True or False (Review Materials) Parts 1-3

Question 1

The law assumes the corporation is a person so it can perform practically all business functions. True or False?

Answer 1

True

Question 2

The personal obligations of the corporate shareholders are not obligations of the corporation. True or False?

Answer 2

True

Question 3

The existence of the corporation should not exceed 50 years from the date of incorporation unless
extended. True or False?

Answer 3

False. The corporation’s life is indefinite or perpetual.

Question 4

A corporation is managed by a group of shareholders called the Board of Directors. True or False?

Answer 4

True

Question 5

A shareholder can sell and transfer his acquired share capital with the knowledge and consent of all the
shareholders. True or False?

Answer 5

False. Knowledge and consent of all the shareholders are not required.

Question 6

A publicly listed corporation sources its funds from the public through the issuance of authorized share
capital. True or False?

Answer 6

True

Question 7

A corporation is formed by the mere desire of owners or the agreement of parties. True or False?

Answer 7

False. Certain requirements are needed for a corporation to be formed and requires special authority or grant by the government.

Question 8

Share Corporations do not issue shares of share because they are created for charitable or religious
purposes. True or False?

Answer 8

False. Share corporations issue shares.

Question 9

Corporators are also called the founders of the corporation. True or False?

Answer 9

False. Incorporators are the founders of the corporation.

Question 10

Shareholders’ Equity represents the residual interest of the shareholders in the assets of the
corporation after deducting the total corporate liabilities. True or False?

Answer 10

True

Question 11

Subscribers are those who have made an agreement with the corporation to buy the corporate shares
at future payments. True or False?

Answer 11

True

Question 12

Subscribed share capital is a portion of share capital that an investor agreed to purchase and has not
yet issued. True or False?

Answer 12

True

Question 13

A preference share is given priority over an ordinary share with respect to dividend distribution. True or False?

Answer 13

True

Question 14

A corporation is not authorized to issue preference shares alone, but it can issue ordinary shares even
without preference shares. True or False?

Answer 14

True

Question 15

A corporation cannot issue its share capital if it is not fully paid. True or False?

Answer 15

True

Question 16

Even if the subscriber signed the subscription contract and made a down payment to the subscriptions,
he shall receive no certificate of shares until he pays the contract price in full. True or False?

Answer 16

True

Question 17

The Share capital is credited more than the par value amount. True or False?

Answer 17

False. Share capital is always recorded at par.

Question 18

True or False?

Answer 18

False. Subscription receivable is usually treated as a deduction in the Shareholders’ Equity except when
collectible within one year (classified as a current asset).

Question 19

If the consideration is cash, the corporation will record an increase in assets based on the face value. True or False?

Answer 19

True

Question 20

When subscribed shares are not yet paid, they contribute to the total capitalization of the corporation. True or False?

Answer 20

False. Unpaid subscription (Subscription Receivable) is deducted in calculating the total equity.

Question 21

Once the subscription is paid in full, both the receivable and subscribed accounts will increase. True or False?

Answer 21

False. It will decrease.

Question 22

If the fair value of services is not available, the par value shall be used in issuing the shares. True or False?

Answer 22

The fair value of shares issued. False.

Question 23

Partial payments on subscription increase contributed capital. True or False?

Answer 23

True

Question 24

The legal capital of share capital with par value is the aggregate amount at par value of the shares
issued and subscribed. True or False?

Answer 24

True