Tax Quizzer

1. Which is incorrect with respect to business taxes? a. VAT is a top-up tax on sales b. Percentage tax is an expensed tax c. VAT is due quarterly but is paid monthly d. Percentage tax is an explicit consumption tax 2. Which of the following transactions has no consumption tax? a. Importation b. Domestic consumption from VAT suppliers c. Domestic consumption from non-VAT suppliers d. Exportation 3. Which of these importations is subject to VAT? a. Lumber b. Flour c. Canned tuna d. Wine 4. The sale of which of the following is exempt from business tax? a. Urea fertilizer b. Hybrid corn seeds c. Herbicides d. Chicken dung 5. Which of the following ingredients is exempt from the VAT on importation? a. Ingredients in the manufacture of Improvised Explosive Devices b. Ingredient used in the manufacture of human foods c. Ingredients used in the manufacture of pet feeds d. Ingredients used in the manufacture of poultry or livestock feeds 6. Which of the following agricultural products is not exempt from business tax on sales? a. Ginseng b. Coffee beans c. Tobacco leaf d. Tea leaf 7. Mabiga Cooperative is an agricultural cooperative which processes the coffee production of its members for sale to NesFe Corporation, a coffee processing company selling bottled instant cofee. Mabiga imported a coffee drier from Colombia Coffee Machineries Corporation. After 3 years of active use, Mabiga disposed the drier to Pedro Mabanag, a member. Which of the following is subject to VAT? a. Importation of coffee drier from Colombia b. Sale of coffee drier to Mr. Mabanag c. Sale of coffee to NesFe Corporation d. Sale of coffee by members to Mabiga Cooperative

8. Ammacian Corporation imported goods from abroad for domestic sale. The details of the importation is given below: Peso value of supplier’s invoice Other cost incurred to bring the goods to Philippine port Other inland costs prior to release of goods from Customs Customs duties Freight cost to bring merchandise to Ammacian’s warehouse

P

2,000,000 70,000 85,000

Compute the Customs duties on the dutiable value. a. P 207,000 c. P 215,500 b. P 200,000 d. P 208,500 9. Compute the VAT on importation on the landed cost. a. P 258,600 c. P 282,600 b. P 283,440 d. P 284,460 10. a. b. c. d.

Which is subject to business tax? Business for subsistence Privilege stores Non-resident sellers All of these

11. a. b. c. d.

Which is considered pure consumption tax? VAT on importation Percentage tax Value Added Tax on sales Excise tax

12. a. b. c. d.

Who is statutory liable to pay the VAT on importation? The non-resident seller The resident buyer Both seller and buyer The Bureau of Customs

13. A business taxpayer had the following summarized transactions during the quarter: Cash sales Sales on credit (account sales) Installment sales (P30,000 collected) Sales returns and allowances Quota discounts Advances for goods not yet delivered Purchase of goods, including of P72,000 VAT passed on by sellers Compute the gross selling price.

P 400,000 600,000 100,000 20,000 10,000 20,000 672,000

10%

a. P1,100,000 b. P1,080,000 14.

c. P1,030,000 d. P1,010,000

A lending investor had the following data during a month:

Cash collection for loan principal Cash collection for interest Cash collection for penalties Uncollected loan principal Billed but uncollected interest Billed but uncollected penalties

P 400,000 50,000 6,000 300,000 2,000 1,000

What is the gross receipt? a. P 456,000 c. P 59,000 b. P 450,000 d. P 56,000 15. Geneva Corporation, a VAT lessor which leases commercial spaces to various businesses, received P1,284,000 rentals from various clients, net of 5% withholding tax. What is the gross receipt? a. P 1,200,000 c. P 1,284,000 b. P 1,351,579 d. P

16. A VAT registered seller made the following sales of goods during a month:

To customer A To customer B To customer C Total sales

Selling price P 150,000 200,000 102,000 P 452,000

Fair value P 180,000 190,000 150,000

Compute the output VAT. a. P 60,000 c. P 62,400 b. P 54,240 d. P 63,600

17. A VAT-registered seller made the following sales to the following entities:

City of San Fernando ABC Trading Company

Selling price P 134,000 100,500

Fair value P 200,000 150,000

What is the output VAT? a. P 34,080 c. P 42,000 b. P 28,080 d. P 40,500

18.

The following pertain to a VAT-registered taxpayer in July 2016:

Fees from senior citizens, before 20% discount

P 225,000

Fees from PWD, before 20% discount Fees received from regular customers Total fees

75,000 340,000 P 640,000

Compute the output VAT assuming the given figures are exclusive of VAT. a. P 48,000 c. P b. P 40,800 d. P 69,312 19. DEF Realty Corporation, a VAT-registered realty dealer, sold the following residential properties during the month:

Residential lot Residential dwelling

Zonal Value P 1,500,000 3,500,000

Assessed Value P 1,200,000 1,500,000

Selling Price P 1,700,000 3,200,000

Compute the output VAT. a. P 0 c. P 624,000 b. P 580,000 d. P 420,000 20. Sarangani, a VAT-taxpayer made a sale of real property with a fair value of P3,000,000 at a selling price of P2,000,000. The sale qualified for installment reporting of output VAT. Sarangani is due to receive the following amounts (net of VAT) in the coming month: Installment Interest Penalty Total

P

P

200,000 12,000 4,000 216,000

What is the reportable output VAT on the scheduled collection? a. P 37,920 c. P 25,920 b. P 36,000 d. P 24,420 21. A VAT-registered taxpayer has its own sales operations but also sells goods through consignees. It also sells goods on consignment for a commission. The following were the results of operations for the month ended April 30, 2016: Sales of own inventories Sales made through consignees Sales made for consignors Commission income from consignors Commissions paid to consignees Compute the output VAT. a. P 96,000 c. P 80,400 b. P 92,400 d. P 62,400

P

500,000 150,000 100,000 20,000 30,000

22. Mr. Misamis, a VAT-registered taxpayer, ceases business operation in May 2015. His business properties upon termination of business operation include the following: Cash Accounts receivables Investments Inventories Property, plant and equipment Total assets

P

50,000 120,000 180,000 200,000 800,000 P 1,350,000

Compute the Output VAT on deemed sales. a. P 162,000 c. P 24,000 b. P 120,000 d. P 0 23. Mr. Kudos, a VAT-registered lawyer, had a residence with a zonal value of P2,000,000 and assessed value of P1,500,000. The same was foreclosed by a bank for his failure to pay his bank loan. What would be the output VAT on the foreclosure of the property? a. None, because the same is a capital asset b. None, because the same is below the threshold on residential dwellings c. P 240,000, because the deemed sales is based on fair value d. P 180,000, because deemed sales on foreclosure sales is based on the lower of cost or fair value 24. Mr. Digong sold a commercial land with a selling price of P2,100,000 but with a zonal value of P2,240,000 and assessed value of P 1,500,000. What is the output VAT? a. P 268,800 c. P 240,000 b. P 252,000 d. P 225,000 25. Assuming the same data in the previous problem except that the commercial land was sold for P2,464,000, what would be the output VAT. a. P 295,680 c. P 264,000 b. P 268,800 d. P 240,000 26. Guimaras Company made the following export and domestic sales during the month: Export destination Export for Hong Kong Export for Thailand Export to Japan

Terms FOB destination FOB destination FOB shipping point

Domestic sales Sales to an PEZA FOB destination Sales to a non-VAT customer

Payment $ 100,000 P 450,000 ¥ 800,000

P2,000,000 500,000

Sales to a VAT customer

1,000,000

The exchange rates were as follows: $1 = P45; ¥1 = P0.50. Compute the output VAT for the month. a. P 474,000 c. P 180,000 b. P 420,000 d. P 120,000 27. a. b. c. d.

