) Liquidity The allowance for doubtful accounts shows a credit
b) Solvency balance of P50,000. Subsidiary details show the
c) Profitability following: Trade accounts receivable, P775,000; Trade
d) Financial flexibility notes receivable, 100,000; installment receivable,
normally due one(1) year to two(2) years, 300,000;
16. It is a financing arrangement whereby one party
Customers’ accounts reporting credit balances arising
formally transfers its rights to accounts receivable to
from sales returns, 30,000; Advance payments for
another party in consideration for a loan.
purchase of merchandise, 150,000;Customers’ accounts
a) Factoring reporting credit balances arising from advance
b) Discounting payments, 20,000; Cash advances to subsidiary,
c) Assignment 400,000; Claims from insurance company, 15,000;
d) Pledge Subscription receivable due in 60 days, 300,000;
Accrued interest receivable, 10,000. How much should
17. Matthew Corporation’s allowance for uncollectible be presented as “trade and other receivables” under
accounts had a credit balance of P60,000 at December current assets?
31, 2009. During 2010, Matthew wrote off uncollectible
accounts of P240,000. The aging of accounts receivable a) 725,000
indicated that a P250,000 allowance for uncollectible b) 1,125,000
accounts was required at December 31, 2010. What c) 1,290,000
amount of uncollectible accounts expense should d) 1,600,000
Matthew report for 2010?
23. A financial asset arising from a loan granted by a
a) 240,000 bank or other financial institution to a borrower or
b) 250,000 client is called
c) 300,000
a) loan receivable
d) 430,000
b) accounts receivable
18. Ted Mosby Company’s allowance for doubtful c) notes receivable
accounts was P1,200,000 at the end of 2015 and d) trade receivables
P980,000 at the end of 2014. For the year ended
24. At the end of the current year, an entity had various
December 31, 2015, Ted Mosby reported bad debt
checks and papers in its safe. Which item should NOT be
expense of P360,000 in its income statement. What
included on in its cash account in the current year-end
amount did Ted Mosby debit in 2015 as accounts
statement of financial position?
written off?
a) US $20,000 cash.
a) 140,000
b) Time deposit which matures in one year.
b) 220,000
c) Another entity’s P150,000 check payable to the
c) 360,000
entity dates December 15 of the current year.
d) 580,000
d) The entity’s undelivered check payable to a
19. Nontrade receivables are classified as current assets supplier dated December 31 of the current
only if they are reasonably expected to be realized in year.
cash
25. Long-term notes receivable which normally bear no
a) Within one year or within the operating cycle, interest or an interest which is unreasonably low shall
whichever is shorter. be recognized initially at
b) Within one year or within the operating cycle,
a) Face value
whichever is longer?
b) Present value
c) Within the normal operating cycle.
c) Maturity value
d) Within one year, the length of the operating
d) Current value
cycle notwithstanding
26. Princess Sophia Company is a dealer in equipment.
20. Which method of recording bad debt loss is
On December 31, 2014, Princess Sophia Company sold
consistent with accrual accounting?
an equipment in exchange for a noninterest bearing
a) Allowance method note requiring five annual payments of P350,000. The
b) Direct writeoff method first payment was made on December 31, 2015. The
c) Percent of sales method market interest for similar notes was 8%. The PV of an
ordinary annuity of 1 at 8% for 5 periods is 3.99. In its d) Check issued by the entity on December 28 of
December 31, 2014 statement of financial position, the current year but dated February 3 of next
what should Princess Sophia report as note receivable? year.

