Exercise Set 4 (True or False) Part I

Question 1

One advantage of a corporation is its being subject to unlimited liability. True or False?

Answer 1

False. Limited liability as owners of corporation won’t have their debt obligations extended to their personal assets.

Question 2

The minimum number of incorporators required in order to form any corporation is two. True or False?

Answer 2

False. Only one is required.

Question 3

Any organization cost incurred in the formation of a corporation is charged as an expense. True or False?

Answer 3

True

Question 4

The minimum number of directors or trustees in order to form any corporation is one. True or False?

Answer 4

True

Question 5

The bylaws is a document which contains matters relating to the internal governance of the corporation. True or False?

Answer 5

True.

Question 6

Each incorporator is required to be an owner or subscriber of at least one share. True or False?

Answer 6

True

Question 7

A de jure corporation is also referred to as a corporation in fact. True or False?

Answer 7

False. De jure means legally completed requirements while De facto means in fact.

Question 8

A non-stock corporation is composed of shareholders. True or False?

Answer 8

False. [*What is a non-stock corporation? **refer to study guide]

Question 9

Any corporation which is incorporated under any law other than the Revised Corporation Code of the Philippines is considered as a foreign corporation. True or False?

Answer 9

True

Question 10

All incorporators are considered as corporators and vice versa. True or False?

Answer 10

False. Not all the time

Question 11

A corporation’s authorized share capital refers to the maximum number of shares the corporation is permitted to issue. True or False?

Answer 11

True

Question 12

The legal capital of a corporation is always composed of the aggregate par value of its issued and subscribed shares. True or False?

Answer 12

False. Not only par value but as well as no par value shares.

Question 13

If a corporation would only have one class of shares, this may either be ordinary or preference share. True or False?

Answer 13

False. There are also other kinds of shares (e.g. par value shares and no par value shares)

Question 14

When shares are issued in exchange of services, the fair value of the shares on such date is the priority over par value of the shares for measurement purposes. True or False?

Answer 14

True

Question 15

A share may be issued above but never below its par value. True or False?

Answer 15

True

Question 16

A corporation’s contributed capital is technically the same as its legal capital. True or False?

Answer 16

False. Legal capital is contributed capital that cannot be distributed and is treated as a trust fund.

Question 17

The minimum consideration for issuance of no-par value shares is ₱2.00. True or False?

Answer 17

False. The minimum is ₱5.00.

Question 18

All corporations are permitted to issue no-par value shares. True or False?

Answer 18

False. Preference share capital are not permitted to issue shares at no par value.

Question 19

The Share Capital account is always credited using the share’s par or stated value. True or False?

Answer 19

True

Question 20

Share certificates are issued upon subscription. True or False?

Answer 20

False.