Which is Exchange Exchange Exchange Exchange

not a deemed sale transaction? of inventory for stocks of property, plants and equipment for stocks of inventory for property of stocks for property

28. A non-VAT retail business exceeded the VAT threshold on October 31, 2016. On that date, it had the following lists of goods on hand which it acquired from VAT suppliers: Snacks foods and grocery items Frozen meat and eggs Fruits and vegetables Shampoos, soaps and detergents Baked bread

P

76,500 30,200 20,360 12,100 6,040

Compute the transitional input VAT. a. P 0 c. P 9,493 b. P 2,904 d. P 10,140 29. A VAT taxpayer had the following data regarding its sales and input VAT during a particular quarter: Sales Regular sales Export sales Sales to government Exempt sales Total

Amount P 800,000 400,000 200,000 100,000 P 1,500,000

Traceable input VAT P 40,000 18,000 15,000 8,000 P 81,000

Non-traceable input VAT totaled P 24,000. Input VAT applied for tax refund totaled P 6,000. Compute the total Output VAT. a. P 180,000 c. P 120,000 b. P 168,000 d. P 96,000 30. Compute the total creditable input VAT. a. P 99,000 c. P 91,200 b. P 95,400 d. P 85,200 31. Compute the VAT still due. a. P 81,000 c. P 34,800

b. P 76,800

d. P 24,800

32. A non-VAT taxpayer secured the services of a foreign consultant to solve one of its recurring business problems. It contracted to pay P1,000,000 for the consultancy services. Compute the final withholding VAT and the creditable input VAT. a. P 0; P 0 c. P 120,000; P 120,000 b. P 0; P 120,000 d. P 120,000; P 0 33. The sale of a VAT registered taxpayer for the last 12 months failed to exceed the VAT threshold. It made the following sales during the month: Sales of rice Sale of flour Sale of fertilizers and seeds Total

P

P

80,000 20,000 40,000 140,000

Compute the output VAT. a. P 0 c. P 7,200 b. P 2,400 d. P 16,800 34. A non-VAT professional service provider which exceeded the VAT threshold had the following revenue and collections during the quarter: Total collections, inclusive of P13,440 advances Total revenue

P 268,800 392,000

Compute the total output VAT. a. P 0 c. P 28,800 b. P 27,360 d. P 42,000 35.

An international carrier generated the following receipts:

Passengers Cargoes, mails; excess baggage

Incoming P 1,000,000 500,000

Outgoing P 2,000,000 400,000

Compute the percentage tax. a. P 72,000 c. P 12,000 b. P 60,000 d. P 0 36.     

Mr. and Mrs. Smith have the following children: Damulag, the family’s cook, 23 years old deaf-mute MJ, 21 years old and working as part-time office assistant Pretty Boy, 16 years old young artist of ABS-CBN Minnie, 14 year old BS. Biology student at Harvard University Doraymund, 12 year old Math genius studying at the elite University of Kalinga

Mr. and Mrs. Smith has salaries from employment of P150,000 and P100,000, respectively. Mrs. Smith paid P3,000 health insurance for the family. Compute the taxable income of Mr. and Mrs. Smith, respectively. a. P75,000; P50,000 c. P50,000; P47,600 b. P50,000; P47,600 d. P25,000; P50,000 37. Intrepid, Inc. showed the following computation of its taxable income in 2016. Gross income Less: Other deductions from gross income Net operating loss carry over Taxable income

P 4,000,000 2,000,000 1,000,000 P 1,000,000

This was the first time Intrepid, Inc. reports taxable income since its inception in 2010. Intrepid, Inc. paid P200,000 MCIT in the last two years. During the current year, taxes withheld by clients evidenced by BIR Form 2307 totaled P25,000. Compute the 2016 income tax payable of Intrepid, Inc. a. P300,000 c. P100,000 b. P275,000 d. P75,000 38.

Atlas, Inc. reported the following in 2016:

Taxable income NOLCO claimed Estimated 2010 income tax paid Capital gains, net of tax Passive income, net of tax Exclusions from gross income Exempt income Dividends declared Appropriation for plant expansion

P

400,000 600,000 100,000 50,000 180,000 120,000 200,000 400,000 300,000

Paid up capital and retained earnings grew by P 500,000 and P700,000 in 2016. Atlas, Inc. was assessed for improperly accumulating profit. Compute the improperly accumulated earnings tax. a. P 90,000 c. P 73,000 b. P 70,000 d. P 40,000 39. All of these are exempt from transfer tax, except? a. General renunciation of share in the conjugal property by the surviving spouse b. Transfer of the usufruct in the owner of the naked title c. Proceeds of group insurance received by heirs of the decedent d. Transfer under special power of appointment 40. Non-resident decedent can claim deduction for a. Medical expenses

b. Family home c. Standard deduction d. Transfer for public purpose 41.

On November 1, 2010, Gwen died leaving the following properties: Agricultural land, inherited February 2, 2008 House and lot Cash Car Other personal properties Total properties Mortgage on the agricultural land Other indebtedness Deductible expenses and losses Total ordinary deductions

P 1,200,000 2,000,000 2,800,000 500,000 1,000,000 P 7,500,000 P 500,000 1,200,000 400,000 P 2,100,000

Gwen paid P300,000 in mortgage before his death. The prior estate paid the estate tax on the agricultural which was then valued at P1,000,000. Compute the vanishing deduction. a. P403,200 c. P330,400 b. P388,800 d. P302,400 42. Mr. and Mrs. Coyiuto got married on February 14, spouses stipulated the conjugal partnership of gains property relation. Mr. Coyiuto died leaving the properties:

2001. The for their following

Mr. Coyiuto died leaving the following properties:  P800,000 cash inclusive of Mr. Coyiuto’s P200,000 SSS benefits  P200,000 claim from insolvent persons, from the salary of Mr. Coyiuto accruing after marriage  P400,000 second hand car, inherited by Mrs. Coyiuto in 2000  P2,000,000 house and lot, purchased out of Mr. Coyiuto’s salary savings  P300,000 pieces of jewelry, inherited by Mr. Coyiuto from his father  P500,000 agricultural land purchased by Mrs. Coyiuto out of her PCSO winnings during the marriage Compute Mr. Coyiuto’s gross estate. a. P4,200,000 c. P3,800,000 b. P4,000,000 d. P3,600,000 43. Zeus is fast getting ultra-rich. He is now deeply concerned about managing his wealth to minimize his future estate tax. Which of the following estate planning alternative is the least possible strategy you can suggest him?

a. Zeus shall invest P100,000 annually to a Personal Equity Retirement Fund (PERA). b. Zeus and his wife shall invest in life insurance and designate the same as irrevocable to their children. c. Set-up an irrevocable trust fund for his children and contributes therein P100,000 yearly until his death. d. Transfer his properties to his children while he is still living so that the same is subject to a 6% capital gains tax instead of the transfer tax. 44. a. b. c. d.

Which of Donation Donation Donation Donation

the following donation is exempt? to the government for public purpose to the Philippine Inventor’s Commission to accredited non-profit institutions to the Board of Accountancy

45. The following are deductible by a non-resident except a. Donation to the government for public purpose b. Indebtedness assumed by done c. Dowry exemption d. Donation to accredited non-profit institutions

alien

donor,

46. a. b. c. d.