a) 1,396,500 33. On October 31, 2009, Bundle Company engaged in

b) 1,750,000 the following transactions: Obtained a P500,000, six-
c) 1,610,000 month loan from City Bank, discounted at 12%. The
d) 2,793,000 company pledged P500,000 of accounts receivable as
security for the loan. Factored P1,000,000 of accounts
27. At January 1, 2009, Queen Co. had a credit balance
receivable without recourse on a non-notification basis
of P130,000 in its allowance for uncollectible accounts.
with Help Company. Help charged a factoring fee of 2%
Based on past experience, 2% of Queen’s credit sales
of the amount of receivables factored and withheld 10%
have been uncollectible. During 2009, Queen wrote off
of the amount factored. What is the total cash received
P162,500 of uncollectible accounts. Credit sales for
from the financing of receivables?
2009 were P4,500,000. What amount should Queen
report as allowance for uncollectible accounts in its a) 1,320,000
December 31, 2009 balance sheet? b) 1,350,000
c) 1,380,000
a) 57,500
d) 1,470,000
b) 90,000
c) 122,500 34. On December 31, 2009, MM Company assigned on a
d) 220,000 non-notification basis accounts receivable of P3,000,000
to a bank in consideration for a loan of 80% of the
28. A method of estimating uncollectible accounts that
receivables less a 5% service fee on the accounts
emphasizes asset valuation rather than income
assigned. The interest rate of the loan is 12% per
measurement is the allowance method based on
annum. The company collected assigned accounts of
a) Aging the receivables P2,000,000 and remitted the collections to the bank in
b) Direct writeoff partial payment for the loan. The bank applied first the
c) Gross sales collection to the interest and the balance to the
d) Credit sales less returns and allowances principal. The interest rate is 1% per month on the
outstanding balance of the loan. In its December 31,
29. Which of the following is not a characteristic of a 2009 balance sheet, what amount of the note payable
system of cash control? should MM report as current liability?
a) Voucher system a) 0
b) Daily deposit of cash receipts b) 400,000
c) Internal audits at irregular intervals c) 424,000
d) Combined responsibility for handling and d) 1,024,000
recording cash
35. Which of the following shall not be considered cash
30. A book reconciling item that refer to items not for financial reporting purposes?
representing deposits credited by the bank to the
account of the depositor but not yet recorded by the a) Petty cash fund
depositor as cash receipts is called b) Money orders
c) Coins and currency
a) Credit memos d) IOUs
b) Debit memos
c) Outstanding checks 36. It is a predetermined amount withheld by a factor as
d) Deposits in transit a protection against customer returns, allowances and
other special adjustments.
31. After being held for 20 days, a 6-month 12%
interest-bearing note receivable was discounted at a a) Service charge
bank at 14%. What is the formula for the proceeds b) Equity
received from the bank? c) Factor’s holdback
d) Loss on factoring
a) Face value less discount at 14%
b) Face value less discount at 12% 37. Why would an entity sell accounts receivable to
c) Maturity value less discount at 12% another entity?
d) Maturity value less discount at 14%
a) To improve the quality of its credit granting
32. Which of the following should be excluded from process
cash and cash equivalents? b) To limit its legal liability
c) To accelerate access to amount collected
a) Time deposit which matures in one year d) To comply with customer agreements
b) Customer’s check denominated in foreign
currency 38. On June 30, 2015, Wayne Company discounted at
c) Compensating balance not legally restricted as the bank a customer’s P6,000,000, 6-month, 10% note
to withdrawal receivable dated April 30,2015. The bank discounted
the note at 12% without recourse. The proceeds from
the note receivable discounting amounted to

a) 6,048,000
b) 6,174,000
c) 5,760,000
d) 5,640,000

39. Which of the following must be deducted from the

bank statement balance in preparing a bank
reconciliation which ends with adjusted cash balance?

a) Deposit in transit
b) Outstanding checks
c) Reduction of loan
d) Certified check

40. The practice of opening the books of accounts

beyond the close of the accounting period for the
purpose of showing a better financial position and
performance is called

a) Lapping
b) Window dressing
c) Kiting
d) Transposition

41. In most situations, the petty cash fund is reimbursed

just prior to the year end and an adjusting entry is made
to avoid

a) the overstatement of cash and the

understatement of expenses.
b) the understatement of cash and the
overstatement of expenses.
c) the misstatement of revenues.
d) the understatement of cash with the
appropriate statement of expenses.
 5. It refers to the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the persons of
the time and the place.

