PRELIMINARY TEST

Law on Business Organizations

University of Luzon, College of Accountancy Judge Bryan Jasper Solis, Law Professor

Direction: Ready each question carefully. Choose the best answer by writing the letter of your choice on a separate answer sheet.
Each correct response is worth two (2) points. Good luck and enjoy the test!

1. On February 14, Elsie, Donald, and Vanix agreed to contribute in equal shares money for use as capital in the furniture
business. On February 16, they registered as partnership under the name EDV Elegant Furniture. On February 20,
each of them delivered the sum of Php150,000.00 to the partnership fund. For the operation of the business, they hired
Jovilan as store manager whose salary will paid from the profits of the business on a monthly basis. On February 28,
compelled by the need for specialty tools/equipments and delivery vehicle, they agreed to receive such contributions
from Renzel and Ariza, respectively, who shall each receive shares in the profits. When has EDV Elegant Furniture
acquired juridical personality?
a. February 14
b. February 16
c. February 20
d. February 28
2. Who among the partners in EDV Elegant Furniture is the industrial partner?
a. Vanix
b. Renzel
c. Jovilan
d. None
3. Without express agreement, how much will each partner share in the profits of the business of EDV Elegant Furniture?
a. Equal
b. In proportion to the amount of work performed for the partnership
c. In proportion to capital contribution
d. To be determined by the managing partner
4. Without express agreement, who is/are considered the managing partner/(s) of EDV Elegant Furniture?
a. Elsie, Donald, and Vanix because they the original partners
b. Renzel and Ariza, because they own the controlling interest in the partnership
c. Jovilan, because he is in charge of the operation of the business.
d. All of the partners.
5. What, if any, is the effect of registration of EDV Elegant Furniture before the SEC?
a. It makes the contract of partnership valid and legal.
b. It results into the acquisition of the partnership of a juridical personality.
c. It qualifies the partnership for issuance of business permit from the concerned local government unit as well as
BIR Registration Certificate.
d. All of the above.
6. EDV Elegant Furniture pays Jovilan the sum of Php15,000.00 out of the monthly profits of the business. Which
statement is legally correct about such share?
a. It is considered as wage or compensation as employee of EDV Elegant Furniture.
b. It represents his interest in the partnership as partner.
c. It is just and equitable a compensation under the circumstance.
d. It gives rise to a prima facie presumption that Jovilan is a partner.
e. All of the above.
7. The capability of EDV Elegant Furniture to acquire properties in its own name—
a. Is dependent on its partners’ will.
b. Is a necessary consequence of its status as a juridical person.
c. Is accorded to it only after registration before the SEC.
d. Is dependent on its existing capital
e. All of the above.
8. On the third year of EDV Elegant Furniture, the following events transpired:
i. Jovilan resigned as manager.
ii. Donald was convicted guilty of the crime of Rape.
iii. Ariza married a Chinese businessman and began living with him in Wuhan, China.
iv. Vanix was admitted as patient at the psychiatric ward of UL General Hospital.
v. Elsie put up a business outside of the partnership.

Which event above dissolved the partnership upon its occurrence?