Which of the following is subject to value added tax? Importation of grapes and apples Sale of seaweeds Sale of fire wood and charcoal Sale of husked rice, corn grits and molasses

47. a. b. c. d.

All of the following entities are VAT-exempt, except? Notre Dame, a proprietary hospital Philippine Airlines, a domestic air carrier Bank of the Philippine Islands, a commercial bank Tagbilaran University, a proprietary educational institution

48. a. b. c. d.

Which is subject to VAT? Life insurance companies Operators of hotels, motels and inns International air or sea carrier Agricultural, credit or multi-purpose cooperative

49. a. b. c.

Which is not subject to output VAT? Sale of residential lot for P1,500,000 Direct export sales of goods Cessation of status as VAT taxpayer with respect to all goods or properties on hand d. Sale of residential dwelling for P2,800,000

50. a. b. c.

Which is not a transaction deemed sales? Withdrawal of goods by the proprietor for personal use Corporate merger or consolidation Retirement from or cessation of business

d. Declaring business properties as property dividends 51. Which is not a zero-rated sale of goods or service? a. Transmission of messages message originating from the Philippines to abroad other than news services, embassies and diplomatic calls. b. Sale of gold to the Bangko Sentral ng Pilipinas c. Sale of electricity from hydropower and solar power plants d. Transport of passengers by air or sea from Philippines to abroad 52. Which is correct statement? a. If the monthly aggregate acquisition cost of capital goods exceeds P1,000,000, the input VAT shall be allocated over a period of 60 months starting from the month of purchase. b. The export sales of non-VAT taxpayers are exempt from VAT. c. The excess of input VAT over standard input VAT on government sales is a taxable gain subject to income tax. d. Monthly VAT is due 25 days from the end of each month with the quarterly VAT payable 20 days from the end of each quarter. 53.

Wendy shows the following input VAT during a quarter:

Deferred input VAT Allocation of current input VAT: - To Regular sales - To Zero-rated sales - To Sales to the government* - To Exempt sales

P 150,000 P 200,000 300,000 100,000 50,000

*equivalent to 8% of sales to government Compute the creditable input VAT. a. P800,000 c. P587,500 b. P650,000 d. P350,000 54. Wholesale traders of presumptive input VAT? A. Raw sugar B. Packed noodles a. All, except A b. All, except B

which

of

the

following

is

allowed

C. Mackerel D. Processed milk c. All of these d. None of these

55. Rural Bank of Gumaca, Inc. (RBG) shows the following receipts during a quarter: Interest income from more than 5 year loans Interest income from less than 5 year loans Gain on sale of ROPA Rental income from ROPA Service fees Dividend income

P 1,000,000 6,000,000 400,000 200,000 800,000 100,000

Assuming RBG is not a cooperative bank, compute the gross receipt tax. a. P408,000 c. P385,000 b. P415,000 d. P208,000 56. Phil Co. raised its total outstanding shares by 40% to 70,000,000. This was made by conducting an initial public offering through the Philippine Stock Exchange. The IPO shares were offered and sold for P20 per share. The stock transaction tax is a. P16,000,000 c. P7,000,000 b. P8,000,000 d. P4,000,000 57. Which is a correct statement? a. Distraint and levy should not be implemented simultaneously so as not to violate the proprietary interest of the taxpayer. b. Assessment must be made by the BIR within 5 years from the date the return is filed. Collection shall be enforced within 3 years from the date of such assessment. c. VAT taxpayers shall issue receipts regardless of the amount of the sale. d. Distrait and levy can be effected even in the absence of a prior assessment. 58. Remy was unjustly assessed by the BIR. The following relates to Remy’s protest: Date Date Date Date

of receipt of final assessment protest was filed to the BIR supporting documents were submitted of denial was received

November 12, December 8, January 26, June 5,

2009 2009 2010 2010

Which of the following statement regarding deadlines is false? a. The last day to file protest is December 12, 2009. b. The last day to submit supporting documents is February 6, 2010. c. The last day to appeal to the CTA is on July 22, 2010. d. If the BIR should not act on the protest until the lapse of 180 days from the submission of the supporting documents, the taxpayer should appeal to the CTA within 30 days from the lapse of the 180 day period. 59.

The following relates to a taxpayer’s claim for refund:

Date of erroneous payment of tax Date of claim for refund was filed with the BIR Date of receipt of BIR denial

April 15, 2009 December 16, 2010 April 9, 2011

The last day to appeal to the Court of Tax Appeals is a. January 16, 2011 c. April 15, 2011 b. April 9, 2011 d. May 9, 2011

60. Mr. Marcos is a resident of Magsaysay, Baguio City. He disclosed the following properties and income during 2010: House and lot Salary Professional fees

P 3,000,000 400,000 800,000

How much shall Mr. Marcos pay in community tax for 2011? a. P5,005 c. P4,205 b. P1,685 d. P 0 61. All of these are incorrect statement, except? a. Tax condonation operates retrospectively. b. Tax amnesty is a general pardon involving total and unconditional relinquishment of government right to enforce tax collection. c. Tax as to incidence can be specific or ad valorem. d. Professional tax is a local tax. 62.

A resident decedent, head of family, left the following: Personal properties P 1,000,000 Real properties (including family P1.5M family home) 2,000,000 Deductions claimed (including funeral expenses of P200,000, and P 600,000 medical expenses) 900,000

Compute the taxable net estate? a. P 2,100,000 c. P 250,000 b. P 1,100,000 d. P 100,000 63. A. B. C. D.

For donor’s tax purposes, this is not a stranger Daughter of godson Grandson of the sister of the donor’s mother Son-in-law Granddaughter of the donor’s sister

64. Mr. and Mrs. J. Cruz donated a conjugal parcel of land to their son who was getting married within six (6) months after the date of donation. The fair market value of the property at the time of donation was 500,000. Its fair market value at the time of marriage was 550,000. The donated property was subject to 100,000 mortgage. This was assumed by the donee. How much is the taxable net gift of Mr. J. Cruz? A. 440,000 C. 215,000 B. 240,000 D. 190,000 65. Monkey is a first cousin of both Zeus and Mark. Zeus and Mark are “loving” friends. Zeus wants to donate P100,000 cash to Mark. What is the best tax strategy to minimize from donor’s tax?  a. Zeus shall donate the property in his will and testament to avoid donor’s tax. b. Zeus may directly donate the P100,000 to Mark since donation up to the first P100,000 is tax-exempt.

c. Zeus shall first donate the property to Monkey under condition that Monkey shall donate the same to Mark. d. Zeus shall split the donation over several years to minimize the annual donor’s tax. 66. A dealer in securities has the following data for the quarter: Sales, shares held as inventory 5,000,000 Sales, shares held as investment 1,500,000 Cost, shares held as inventory 2,000,000 Cost, shares held as investment 500,000 Supplies expense, net of VAT 100,000 Rent expense, net of VAT 200,000 How much is the VAT payable? A. 470,000 B. 324,000

C. 270,000 D. Not subject to VAT

67. Mr. Juan Cruz, VAT-exempt, issued VAT invoice to Mr. S. Santos, VAT-registered trader. As a consequence, Mr. Juan Cruz would: a. be liable to VAT without the benefit of input tax credit b. not be liable to VAT because he is VAT-exempt c. be liable to percentage tax, VAT, and a surcharge of 50% d. not be liable to any business tax but may be liable to income tax 68. Beneco is a holder of franchise to distribute and sell electricity. In a particular quarter, its gross receipts amounted to P2,000,000 from distribution and sale of electricity. It has also receipts from the lease of its auditorium amounting to P600,000. The value-added tax or percentage tax due for the quarter is: a. P40,000 percentage tax c. P52,000 percentage tax b. P72,000 value-added tax d. P312,000 value-added tax 69. Chavit, a Filipino citizen, promoted a Philippine boxing championship in Manila featuring Mark, the champion and Zeus, his challenger. Gate receipts amounted to P3,000,000 and additional receipts from television coverage was P2,000,000. The amusement tax due is: A. Exempt C. P300,000 B. P500,000 D. P600,000 70. Gloria, a security dealer, purchased P500,000 shares of Tabako Corp. The corporation’s shares are listed and are traded in the local stock exchange. Gloria sold the shares for P350,000 through the local stock exchange. The percentage tax on the sale is: A. P 0 C. P1,750 B. P3,500 D. P2,500 71.