a) Dolo
b) Mora
c) Culpa
d) Contravention of the tenor

6. The palay harvested from the agricultural land is an

example of:

a) industrial fruit
ACCL101 b) natural fruit
POSSIBLE EXAM QUESTIONS c) civil fruit
d) It is not a fruit.
1. D is obliged to give C a specific watch, a s specific
ring, or a specific bracelet. The parties agreed that C will 7. On May 1, 2015, D executed a written undertaking
have right to choose the thing which will be given to obliging himself to deliver 100 sacks of rice to C on May
him. Before C could make his choice, the watch and the 31, 2015. On May 28, 2015, C demanded the delivery of
ring were lost through D's fault, successively. What is 100 sacks of rice from D but D did not comply. The
the right of C? following day, a fire of undetermined origin destroyed
D's warehouse together with about 500 sacks of rice
a) C may choose the delivery to him of the stored therein and from which D intended to get 100
bracelet, or price of the watch or the price of sacks of rice for delivery to C.
the ring plus damages
b) C cannot choose the price of the watch or the a) D's obligation to deliver 100 sacks of rice to C is
price of the ring because the said objects have extinguished, the cause of the loss being a
already been lost fortuitous event.
c) C can only choose to have the bracelet because b) D's obligation to deliver 100 sacks of rice to C is
anyway, D can still perform his obligation not extinguished because he can get 100 sacks
d) C can only choose to have delivery of the of rice from other sources.
bracelet or the price of the ring which was the c) D’s obligation to deliver 100 sacks of rice to C is
last item that was lost plus damages. not extinguished because D was in default.
d) D’s obligation is to pay damages because he
2. A, B and C are solidarily liable to D for P30,000. D was in default.
assigned the note to X. Afterwards, X assigned the note
to A. How much obligation is extinguished? 8. In a facultative obligation, to whom shall the right of
choice belong?
a) P10,000
b) P20,000 a) Always creditor
c) P30,000 b) Always debtor
d) None of the above c) Generally debtor unless granted to the creditor
d) Generally creditor unless granted to the debtor
3. The following are obligations with a term or period,
except: 9. Which of the statements is correct?

a) D to give C P50,000.00 on December 1. 2015 I. Accessories refer to those which destined for the
b) D to give C P50,000.00 on Christmas day next embellishment, use or their preservation of another
year. thing or more importance, have for their object the
c) D to give C P50,000.00 upon the death of C's completion of the latter for which they are
father. indispensable or convenient.
d) D to give C P50,000.00 if C's father dies within 2 II. Accessions include everything which is produced by a
years. thing or which is incorporated or attached thereto,
4. Which of the following obligations is a pure obligation either naturally or artificially.
and is demandable at once? a) I only
a) D to allow to use D's car until December 31. b) II only
2015 c) Both I and II
b) D to allow to use D's car until C finishes his d) Neither I nor II
course in Accounting 10. S and B agreed in writing for the sale of authentic
c) D to give C his car. No mention is made when D Coach bag at a price of P50,000. At the time of delivery
shall give the car. of the bag, S delivered a counterfeited replica bag.
d) D to give a car if c finishes his course in What is the remedy available to B?
Accounting
a) A File an action for damages because S is guilty
of incidental fraud or dolo incidente
 b) File an action for annulment of contract b) If the bracelet is lost through a fortuitous event
because S is guilty of causal fraud which vitiated before substitution, the obligation is
B's consent. extinguished
c) File an action for declaration of nullity because c) If the ring is lost through a fortuitous event
the subject matter is illegal. after substitution, the obligation is extinguished
d) File an action for rescission of contract because d) If the ring is lost through the debtor's fault
it is intended to defraud creditor. substitution, the debtor shall pay damages.