a. (i)
b. (ii)
c. (iii)
d. (iv)
 e. (v)
f. All of the above
g. None of the above
9. Who is entitled to the profits earned by Elsie from that business put up by her outside the partnership?
a. EDV Elegant Partnership only
b. Elsie only
c. Both (a) & (b)
d. Elsie, but she will indemnify the partnership for damages
10. If the partners in EDV Elegant Partnership have separate properties outside the partnership, the partnership formed is
—
a. General partnership
b. Particular partnership
c. Universal partnership
d. Limited Partnership
11. Without express agreement, who is liable for partnership debts in case of insolvency of EDV Elegant Partnership?
a. All the partners
b. All the partners, including Jovilan
c. The managing partner
d. The partner at fault or guilty of negligence
12. Assuming all the partners are liable for partnership debts in case of insolvency, EDV Elegant Partnership is a—
a. General partnership
b. Particular partnership
c. Universal partnership
d. Limited partnership
13. By agreement of the partners, those who contributed money to the partnership fund are exempt from liability to third
persons in case of insolvency of the partnership. Such is stipulation is—
a. Void insofar as third persons are concerned.
b. Valid as among the partners.
c. Valid if the contract with such stipulation is registered and acknowledged before the SEC.
d. All of the above.
14. By mere agreement that the partners who contributed money are exempt from liability mentioned in the preceding
number, the partnership is--
a. General partnership
b. Particular partnership
c. Universal partnership
d. Limited partnership
15. Vanix’ connection to EDV Elegant furniture is kept from the public. She is also not active in the management of the
business of the partnership. What kind of partner is Vanix?
a. Nominal
b. Secret
c. Silent
d. Dormant
16. Bryan and Freddie formed a universal partnership of profits. Which of the following properties belong to the
partnership?
a. Banana plantation inherited by Bryan before the formation of the partnership.
b. Salary received by Freddie as law professor of the College of Accountancy of UL.
c. Lotto prize won by Bryan during the first year of the partnership.
d. Vehicle donated to Freddie during the first year of the partnership.
17. Marisol owes Glenda Php10,000.00. She also owes Php12,000.00 to AGB Co., a partnership of which Glenda is the
partner authorized to collect the credits of the partnership. Both debts are due. Marisol gives Php10,000.00 informing
Glenda that the amount is in payment of her debt to the latter. However, Glenda issues a receipt of AGB Co. in partial
payment of its credit. To which credit will the payment be applied?
a. To the credit of Glenda
b. To the credit of AGB Co.
c. To the credit of Glenda and that of AGB Co. proportionately at Php4,000.00 and Php6,000.00 respectively.
d. To the credit of Glenda and that of AGB Co. equally at Php5,000.00 each.
18. CLAMPER Co., a partnership engaged in the trading of bathroom fixtures, is composed of the following partners with
their respective capital contributions: Christian, Php10,000.00; Laisa, Php20,000.00; April, Php30,000.00; Milyn,
Php50,000.00; Pamela, Php80,000.00; Elisha, Php200,000.00; and Rhealyn, Php300,000.00. Christian, Laisa, April,
Milyn and Pamela were appointed as managers without any specification of their respective duties. In March, 2020,
Christian proposed to buy stocks from LAVAVO Trading, but Pamela opposed. A voting took place and Laisa and
April sided with Christian, while Milyn sided with Pamela. How shall the conflict be resolved?
a. The group of Christian, Laisa and April will prevail because they constitute the majority of the managing
partners.
b. The group of Milyn and Pamela will prevail because they constitute the controlling interest among the
managing partners.
 c. Neither of the two groups will prevail because the partners should act in unanimity.
d. The votes of Elisha and Rhealyn are necessary to resolve the conflict.
19. Supposing that when the voting took place, Laisa sided with Christian, Milyn sided with Pamela, while April abstained
thereby resulting in a tie among the managing partners. In this case:
a. The group of Pamela will prevail because she and Milyn own the controlling interest among the managing
partners.
b. The tie will have to be resolved by Rhealyn because she owns the controlling interest among all the partners.
c. Neither of the two groups will prevail because of the equal number of votes.
d. Another voting should be conducted to resolve the conflict.
20. For a decade, Jane and Jamille have been partners in J & J Boutique and Fashion House. At the end of February, Jane
assigned her interest to James, but Jamille objected on the ground that she did not want James to be her partner.
a. Jane, without Jamille’s consent, cannot convey her interest to James or any other person.
b. The partnership between Jane and Jamille was automatically dissolved when Jane assigned his interest to
James.
c. James automatically became Jamille’s partner when Jane assigned her interest to him.
d. Jane remains as a partner of Jamille with all the rights and obligations of a partner.
21. By assigning Jane’s interest in the partnership to James, he is entitled—
a. Co-equal right to use specific partnership property
b. Right to manage the affairs of the partnership
c. Share in the profits and surplus
d. All of the above.
22. BRAVO Enterprises is a partnership owned by Bernadette who invested Php20,000.00; Rowena, Php40,000.00; Aira,
Php10,000.00; Vanessa, Php30,000; and Oscar, who contributed her services. The partners have stipulated that
Bernadette shall be exempt from obligations to third persons. After three years of losses, the business had liabilities of
Php90,000.00, while its assets dwindled to Php50,000.00. In the payment of the liabilities, the assets of the partnership
will first be exhausted, and thereafter:
a. The unpaid liabilities of Php40,000.00 will be paid equally by all the partners from their separate assets at
Php8,000.00 each with no right to reimbursement.
b. The unpaid liabilities of Php40,000.00 will be paid equally by all the partners from their separate assets at
Php8,000.00 each with a right to reimbursement on the part of Bernadette, who was exempted from the
liability to third persons by agreement, and Oscar, who is an industrial partner who must not share in the
losses.
c. The unpaid liabilities of Php40,000.00 will be paid equally by Bernadette, Rowena, Aira, Vanessa, and Oscar
at Php10,000.00 each with no right of reimbursement on the part of Oscar.
d. The unpaid liabilities of Php40,000.00 will be paid equally by Bernadette, Rowena, Aira, Vanessa, and Oscar
at Php10,000.00 each with no right of reimbursement on the part of Bernadette.
23. Assume that there is concurrence of creditors of Bernadette, a partnership creditor and personal creditor with only her
personal assets remaining to satisfy any debt. Who shall have preference?
a. Partnership creditor
b. Personal creditor
c. Both partnership and personal creditor in proportion to the debts owed
d. Either on a “first come, first serve” basis
24. BRAVO Enterprises is engaged in the business of consumer electronics. Without due authority, Oscar purchased
sports watches from ICONX Corp. in the name of the partnership. Assuming ICONX Corp. is not aware of the lack of
authority, the resulting contract is—
a. Void, as it was entered without the consent of the partnership
b. Valid, as it was apparently carried on in the usual way the business of the partnership.
c. Unenforceable for being an ulta vires act.
d. Valid because any partner is deemed an agent of the partnership.
25. In payment of the price of Php350,000.00 for the sports watch, it is chargeable on—
a. Partnership assets only
b. Partnership assets, and if insufficient, personal assets of all partners.
c. Partnership assets, and if insufficient, personal assets of acting partner.
d. Personal assets of the acting partner only.
26. The following statements concerning notice and knowledge of a partner concerning partnership affairs are presented to
you:
i. Notice to any partner
ii. Knowledge of a partner acting on the particular matter obtained by him while already a partner.
iii. Knowledge of a partner not acting on the particular matter obtained by him before he became a
partner.