Victory Bus Lines had the following receipts during the quarter: Gross receipts, without tax: Transport of passengers

P 1,000,000

Transport of goods Transport of cargoes

1,500,000 500,000

The output VAT and OPT due for the quarter are: Output VAT A. P240,000 B. 360,000

OPT due P 30,000 C. 0 D.

Output VAT P 0 360,000

OPT due P 90,000 30,000

64. The lease of property, real or personal, is subject to: I. 7% gross receipts tax if the lessor is a bank. II. 12% VAT if the lessor is not a bank. A. Yes to I and II B. No to I and II

C. Yes to I only D. Yes to II only

72. Tarlac Company voluntarily registered to VAT. It has the following inventory at the start of the year: Processed foods from VAT sellers Processed foods from non-VAT sellers Agricultural food products

P

11,200 90,000 200,000

Compute the transitional input VAT. A. P 0 C. P2,000 B. P1,200 D. P6,000 73. Moses, Inc., a VAT registered trader, compiled the following payments on purchases during the year: Payments for merchandise from VAT suppliers Payments merchandise from non-VAT suppliers Landed cost of merchandise withdrawn from the BOC

P

134,400 82,400 224,000

What is the creditable input VAT? A. P 0 C. P38,400 B. P41,280 D. P50,108 74. A VAT-registered customer ordered the following from a non-VATregistered supplier: Eggs Dried fish Marinated fish

P

100,000 150,000 200,000

Under current revenue regulations, what is the output VAT? A. P 0 C. P24,000 B. P12,000 D. P36,000

75. A manufacturer of perfume oils which newly registered as VAT taxpayers during the quarter shall not be allowed which of the following? A. Transitional input VAT B. Presumptive input VAT C. Regular input VAT D. None of these

TAXATION – TEST BANK 1. Hayden Co, a resident citizen, earned the following interest income gross of applicable taxes: Interest Interest Interest Interest

income income income income

from from from from

PNB, SVB, THE, XHE,

a a a a

domestic bank domestic bank* non-resident foreign bank* resident foreign bank*

P

40,000 30,000 20,000 10,000

*in Philippine Peso equivalent Compute the amount of final tax. a. P 11,000 c. P 8,000 b. P 10,250 d. P 0 2. If Hayden is an OFW, what compute the amount subject to regular tax. a. P 40,000 c. P 20,000 b. P 30,000 d. P 0 3. If Hayden is a resident citizen, compute the amount subject to regular tax. a. P 50,000 c. P 30,000 b. P 40,000 d. P 20,000 4. Miss Darrelle Joe is a self-published author. She printing press and a marketing distribution business which sells wildly hot like chili-flavored pizza. She anything about taxation so she consulted you about income tax she will pay.

established a for her books does not know what type of

What advice would you give her? a. You are subject to regular tax not to final tax so file three quarterly income tax returns every 60 days following the end of the first three quarters and file an annual consolidated income tax return on or before April 15 of the following year. b. You are subject to final tax on your book royalties. There is no need to file regular tax returns. c. You should pay regular income tax on your net income and 10% final tax on your royalties from your books to avoid hassle with the tax authorities. d. You are subject to regular tax. You shall file three quarterly income tax returns on or before before April 15, August 15, and November 15 respectively and file a consolidated annual income tax return on or before April 15 of the following year. 5. Which is subject to creditable withholding tax? a. Winnings b. Dividends c. Professional fees d. Royalties 6. Who is not required to file the quarterly income tax return? a. Individuals who are purely engaged in business b. Individuals who are purely engaged in profession c. Partnerships and corporations d. Individuals who are purely employed 7. Withholding taxes are the primary liability of the a. Earner or payee of income b. Payor of income c. Payee and payor of income d. Collecting agency of the government 8. NFC, Inc. is due to pay the following expenses:

TAXATION – TEST BANK

Interest expense – bank loans Royalty expense – from franchisor Rent expense – for lease of office building Salaries expense – for employees Dividends to shareholders

P

21,000 40,000 10,000 100,000 40,000

Which of the following is subject to final withholding tax? a. None c. Salaries b. Interest d. Royalties 9. Compute the final tax to be withheld by SPV. a. P 0 c. P12,000 b. P 4,000 d. P16,200 10. Which is subject to creditable withholding tax? a. Royalty c. Salaries b. Dividend d. None of these 11. Mr. Escala is a seaman employed abroad in an international vessel that operates exclusively in international transport operations. Wako invested all his earnings abroad in the time deposits of the Bank of the Philippine Islands. A summary of his investments follows: P5,000,000 6-year non-preterminable deposit P3,000,000, 3 year deposit $100,000, 5 year preterminable deposit $50,000, 2 year deposit

10% 7.5% 10% 8%

p.a. p.a. p.a. p.a.

The applicable conversion rate is P47:$1. Compute Wako’s annual final tax. a. P 94,350 c. P 45,000 b. P 59,100 d. P 16,875 12. Juan Company invested in the stocks of You See Corp. It purchased 10,000 shares of You See on April 2016 for P90 per share. The shares had a par value of P50/share. You See declared a 20% stock dividend in July 2016 followed by a P14/share cash dividend in October 10, 2016. In need of working capital, Juan Company sold 5,000 shares for P100.00 per share on November 12, 2016. Compute the final tax on Juan’s dividends. a. P 28,000 c. P 14,000 b. P 16,800 d. P 0 13. Who shall remit any dividend tax to the government? What is the deadline for such remittance? a. Juan Company; November 5, 2016 b. You See Corp; November 15, 2016 c. Juan Company; November 10, 2016 d. The BIR; November 10, 2016 14. Compute the capital gains tax due of Juan Company. a. P7,500 c. P 2,500 b. P 7,406 d. P 2,453 15. What is the deadline on Juan Company’s capital gains tax return? a. December 5, 2016 c. December 12, 2017 b. December 15, 2017 d. April 15, 2017 16.

Compute the documentary stamp tax on the sale of stocks.