11. Which of the following statements concerning delay 16. A and B are indebted to X and Y for 10,000.00.A and
is incorrect? B share in the debt in the ratio of 1:3; while X and Y in
the credit in the ratio of 2:3. How much may X collect
a) There is no delay in obligations not to do
from A if the debtors are joint debtors, while the
b) Delay, as a rule, exists, when the debtor does
creditors are joint creditors?
not perform his obligation on the date it is due.
c) Demand, as a rule, is required, in order for a) P10,000.00
delay to exist. b) P2,500.00
d) When time is of the essence of the contract, c) P4,000.00
delay on the part of the debtor exists despite d) P1,000.00
the absence of demand.
17. As a general rule, the court is not allowed to fix the
12. The following are the principal consequences of the period of an obligation. The following are the
joint character of the obligation, except exceptional instances wherein the court may fix the
period of an obligation with a period, except
a) The demand by one creditor upon one debtor
produces the effects of default only with a) If the obligation does not fix a period, but from
respect to the creditor who demanded and the its nature and the circumstances it can be
debtor on whom the demand was made, but inferred that a period was intended.
not with respect to the others. b) If the period depends upon the sole will of the
b) The interruption of prescription by the judicial debtor.
demand of one creditor upon a debtor, does c) In case of pure obligation, to prevent
not benefit the other creditors nor interrupt the unreasonable interpretations of its immediate
prescription as to other debtors. demandability
c) The vices of each obligation arising from the d) If the obligation is pure, simple, unconditional
personal effect of a particular debtor or creditor and payable on demand.
do not affect the obligation or rights of the
18. D, a professional singer, agreed to sing for a fee of
others.
P20,000 at the birthday party of who was a fan of D.
d) The insolvency of a debtor increases the
Due to numerous commitments, D could not go to the
responsibility of his co-debtors and it authorizes
birthday party of C. So he sent X, another professional
a creditor to demand anything from his co-
singer who was known to sing better than D, to sing at
creditors in case of insolvency of a debtor.
C's birth party, and informed that the latter needed to
13. One of the following obligations is not demandable pay only P10,000. Which is correct?
at once. Which is it?
a) D may validly assign his obligation to sing
a) D to give his car to C. No date was fixed parties because the reduced fee was advantageous to
for the date of delivery C.
b) D to give his car to C until C completes his b) D may validly assign his obligation to sing
course in BS Accountancy because X could perform the obligation better
c) D to give his car to C until X dies. than him.
d) D to give his car should C enroll in BS c) D may not validly assign his obligation to sing
Accountancy. because it is personal in nature.
d) C cannot refuse the performance of the
14. Which of the following is an indivisible obligation?
obligation by X because the obligation to sing is
a) To give a rendition tonight of Handel's transmissible since it would not require much
"Messiah' in a concert at the Folk Arts Theater effort on the part of either D or X who are both
b) To construct a pavement measuring 2 meters professional singers.
wide and 10 meters long
19. When the choice has been expressly given to the
c) To lecture for 5 Saturdays in a tax seminar.
creditor, the obligation shall cease to be alternative
d) To pay a loan obligation of P100,000.00 in 10
from the day when the selection has been
equal monthly installments.
communicated to the debtor. Until then, the
15. D is obliged to give a specific ring. The parties responsibility of the debtor when the right of choice has
agreed that D may give a specific bracelet as substitute. been granted to the creditor shall be governed by the
Which of the following statements is true? following rules, except

