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
8. Ammacian Corporation imported goods from abroad for domestic sale. The details of the importation is given below:
Peso value of supplier’s invoice P 2,000,000 Other cost incurred to bring the goods to Philippine
port
70,000 Other inland costs prior to release of goods from
Customs
85,000
Customs duties 10%
Freight cost to bring merchandise to Ammacian’s warehouse
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. Which is subject to business tax?
a. Business for subsistence b. Privilege stores
c. Non-resident sellers d. All of these
11. Which is considered pure consumption tax? a. VAT on importation
b. Percentage tax
c. Value Added Tax on sales d. Excise tax
12. Who is statutory liable to pay the VAT on importation? a. The non-resident seller
b. The resident buyer c. Both seller and buyer d. The Bureau of Customs
13. A business taxpayer had the following summarized transactions during the quarter:
Cash sales P 400,000
Sales on credit (account sales) 600,000 Installment sales (P30,000 collected) 100,000
Sales returns and allowances 20,000
Quota discounts 10,000
Advances for goods not yet delivered 20,000 Purchase of goods, including of P72,000 VAT
passed on by sellers 672,000
a. P1,100,000 c. P1,030,000 b. P1,080,000 d. P1,010,000
14. A lending investor had the following data during a month:
Cash collection for loan principal P 400,000
Cash collection for interest 50,000
Cash collection for penalties 6,000
Uncollected loan principal 300,000
Billed but uncollected interest 2,000
Billed but uncollected penalties 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:
Selling price Fair value To customer A P 150,000 P 180,000
To customer B 200,000 190,000
To customer C 102,000 150,000
Total sales P 452,000 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:
Selling price Fair value City of San Fernando P 134,000 P 200,000 ABC Trading Company 100,500 150,000 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 75,000 Fees received from regular customers 340,000
Total fees 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:
Zonal Assessed Selling
Value Value Price
Residential lot P 1,500,000 P 1,200,000 P 1,700,000 Residential dwelling 3,500,000 1,500,000 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 P 200,000
Interest 12,000
Penalty 4,000
Total P 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 P 500,000 Sales made through consignees 150,000 Sales made for consignors 100,000 Commission income from consignors 20,000 Commissions paid to consignees 30,000 Compute the output VAT.
a. P 96,000 c. P 80,400 b. P 92,400 d. P 62,400
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 P 50,000
Accounts receivables 120,000
Investments 180,000
Inventories 200,000
Property, plant and equipment 800,000
Total assets 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 Terms Payment Export for Hong Kong FOB destination $ 100,000 Export for Thailand FOB destination P 450,000 Export to Japan FOB shipping point ¥ 800,000 Domestic sales
Sales to an PEZA FOB destination P2,000,000 Sales to a non-VAT customer 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. Which is not a deemed sale transaction? a. Exchange of inventory for stocks
b. Exchange of property, plants and equipment for stocks c. Exchange of inventory for property
d. Exchange 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 P 76,500
Frozen meat and eggs 30,200
Fruits and vegetables 20,360
Shampoos, soaps and detergents 12,100
Baked bread 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 Amount Traceable input VAT Regular sales P 800,000 P 40,000
Export sales 400,000 18,000
Sales to government 200,000 15,000 Exempt sales 100,000 8,000
Total P 1,500,000 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.
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 P 80,000
Sale of flour 20,000
Sale of fertilizers and seeds 40,000
Total P 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 P 268,800
Total revenue 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: Incoming Outgoing
Passengers P 1,000,000 P 2,000,000
Cargoes, mails; excess baggage 500,000 400,000 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
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 P 4,000,000
Less: Other deductions from gross income 2,000,000 Net operating loss carry over 1,000,000
Taxable income 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 P 400,000
NOLCO claimed 600,000
Estimated 2010 income tax paid 100,000 Capital gains, net of tax 50,000 Passive income, net of tax 180,000 Exclusions from gross income 120,000
Exempt income 200,000
Dividends declared 400,000
Appropriation for plant expansion 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 P 1,200,000
House and lot 2,000,000
Cash 2,800,000
Car 500,000
Other personal properties 1,000,000
Total properties P 7,500,000
Mortgage on the agricultural land P 500,000
Other indebtedness 1,200,000
Deductible expenses and losses 400,000 Total ordinary deductions 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, 2001. The spouses stipulated the conjugal partnership of gains for their property relation. Mr. Coyiuto died leaving the following properties:
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. Which of the following donation is exempt? a. Donation to the government for public purpose b. Donation to the Philippine Inventor’s Commission c. Donation to accredited non-profit institutions d. Donation to the Board of Accountancy
45. The following are deductible by a non-resident alien donor, except
a. Donation to the government for public purpose b. Indebtedness assumed by done
c. Dowry exemption
d. Donation to accredited non-profit institutions
46. Which of the following is subject to value added tax? a. Importation of grapes and apples
b. Sale of seaweeds
c. Sale of fire wood and charcoal
d. Sale of husked rice, corn grits and molasses
47. All of the following entities are VAT-exempt, except? a. Notre Dame, a proprietary hospital
b. Philippine Airlines, a domestic air carrier
c. Bank of the Philippine Islands, a commercial bank
d. Tagbilaran University, a proprietary educational institution 48. Which is subject to VAT?