TAXATION – TEST BANK a. P 825.25 b. P942.50

c. P 937.50 d. P 925.00

17. What is the deadline for the documentary stamp tax? a. December 5, 2016 c. December 12, 2017 b. December 15, 2016 d. April 15, 2017 18. Mr. Digong earned the following prizes from two different competitions: Date January 4, 2011 February 14, 2011

Event Singing competition Painting competition

Gross Prize P 12,000 10,000

Compute the total final tax that should have been withheld from the above prizes. a. P5,500 c. P3,000 b. P4,400 d. P2,400 19. Mr. Quito won a gold medal and P50,000 cash prize for chess competition in the Palarong Pambansa. How much final tax should be withheld from the prize? a. P 20,000 c. P5,000 b. P 10,000 d. P 0 20. Tiong Department Store conducted a sales promotion where customers purchases exceeding P1,000 in one transaction shall be entitled to a ticket for a chance to win P500,000. Mr. Shing won the prize. How much shall Tiong withhold from the grand prize winning? a. P200,000 c. P 50,000 b. P100,000 d. P 0 21. Mr. Koronadal made the trade sales transactions during the year in the common stocks of Ipus-ti-Baka Corporation, a domestic listed company: Date 5/8/2015 8/5/2015 9/8/2015

Transaction Sale Sale Sale

Gain(Loss) P120,000 ( 20,000) 240,000

Compute the final capital gains tax on April 15, 2016. a. P29,000 c. P3,000 b. P22,000 d. P 0 22. Mrs. Joson sold a residential lot on July 1, 2014 for P2,000,000. The property had a zonal value of P2,500,000 and an assessed value of P1,000,000. On August 1, 2015, Mrs. Joson was compelled to pay the capital gains upon the request of the buyer. The compromise penalty was determined to be P20,000. Late payment to the capital gains tax is subject to a 25% surcharge plus interest of 20% p.a. based on the basic tax and compromise penalties. Compute the total tax due. a. P 150,000 c. P 217,500 b. P 180,000 d. P 237,500

TAXATION – TEST BANK 23. Basic Company paid P9,000 documentary stamp tax on the sale of a real property capital asset. Compute the capital gains tax on the sale. a. P 9,000 c. P 36,000 b. P 16,000 d. P 42,000 24. Bentong is employed by Sisiw, Lang, Bebe & Co, CPAs (SLB) as a senior audit executive. Bentong is assigned a laptop for his office use. To impress SLB’s clients, Bentong also purchased an iPhone 8 for his office use. Which is correct? a. The iphone 8 and the laptop is an ordinary asset of Bentong. b. The iPhone 8 and the laptop is an ordinary asset of SLB. c. The iPhone 8 is an ordinary asset to Bentong while the laptop is an ordinary asset of SLB. d. The iPhone 8 is a capital asset to Bentong but the laptop is an ordinary asset of SLB. 25. Mr. Bassit Unay sold a residential land for P4,000,000. The land had a zonal value of P7,500,000 and an assessed value of P4,000,000. What is the total income tax and documentary stamp tax due? a. P 0; P 60,000 c. P400,000; P 112,500 b. P 450,000; P15,000 d. P450,000; P112,500 26. On August 15, 2011, Ms. Mones sold a 500-square meter residential house and lot for P3,000,000. The house was acquired in 2005 at P2,000,000. The assessed fair market values of the house and lot, respectively, were P1,500,000 and P1,000,000. The zonal value of the lot was P5,000 per square meter. What is the capital gains tax? a. P240,000 c. P180,000 b. P210,000 d. P120,000 27.

Malena has the following items of income:

Business income Professional fees Compensation income Rent income Interest income-bank Royalty

Philippines P 200,000 100,000 400,000 300,000 20,000 30,000

Abroad P 100,000 50,000 200,000 30,000 10,000

Assuming Malena is a resident citizen, compute the total income subject to Philippine income tax. a. P1,420,000 c. P1,030,000 b. P1,180,000 d. P1,390,000 28. Assuming Malena is subject to Philippine a. P1,420,000 c. b. P1,180,000 d.

a resident alien, compute the total income income tax. P1,000,000 P1,390,000

29. Assuming Malena is a resident corporation, compute the total income subject to Philippine income tax. a. P1,420,000 c. P1,000,000 b. P1,180,000 d. P1,390,000 30. Assuming Malena is a domestic corporation, compute the total income subject to Philippine income tax. a. P1,420,000 c. P1,030,000

TAXATION – TEST BANK b. P1,180,000 31. a. b. c. d.

d. P1,390,000

A Japanese who is staying in the Philippines for 183 days is a Resident alien Non-resident alien Non-resident alien engaged in trade or business Non-resident alien not engaged in trade or business

32. A Canadian who is staying in the Philippines for more than one year is a a. Resident alien b. Non-resident alien c. Non-resident alien engaged in trade or business d. Non-resident alien not engaged in trade or business 33. a. b. c. d.

Which is a A taxpayer A taxpayer A taxpayer A taxpayer

large taxpayer? with quarterly VAT of P900,000 with annual income tax of P900,000 with annual excise tax due of P900,000 with annual withholding tax remittances of P900,000

34. a. b. c. d.

Which is an incorrect statement regarding situs of income? Interest income is earned in the residence of the debtor. Royalty is earned where the intangible is employed. Service income is earned in the domicile of the taxpayer. Rent is earned in the location of the property.

35. Excellent Company insured the life of its president for P2,000,000. A total of P500,000 in premiums was paid before the president died. The company collected the total proceeds. Compute the return on capital. a. P2,000,000 c. P500,000 b. P1,500,000 d. P 0 36. A tax that is imposed enjoyment of a privilege as a. income tax. b. license.

upon the performance of an act, the or the engagement in a profession is known c. excise tax. d. transfer tax.

37. a. b. c.

Which of the following distinguishes license from tax? Unlimited in imposition Imposed for revenue Does not necessarily renders business illegal in case of nonpayment d. Pre-activity in application

38. Tax classifications as to object do not include a. Poll tax c. Regulatory tax b. Property tax d. Excise tax 39. Mr. A has a tax obligation to the government amounting to P80,000. Since he is leaving the country, he entered into a contract with Mr. B, a tax practitioner, wherein Mr. B shall pay the P80,000 tax in his behalf. On due date, Mr. B failed to pay the tax. The BIR sent a letter of demand to Mr. A which he refused to pay. Which of the following statements is correct? a. The government cannot enforce collection charges against Mr. A since he has validly transferred his obligations to B under the contract.

TAXATION – TEST BANK b. The government can no longer run after Mr. A because he is already outside the Philippine territory. c. The government should wait until Mr. B becomes solvent again. d. The government should force Mr. A to pay because taxes are nonassignable. 40. Which of the following is limited in application? a. Tax laws c. Tax treaties b. Revenue Regulations d. BIR Ruling 41. The principles of a sound tax system exclude a. Economic efficiency c. Theoretical justice b. Fiscal adequacy d. Administrative feasibility 42. The Bureau of Internal Revenue is authorized to do the following, except? a. Assess and collect taxes b. Issue receipts and clearances c. Enforce all forfeitures, penalties and fines d. Mete out sentence of imprisonment for violation of Tariff and Customs Code 43. a. b. c. d.

The Commissioner of Internal Revenue is not authorized to interpret the provisions of the National Internal Revenue Code promulgate Revenue Regulations. terminate an accounting period. prescribe presumptive gross receipts.

44. a. b. c. d.

The provisions in the Constitution regarding taxation are Grants of the power to tax Limitations to the power to tax Grants and limitations to the power to tax Limitations against double taxation

45. Which of the following violates Constitutional provisions? a. Payment of salaries to priests or religious ministers employed by the Armed Forces of the Philippines b. Imposing tax on properties of religious institutions which are not directly and exclusively used for religious purposes c. Imposition of license for the sale of religious literature d. Authorizing the President of the Philippines to fix the rates of tariffs or imposts 46. With the country under incessant shortage of sugar, the Philippine Congress enacted a law providing tax exemptions and incentives to cane farmers without at the same time granting tax exemptions to rice farmers who produce the staple food of the Philippines. Is the new law valid? a. Yes, since there is a valid classification of the taxpayers who would be exempted from tax. b. Yes, since sugar is more important than rice. c. No, since the grant of exemption is construed in favor of taxpayers. d. No, because there is no uniformity in the grant of tax exemption. 47. a. b. c.