a) If the ring is lost through a fortuitous event a) If one of the things is lost through a fortuitous
before substitution, the obligation is event, he shall perform the obligation by
extinguished delivering that which the creditor should
 choose from among the remainder, or that c) P4,000.00
which remains if only one subsists. d) P1,000.00
b) If the loss of one of the things occurs through
25. XYZ is a cooperative store. On July 1, 2014, it paid
the fault of the debtor, the creditor may claim
the Government of the City of Manila certain taxes
any of those subsisting without right to
believing that it owed the same. After six months, XYZ
damages, or the price of that which, through
learned that it was not subject to the said taxes.
the fault of the former, has disappeared, with a
Accordingly, it sought to recover the said taxes it
right to damages.
previously paid. The obligation of the Government of
c) If all the things are lost through the fault of the
the City of Manila to return the said taxes paid is based
debtor, the choice by the creditor shall fall upon
on:
price of any one of them, also with indemnity
for damages. a) negotiorum gestio
d) If all the things are lost through fortuitous b) solutio indebiti.
event, the debtor shall be liable for damages. c) quasi-delict
d) The Government is exempt from giving tax
20. On May 31, 2014, D promised to give a a specific
refunds
house and lot to C if C passes the Bar Examination. On
September 24, 2014, C took the Bar Examination. The 26. Dolores borrowed P15,000.00 from Consuelo. On
result of the examination which C took was released on due date, Dolores was not able pay but she promised to
March 26, 2015 and C passed it. C shall be entitled to give Consuelo a specific ring, a specific bracelet, or
the house and lot: necklace, in payment of the debt. Consuelo accepted
the offer of Dolores. What kind of obligation is the new
a) on May 31,2014.
obligation of Dolores?
b) on September 24, 2014.
c) on March 26, 2015. a) Facultative obligation.
d) when he receives his rating. b) Compound obligation.
c) Alternative obligation
21. A, B and C are solidary debtors of X in the amount of
d) Simple obligation.
P9,000.00. Subsequently, X renounced the share of A. A
accepted the renunciation of his share. On due date. B 27. D promises to deliver a specific thing to C if the
paid X P6,000.00. B demanded reimbursement from C latter will pass the CPA Board Exam. Before the
but C is insolvent. In this case: fulfilment of such suspensive condition, D made
improvement to the specific thing. Afterwards, C passed
a) B may demand the payment of P3,000.00 from
the CPA Board Exam. What is the right of D to such
A.
improvement of specific thing during the pendency of
b) B may not demand any payment from A
condition at his expense?
because the share of A had already been
renounced or condoned. a) D is the owner of such improvement because it
c) B may demand P1,500.00 from A representing was made at his expense
A's share in C's insolvency. b) D shall have no other right than that granted to
d) B may demand from A P4,500.00 so that their the usufructuary which is the right to enjoy and
sharing in the total debt is equal. use the improved determinate thing for a
reasonable time.
22. It is a type of obligation which has an accessory
c) D has the right to retain the improved specific
undertaking to assume greater liability in case of
thing by virtue of legal pledge until he was
breach.
reimbursed by C for the improvement he made
a) Obligation with a condition on the specific thing
b) Obligation with a penal clause d) D has the right to ask for reimbursement from C
c) Obligation with a period for the improvement he has made on the
d) Obligation with a term specific thing