Which of the above notice/knowledge is also notice or knowledge of the partnership?

a. i and ii
b. i and iii
c. ii and iii
d. i, ii, and iii
27. The following sources of obligation are presented to you:
 i. Liability arising from torts (quasi-delicts) and crimes for the individual acts of partners.
ii. Liability for contractual obligations of the partnership.
The liability of the partners and the partnership is:
a. i—solidary (partners and partnership); ii—joint (partners)
b. i-joint (partners); ii-solidary (partners and partnership)
c. solidary (partners and partnership) for both (i) and (ii)
d. joint (partners) for both (i) and (ii).
28. Which of the following losses will not cause the dissolution of the partnership?
a. Loss before its delivery to the partnership of property only the use of which was contributed by the partner
who owned it.
b. Loss after its delivery to the partnership of property only the use of which was contributed by the partner who
owned it.
c. Loss before its delivery to the partnership of property which a partner had promised to contribute to the
partnership.
d. Loess after its delivery to the partnership of property which a partner had promised to contribute to the
partnership.
29. A limited partner is liable as a general partner:
i. If he is also a general partner
ii. If he participates in the management of the partnership.
iii. If he allows his surname to be included in the partnership name.
The statement is true with respect to:
a. (i) and (ii)
b. (i) and (iii)
c. (ii) and (iii)
d. (i), (ii) and (iii)
30. Mariefel and Mariel entered into a universal partnership of all present property (M & M). At the time of the execution
of the partnership, Mariefel owned 5 delivery trucks, a warehouse building, and 5 cars, while Mariel owned a five-
hectare fruit and vegetable farm, a tractor, and a poultry farm. During the first year of the partnership, the following
transactions took place:
i. The delivery trucks earned trucking income.
ii. The warehouse earned storage income.
iii. The cars realized revenues from lease (Grab).
iv. Fruits and vegetables were harvested from the farm
v. Chickens and eggs were produced from the operations of the poultry farm
vi. Partner Mariefel purchased a commercial building from her own funds.
vii. Rent was realized from the commercial building.
viii. Partner Mariel inherited a rice field.
ix. Rice was harvested from the field.
The following properties belong to M & M partnership, except:
a. delivery trucks, warehouse and cars from Mariefel
b. Fruit and vegetable farm and poultry farm from Mariel
c. Trucking income, storage income, lease revenues, fruits and vegetable harvested, and chickens and eggs,
because they are the fruits of the present properties.
d. The commercial lot and building and the rentals therefrom.
e. None of the above.
31. Assume that the parties stipulated that after-acquired properties shall belong to the partnership, these properties belong
to M & M partnership, except:
a. Commercial lot and building
b. Rental of the commercial lot and building
c. Rice field inherited by Mariel
d. Rice harvested from the rice field inherited by Mariel
e. None of the above.
32. M & M partnership fixed a period of five (5) years to operate business. On the expiration of the term—
a. The partnership is deemed dissolved.
b. The partners cease to be partners outright.
c. The partnership is terminated.
d. The business becomes illegal.
33. Should Mariefel and Mariel continue the business after lapse of the specific period, the kind of partnership formed is—
a. Partnership by estoppel.
b. Limited partnership
c. Partnership at will.
d. Particular partnership.
34. BEST Company is a partnership composed of Bryce, Eric, Sean, and Tim. Bryce contributed Php50,000.00; Eric,
Php30,000.00; Sean, Php15,000.00; and Tim, Php5,000.00. During the year, BEST Company realized a net profit of
Php10,000.00. If the partners did not have a profit-sharing agreement, how much will each partner receive as share in
the profits?
a. Each partner will receive equal share of Php2,500.00 each.
b. Bryce, Php5,000.00; Eric, Php3,000.00; Sean, Php1,500.00; and Tim, Php500.00.
c. Bryce, Php5,000.00; Eric, Php2,000.00; Sean, Php2,000.00; and Tim, Php1,000.00.
d. Bryce, Php4,000.00; Eric, Php3,000.00; Sean, Php1,500.00; and Tim, Php1,500.00.
35. Partnership and Agency are peculiar from other contracts in that the parties have mutual trust and confidence. In this
sense, these contracts are characterized as:
a. Aleatory
b. Gratuitous
c. Fiduciary
d. Preparatory.

--nothing follows—

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