Which of the following normally pays real property tax? Bantay Bata, a non-profit charitable institution Jesus Crusade movement, a religious institution University of Pangasinan, a private proprietary educational institution d. UVS Corporation, a registered trading company

TAXATION – TEST BANK 48. The Korean government invested P100,000,000 in a Philippine local bank and earned P10,000,000 interest. Which is correct? a. The income is exempt on grounds of territoriality. b. The income is exempt due to international comity. c. The income is subject to tax on the basis of sovereignty. d. The income is subject to tax because the income is earned within the Philippines. 49.

Which is principally limited by the requirement of due process? a. Eminent domain c. Taxation b. Police power d. All of these

50. to a. b. c. d.

Which of the following is not an inherent limitation of the power tax? Tax should be levied for public purpose. Taxation is limited to its territorial jurisdiction. Tax laws shall be uniform and equitable. Government agencies and instrumentalities are exempt from tax.

51. Which of the following is not within legislation? a. Fixing the imposable tax rate; b. Assessment of the tax; c. Determining the subject to be taxed; d. Determining the purpose of the tax.

the

scope

of

tax

52. of a. b.

Which of the following is not an inherent limitation of the power taxation? International Comity; c. Territoriality; Veto power of the President; d. Public purpose test.

53. a. b. c. d.

Which is not subject to income tax? Harvested fruits Sold crops Offset of indebtedness for services rendered Damages recovered in a patent infringement suit

54. in a. b. c. d.

Which is not business? File and pay File and pay File and pay Withhold and

a tax obligation of an individual taxpayer engaged monthly business tax monthly income tax annual income tax remit any withholding tax on income payments

55. The taxpayer realized P60,000 and P80,000 capital gains separately on the sale of domestic stocks directly to buyer. A lone capital loss of P10,000 was sustained during the year. What is the annual capital gains tax due to be filed through BIR Form 1707A? a. P 0 c. P 8,000 b. P 1,000 d. P 9,000 56. A dealer in securities made a disposition of real properties P6,000,000. The property has a zonal value of P5,000,0000 assessed value of P3,000,000. The same property was acquire P7,000,000 and has a present appraisal value of P6,500,000 at date of sale. What is the capital gains tax to be filed through Form 1706? a. P 0 c. P 360,000 b. P 300,000 d. P 390,000

for and for the BIR

57. The residence of Mang Pedro is being expropriated by the government to be used in road widening. The property has a zonal value of P5,000,000. The city’s assessed value on property

TAXATION – TEST BANK improvement was P2,000,000. Mang Pedro bought the lot for P2,000,000 and incurred P1,500,000 in building his residence. What is the best alternative for Mang Pedro to save from taxes? a. He should opt to be taxed at regular tax and claim tax exemption. b. He should opt to be taxed at capital gains tax and claim tax exemption. c. He should enter a contract of lease with the government. d. He should question the validity of the expropriation law. 58. The Japanese government invested in the stocks of San Miguel Corporation by purchasing P1,000,000 worth of stocks from the stock market. Japan later sold the same directly to the Yuchengco group for P3,000,000 when the stocks were selling at P4,000,000. Which is correct? a. The P1,000,000 gain is subject to capital gains tax. b. The transaction is subject to capital gains tax to the excess of the higher of fair value and selling price and the cost. c. This transaction is not subject to tax. d. This transaction is subject to stock transaction tax. 59. A dealer in securities executed various trades through the Philippine Stock Exchange and realized thereon a total gain of P200,000. This transactions is a. subject to capital gains tax. b. subject to regular income tax c. not subject to income tax d. subject to final tax. 60. Mr. Tinio, not a dealer dispositions during the year. Property Land Car Laptop

Holding period 5 years 1year and 8 months 8 months

in

properties,

made

the

following

Gain (loss) P 200,000 30,000 (8,000)

Compute the net gain to be included in gross income subject to regular tax. a. P222,000 as net capital gain b. P207,000 as net capital gain c. P200,000 as ordinary gain and P7,000 as ordinary gain d. P7,000 as net capital gain 61. Ms. Charots, a realty properties in 2015: Properties House and lot Commercial lot Personal car Personal i-Phone

dealer,

Date of acquisition 2/25/2010 8/12/2011 7/18/2014 1/14/2014

Compute the ordinary regular income tax. a. P480,000; P0 b. P400,000; P80,000

gain

and

had

the

Date of sale 2/27/2015 3/14/2015 5/12/2015 7/3/2015 the

net

dealings

in

Gain (Loss) P 400,000( 100,000) 80,000( 40,000)

capital

c. P400,000; P60,000 d. P300,000; P60,000

62. What is the amount of ordinary loss? a. P 0 c. P 100,000 b. P 40,000 d. P 140,000

following

gain

subject

to

TAXATION – TEST BANK 63. Mr. Andonicus, a dealer of household appliances, following dispositions of properties during 2015: Properties Leasehold right Taxi franchise Electric oven Residence

Date of acquisition 12/2/2012 7/10/2010 6/15/2015 1/14/2014

Date of sale 2/27/2015 3/14/2015 7/15/2015 7/3/2015

made

the

Gain (Loss) P 50,000 100,000 80,000 800,000

Compute the net capital gains subject to regular tax. a. P955,000 c. P 155,000 b. P875,000 d. P 75,000 64. The following relate to the compensation income of a private rank and file employee during the year: Annual compensation income 13th month pay 14th month pay Total of monthly rice allowances during the year Commission from employer Christmas gift

P

540,000 45,000 45,000 20,000 12,000 8,000

Compute the total non-taxable compensation income including exempt de minimis benefits. a. P 0 c. P55,000 b. P23,000 d. P105,000 65. Compute the total supplemental compensation. a. P28,000 c. P19,000 b. P25,000 d. P13,000 66. Compute the exempt de minimis benefits. a. P18,000 c. P26,000 b. P23,000 d. P50,000 67. Compute the gross taxable compensation income. a. P570,000 c. P553,000 b. P565,000 d. P540,000 68. Mr. Cute is a top executive at The Real Company. After years of dedicated and passionate service, he met the vesting condition of his employer’s stock option plan (ESOP) where he is entitled to buy 10,000 of his employer’s share at a strike price of P100. Mr. Cute exercised the option when the share of his employer was selling P150/share. He eventually sold this to another employee of the company for P180 per share. Compute the compensation income. a. P 0 c. P 500,000 b. P 300,000 d. P 800,000 69. In the immediately gains tax. a. P 0 b. P 25,000

preceding

problem,

compute

Cute’s

capital

c. P 45,000 d. P75,000

70. Markus Ngineus, single, is a managerial employee of Microna & Softpa Company. He received the following employee benefits in 2014: Salaries Stock bonus

P

4,000,000 800,000

TAXATION – TEST BANK Fixed allowances Car designated for the use of Markus House and lot, transferred in the name of Markus