23. A and B are indebted to X and Y for 10,000.00. A and 28. What is the effect of the loss or deterioration of the
B share in the debt in the ratio of 1:3; while X and Y in thing intended as a substitute in a facultative obligation
the credit in the ratio of 2:3.How much may X collect before the substitution?
from A if there is passive solidarity?
a) The debtor becomes liable for damages.
a) P10,000.00 b) The creditor may rescind the obligation with
b) P2,500.00 damages
c) P4,000.00 c) The debtor shall indemnify the creditor
d) P1,000.00 d) The debtor shall not be liable on account of the
loss
24. A and B are indebted to X and Y for 10,000.00. A and
B share in the debt in the ratio of 1:3; while X and Y in 29. On January 1, 2000, Vendor Inc. sold a specific car to
the credit in the ratio of 2:3. How much may X collect Buyer Inc. with payment to be made after two months.
from A if there is active solidarity? The parties agreed that Vendor Inc. shall deliver the car
to Depositary Inc, in behalf of Buyer Inc. Depositary Inc.
a) P10,000.00
has the obligation to preserve the said car until Buyer
b) P2,500.00
Inc, obtains the same. On January 2, 2000, Vendor Inc. c) P30,000
actually delivered the car to Depositary Inc. On January d) None of the above
3, 2000, the car was destroyed by a storm while it was
35. Which of the following statements concerning the
in Depositary's possession. Who will suffer the risk of
kinds of quasi-contract is correct?
loss?
I. Negotiorum Gestio refers to the voluntary
a) Buyer Inc, because it is already the owner at the
management of the property or affairs of other without
time of loss.
the knowledge or consent of the latter.
b) Depositary Inc. even it exercised ordinary
diligence to prevent or minimize the loss during II. Solutio Indebiti refers to the juridical relation which is
the storm. created when something is received when there is no
c) Vendor Inc. because actual possession has not right to demand it and it was unduly delivered through
yet been given to Buyer Inc. mistake.
d) Vendor Inc. because non-payment of the price
will result to non-transfer of ownership to a) I only
Buyer Inc. b) Il only
c) Both I and II
30. A, B and Care solidarily liable to X for P30,000. A is d) Neither I nor II
insolvent. X condoned B's share in the obligation. Which
of the following statements is correct? 36. P took a public bus in going to his office. Although P
paid his fare, the bus conductor did not issue to him a
a) C is liable to X in the amount of P10,000 only. ticket. Alongthe way, the bus met an accident causing a
b) B is still liable to X in the amount of P20,000. slight injury to P and other passengers. If P is to recover
c) X may only collect P10,000 from B. damages from the bus owner, the source of the bus
d) X may only collect P10,000 from C. owner's liability is:
31. If there is no stipulation as to whose benefit the a) contract
period is established, which of the following statements b) quasi-delict
is incorrect? c) law
d) P cannot recover any amount because no ticket
a) The creditor cannot demand payment before
was issued.
the period stipulated.
b) The debtor cannot make an effective tender 37. Which of the following is true or false?
and consignation of payment before the period
stipulated. I. In alternative obligation, the choice belongs only to
c) The term is for the benefit of both debtor and the debtor, while in facultative obligation, the choice
creditor. may be given to the creditor.
d) The term is for the benefit of the debtor. II. In alternative obligation, there is only one obligation,
32. S, a supplier of fresh fish from Lucena City, hired T, but there is a substitute, while in facultative obligation,
the owner of a trucking company, for a fee of P3,000.00 there are many obligations.
to bring the fish catch of S to the Dampa Market in III. In alternative obligation, obligation is extinguished
Paranaque City which ordered the fish for a price of by the fulfilment of only one of the obligations, while in
P20,000.00. In so far as S is concerned, his prestation in facultative obligation, the obligation is extinguished by
his contract with T is: the fulfilment of the principal obligation when there is
a) the sale of the fish. no substitution yet.
b) the transport of the fish a) False, False, True
c) the payment of P3,000.00 b) True, True, False
d) the payment of P20,000.00 c) True, False, True
33. A, B and C are liable jointly in the amount of P60,000 d) False, True, True
to D and E. joint creditors. D condoned the whole 38. S sold his only horse to B for P10,000.00 cash. The
obligation. How much obligation is extinguished by parties agreed that S shall deliver the horse within one
remission? week from their agreement. Nothing is mentioned in
a) P60,000 the agreement on how the horse will be cared for by S
b) P30,000 before delivery.
c) P20,000 a) S must take care of the horse with the diligence
d) P10.000 of a good father of a family before delivery
34. A, B and C wrote a promissory note which states "I b) S need not take care of the horse because
promise to pay P30,000 to D with the following maturity nothing was mentioned in the agreement on
dates: October 4, 2019 for A's share; November 5, 2019 how the horse will be cared for.
for B's share; and December 7, 2019 for C's share." How c) S must take care of the horse with
much may D collect from C if today is October 4, 2019? extraordinary diligence
d) The absence of a stipulation on how the horse
a) P10,000 must be cared for renders the sale void because
b) P20,000
 such stipulation is an essential element of the
contract.

39. Dolores borrowed P15,000.00 from Consuelo. On

due date, Dolores was not able pay but she promised to
give Consuelo a specific ring, a specific bracelet, or
necklace, in payment of the debt. Consuelo accepted
the offer of Dolores. Assume that before Dolores could
deliver any of the ring, bracelet or necklace, the ring
and the bracelet were lost successively through the
fault of Dolores. In this case:

a) Consuelo may demand the payment of the price

of the ring or the price of the bracelet plus
damages, or the delivery of the necklace
b) Consuelo may demand the payment of the price
of the ring or the price of the bracelet plus
damages, or the delivery of the necklace
c) Dolores may deliver the necklace to Consuelo
with the obligation to pay damages because the
ring and the necklace were lost through her
fault.
d) Consuelo may demand the payment of the price
of the bracelet which was the last item that was
lost, plus damages.

40. Dominico and Domingo are jointly and severally

liable to Crispino for P100,000.00. The obligation is due
on June 30 2015. On June 25, 2015, Dominico paid the
whole amount of the note to Crispino. If Domingo
reimburses Dominico on July 15, 2015, Dominico is
entitled to receive from Domingo:

a) P50,000.00 plus interest from June 25 to July

15, 2015.
b) P50,000.00 plus interest from June 25 to June
30, 2015
c) P50,000.00 plus interest from June 30 to July
15, 2015.
d) P50,000.00 with no interest because paid the
note before due date.