200,000 2,500,000 5,000,000

Compute the taxable income of Markus. a. P12,450,000 c. P 4,950,000 b. P7,450,000 d. P4,750,000 71. In the immediately preceding problem, compute the fringe benefit tax for the year. a. P1,176,471 c. P2,470,588 b. P2,352,941 d. P3,529,412 72. The following relate to the net income of the audit firm of Mr. Trinidad, a single taxpayer with two dependent children: Professional fees Long-term capital gain Short-term capital gain Ordinary gain Long-term capital loss Short-term capital loss Ordinary loss Other business expenses Net income

P

( ( ( ( P

500,000 80,000 45,000 20,000 90,000) 30,000) 40,000) 200,000) 285,000

Compute his taxable income. a. P 290,000 c. P 210,000 b. P 190,000 d. P 235,000 73. Shown below is the summarized result of operations of Mr. Oha’s business: Sales Cost of sales Gross profit Capital gain on the sale of land Total gross income Other deductible expenses Contributions expenses: - Government priority project - Non-accredited non-profit institution - Foreign foundation Net income

P P P

P

700,000 300,000 400,000 100,000 500,000 100,000 50,000 45,000 25,000 280,000

Compute his taxable income. a. P 230,000 c. P 170,000 b. P 255,000 d. P 270,000 74. Exempt corporations are nevertheless subject to 30% tax on income from a. related activities. b. unrelated activities. c. both related and unrelated activities. d. neither related and unrelated activities. 75. a. b. c. d.

Which is not taxable on unrelated activities? Government agencies Non-profit corporations Government-owned and controlled corporations Non-profit schools

TAXATION – TEST BANK 76. The income from properties of exempt corporations is considered income from a. related sources. b. unrelated sources. c. either related or unrelated activities at the discretion of the examiner. d. either related or unrelated activities depending on the nature of the properties concerned. 77. a. b. c. d.

The classification rule is not relevant to a cooperative. farmers’ association. government school. profit-oriented agricultural organization.

78. An allocation of common expenses between related and unrelated activities is made to properly reflect taxable income. This procedure is required only of a. domestic corporations. b. resident foreign corporations. c. exempt corporations. d. non-profit hospitals. 79.

The following relates to a taxpayer:

Sales Less: Cost of sales Gross income from operations Add: Non-operating income Dividend income – domestic Interest income – bank Gain on sale of domestic stocks Gain on sale of office equipment Total gross income Less: Expenses Interest expense Salaries expense Depreciation expense Contribution expense Pension contribution Provision for bad debts Entertainment expense Office supplies Loss on sale of patent Total Net income

P 1,000,000 450,000 P 550,000

P P

P P

50,000 20,000 30,000 20,000 670,000 40,000 150,000 50,000 80,000 50,000 15,000 10,000 12,000 40,000 447,000 223,000

Half of the contribution to pension is funding of prior service cost. There was a write-off receivables totaling P12,000 during the year. The contribution was made to an accredited civic organization. What is the total regular allowable itemized deduction? a. P 354,600 c. P 369,900 b. P 317,910 d. P371,100 80. Compute the taxable income assuming the taxpayer uses OSD. a. P 620,000 c. P 520,000 b. P 550,000 d. P 570,000 81. Compute the total corporation using OSD. a. P 220,000 b. P 228,000

deductions c. P 240,000 d. P 268,000

assuming

the

taxpayer

is

a

TAXATION – TEST BANK

82. An individual taxpayer with two dependents reported the following income: Gross taxable compensation income Gross income from operations Ordinary gain Interest income from investment in bonds Royalty Total income

P

Ordinary loss Capital loss Contribution to a non-profit organization Donation to government’s priority activity Rent expense Interest expense Other deductions Total expenses Net income

P

P

P P

200,000 300,000 130,000 50,000 20,000 700,000 60,000 20,000 70,000 40,000 17,000 10,000 200,000 417,000 283,000

Assuming that the rent expense pertains to the rental of the residence of the taxpayer, compute the allowable deductions against gross income? a. P 327,000 c. P 351,000 b. P 331,000 d. P353,000 83. Assuming that the rent expense pertains to the rental of the residence of a managerial employee, compute the total deductions. a. P 312,000 c. P 353,500 b. P 324,500 d. P 306,300 84. Mr. Roger is a managerial employee at Curad International. He is paid the following benefits during the year: Salaries, net of P8,000 PhilHealth, P12,000 SSS and P4,000 HDMF and P10,000 withholding tax Fixed allowances 13th month pay and other benefits Fringe benefits (residential rentals)

P

970,000 40,000 98,000 102,000

Mr. Roger has a senior citizen mother and a disabled brother who are dependent upon him for chief support. Compute the taxable compensation income. a. P 1,036,000 c. P 961,000 b. P 936,000 d. P 986,000 85. Compute the fringe benefit tax. a. P 0 c. P 48,000 b. P 72,000 d. P 24,000 86. Assuming Curad International is a regional operating headquarter of a multinational corporation, compute Mr. Roger’s income tax on compensation. a. P 155,400 c. P 117,000 b. P 259,000 d. Indeterminable 87. Using the same facts in the immediately compute the fringe benefits tax. a. P 34,000 c. P 17,000 b. P 18,000 d. P 9,000

preceding

problem,

TAXATION – TEST BANK 88. a. b. c. d.

Which is not subject to final tax to a corporation? Interest income – Foreign currency deposit Royalty Prizes None of these

89.

The following data relates to a corporate taxpayer: Philippines P 4,000,000 2,000,000 1,200,000 P 800,000

Gross receipts Direct cost of services Expenses Net income Income tax paid

Abroad P 3,000,000 1,500,000 1,000,000 P 500,000 P 165,000

Global P 7,000,000 3,500,000 2,200,000 P 1,300,000

Compute the income tax still due if the taxpayer is a domestic airliner. a. P 390,000 c. P 240,000 b. P 175,000 d. P 0 90. Compute the income tax due if the taxpayer is an international carrier whose country taxes international carriers 1.5%. a. P 105,000 c. P 60,000 b. P 100,000 d. P 20,000 91. A non-profit hospital which started operations in 1990 has the following results of operations in 2016:

Gross Cost sales Gross Less:

receipts and sales of services and

income Expenses Deduction incentives Net income

Hospital related P 300,000,000 280,000,000

Non-hospital related P 200,000,000 _140,000,000

P

20,000,000 40,000,000 12,000,000

P

(P32,000,000)

P

Total P

500,000,000 420,000,000

60,000,000 20,000,000 6,000,000

P

80,000,000 60,000,000 18,000,000

34,000,000

P

2,000,000

Compute the income tax due. a. P 1,600,000 c. P 1,200,000 b. P 600,000 d. P 10,200,000 92. Assuming the above hospital is a government hospital, compute the income tax due. a. P 0 c. P 1,600,000 b. P 600,000 d. P 10,200,000 93. A corporate taxpayer had the following income on its fifth year of operations:

Gross receipts and sales Cost of services and sales Gross income Less: Expenses Net income Total of BIR Form 2307s Income tax paid

Within the Phils. P 300,000,000 _ 180,000,000 P 120,000,000 114,000,000 P 6,000,000 P

*Paid through BIR Form 1702Q

400,000 *1,500,000

Without the Phils. P 200,000,000 100,000,000 P 90,000,000 40,000,000 P 50,000,000 12,000,000

P P P

Total 500,000,000 280,000,000 210,000,000 154,000,000 56,000,000 400,000 13,500,000

TAXATION – TEST BANK

Assuming the corporation is a domestic corporation, compute the tax still due per BIR Form 1702-RT. a. P 0 c. P 4,400,000 b. P 2,900,000 d. P 14,900,000 94. Assuming the corporation is a resident foreign compute the income tax still due (refundable). a. P 0 c. P 500,000 b. (P 100,000) d. P 300,000

corporation,

95. The Calintaan Corporation had the following historical MCIT and RCIT data: MCIT RCIT

2013 P 120,000 P 110,000

2014 P 200,000 P 220,000

2015 P 190,000 0

P

2016 P 170,000 180,000

Basing solely on the information provided, what is the tax due and payable respectively in 2013 and 2014? a. P120,000; P220,000 c. P120,000; P210,000 b. P120,000; P100,000 d. P110,000; P220,000 96. In the immediately preceding problem, what is the tax due and payable respectively in 2015 and 2016? a. P190,000; P 0 c. P 0; P 0 b. P190,000; P180,000 d. P170,000; P 0 97.

The following relates to Gandabebe Co., a domestic corporation:

Minimum corporate income tax Allowable deductions Creditable withholding tax Estimated income tax payments

P

164,000 7,600,000 52,000 87,000

What is the income tax still due to be filed through BIR Form 1702RT? a. P 0 c. P 41,000 b. P 25,000 d. P112,000 98. A corporate taxpayer had the following data on its fifth year of operation: Sales Less: Cost of services Gross income from operation Interest on deposits Total Income Less: Business expenses Net income

Philippines P 2,000,000 1,200,000 P 800,000 50,000 P 850,000 800,000 P 50,000

Abroad P 3,000,000 1,800,000 P 1,200,000 250,000 P 1,450,000 1,300,000 P 150,000

Total P 5,000,000 3,000,000 P 2,000,000 300,000 P 2,300,000 2,100,000 P 200,000

What is the tax due assuming the taxpayer is a domestic corporation? a. P 60,000 c. P45,000 b. P 46,000 d. P40,000 99. In the immediately preceding problem, what is the tax due if the corporation is a resident foreign corporation? a. P 0 c. P16,000 b. P15,000 d. P17,000

TAXATION – TEST BANK 100. Hehe Inc., a domestic corporation, was assessed by the BIR for improperly accumulated earnings tax. Relevant to the determination of the IAET are the following data: Gross income P 4,000,000 Allowable deductible expenses 3,200,000 Interest income, net of tax 40,000 Gain on sale of domestic stocks, net of tax 60,000 Dividends declared 400,000 Common stocks, excluding P200,000 share premium 300,000 Retained earnings, end 500,000 What is the improperly accumulated earnings tax? a. P 36,000 c. P 16,000 b. P 26,000 d. P 20,000 101. La-View Trading Corporation reported the following on its fifth year of operation: Sales, net of 1% withholding tax P 4,950,000 Cost of sales 2,000,000 Interest from deposit, net of tax 75,000 Gain on sale of domestic stocks directly to buyer 150,000 Casual rent income, net of 5% creditable withholding tax 95,000 Interest income from advances to employees 50,000 Business expenses 3,100,000 Estimated quarterly tax payments 10,000 Compute the income tax still due or (refundable). a. P53,000 c. (P2,000) b. (P50,000) d. P15,000 102. Aleppo Corporation is on its fifth year of business operation when it was assessed by the BIR for improperly accumulating profits. Gross income P 2,000,000 Business expense 1,400,000 NOLCO prior years 500,000 Dividend income - domestic 30,000 Gross interest income - bank 50,000 Gain on sale of domestic stocks directly to buyer 200,000 Gain on sale of land classified as capital asset (Selling price = P2,000,000; fair value = P2,500,000) 500,000 Dividends declared 100,000 Appropriation for treasury stocks 50,000 Appropriation for plant expansion 150,000 Aleppo has P2,000,000 in common stocks, exclusive of P500,000 share premium, and beginning retained earnings of P1,900,000. Compute the improperly accumulated earnings tax. a. P 86,500 c. P 60,000 b. P76,500 d. P 74,500 103. A resident foreign corporation earning purely active reported the following since it started operation in 2015: Profit after tax Remittance

2015 P 200,000 80,000

2016 P 150,000 300,000

Compute the branch profit remittance tax in 2016.

income

TAXATION – TEST BANK a. P 12,000 b. P 38,000

c. P 45,000 d. P 40,500

104. Reek Review Center Inc. provides preparatory review services for professional examinees. Reek had the following expenses: Salaries of reviewers P 800,000 Administrative staff salaries 80,000 Marketing salaries and other expenses 150,000 Rent expense on review rooms 300,000 Rent on administrative offices 100,000 Printing costs of reviewee handouts 100,000 Classroom & library electricity expense 30,000 Office utilities 40,000 Classroom supplies expense 5,000 Loss on sale of old chairs 15,000 Interest expense 50,000 Compute the amount of direct cost of services to be presented in the income tax return. a. P1,230,000 c. P1,235,000 b. P1,325,000 d. P1,285,000 105. Xhelsy Drugstore Inc. recorded expense and the following sales:

Gross sales Cost of sales

a

P1,200,000

total

deductible

Customers Regular Senior citizens P 5,000,000 P 1,200,000 3,000,000 800,000

Xhelsy adopts a policy of giving senior citizens a 25% Consequently, it granted P300,000 total senior citizens’ during the period.

discount. discounts

Compute the taxable income. a. P1,200,000 c. P 960,000 b. P1,100,000 d. P 900,000 106. In 2016, Baguio Realty Corporation participated in the “Adopt-aSchool Program” by contributing its services to a public school in La Trinidad, Benguet. The agreed value fixed in the memorandum of agreement for the construction of the public school building was P1,000,000. However, Baguio Realty was able to complete the same at a total cost of P800,000. The “Adopt-a-School Program” is a priority program in 2016. Compute the total allowable deduction from the above contribution. a. P1,200,000 c. P 1,000,000 b. P 800,000 d. P 900,000 107. An individual taxpayer compiled the following income, expense and personal exemptions. Compensation income Business gross income Deductions Personal exemptions

2013 2014 2015 P 20,000 P 220,000 P 80,000 470,000 400,000 500,000 500,000 420,000 420,000 50,000 50,000 100,000

TAXATION – TEST BANK Compute the taxable income in 2014. a. P170,000 c. P 160,000 b. P150,000 d. P 140,000 108. Compute the taxable income in 2015. a. P10,000 c. P 70,000 b. P20,000 d. P 60,000 109. A taxpayer had the following interest expense and interest income in 2016: Interest expense on bank loan Interest income from time deposit, gross Interest income from promissory notes

P 100,000 10,000 40,000

Compute the allowable deduction for interest expense. a. P 96,700 c. P50,000 b. P 83,500 d. P 100,000 110. The Crosby Manufacturing Corporation usually bills its foreign branch at cost; however, it entered into an advanced pricing agreement (APA) with the BIR which fixed its cross-border pricing to its foreign branch at 150% of cost. Crosby compiled the following costs and sales during the year: Sales through the foreign branch: Philippines Sales P 7,000,000 P Less: cost of sales 7,000,000 Gross income P 0 P

Branch 12,000,000 7,000,000 5,000,000

Sales to unassociated domestic enterprises: Philippines Branch Sales P 3,000,000 Less: cost of sales 1,200,000 Gross income P 1,800,000 Total gross income P 5,300,000 Using the advanced pricing agreement, compute the total gross income subject to Philippine taxation? a. P 11,300,000 c. P 8,800,000 b. P 7,800,000 d. P 6,800,000