a. Life insurance companies
b. Operators of hotels, motels and inns c. International air or sea carrier
d. Agricultural, credit or multi-purpose cooperative 49. Which is not subject to output VAT?
a. Sale of residential lot for P1,500,000 b. Direct export sales of goods
c. 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. Which is not a transaction deemed sales?
a. Withdrawal of goods by the proprietor for personal use b. Corporate merger or consolidation
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 P 150,000
Allocation of current input VAT:
- To Regular sales P 200,000 - To Zero-rated sales 300,000 - To Sales to the government* 100,000
- To Exempt sales 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 which of the following is allowed presumptive input VAT?
A. Raw sugar C. Mackerel
B. Packed noodles D. Processed milk a. All, except A c. All of these b. All, except B 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 P 1,000,000 Interest income from less than 5 year loans 6,000,000
Gain on sale of ROPA 400,000
Rental income from ROPA 200,000
Service fees 800,000
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 of receipt of final assessment November 12, 2009 Date protest was filed to the BIR December 8, 2009 Date supporting documents were submitted January 26, 2010 Date of denial was received June 5, 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 April 15, 2009 Date of claim for refund was filed with the BIR December 16, 2010 Date of receipt of BIR denial 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 P 3,000,000
Salary 400,000
Professional fees 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. For donor’s tax purposes, this is not a stranger A. Daughter of godson
B. Grandson of the sister of the donor’s mother C. Son-in-law
D. 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 C. 270,000
B. 324,000 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 goods 1,500,000
Transport of cargoes 500,000
The output VAT and OPT due for the quarter are:
Output VAT OPT due Output VAT OPT due A. P240,000 P 30,000 C. P 0 P 90,000 B. 360,000 0 D. 360,000 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 C. Yes to I only B. No to I and II 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 P 11,200 Processed foods from non-VAT sellers 90,000 Agricultural food products 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 P 134,400 Payments merchandise from non-VAT suppliers 82,400 Landed cost of merchandise withdrawn from the BOC 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-VAT-registered supplier:
Eggs P 100,000
Dried fish 150,000
Marinated fish 200,000
Under current revenue regulations, what is the output VAT?
A. P 0 C. P24,000
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 income from PNB, a domestic bank P 40,000 Interest income from SVB, a domestic bank* 30,000 Interest income from THE, a non-resident foreign bank* 20,000 Interest income from XHE, a resident foreign bank* 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 established a printing press and a marketing distribution business for her books which sells wildly hot like chili-flavored pizza. She does not know anything about taxation so she consulted you about what type of income tax she will pay.
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
TAXATION – TEST BANK
Interest expense – bank loans P 21,000 Royalty expense – from franchisor 40,000 Rent expense – for lease of office building 10,000 Salaries expense – for employees 100,000
Dividends to shareholders 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 10% p.a. P3,000,000, 3 year deposit 7.5% p.a. $100,000, 5 year preterminable deposit 10% p.a.
$50,000, 2 year deposit 8% 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
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a. P 825.25 c. P 937.50 b. P942.50 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 Event Gross Prize
January 4, 2011 Singing competition P 12,000 February 14, 2011 Painting competition 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 Transaction Gain(Loss)
5/8/2015 Sale P120,000
8/5/2015 Sale ( 20,000)
9/8/2015 Sale 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: Philippines Abroad Business income P 200,000 P 100,000 Professional fees 100,000 50,000 Compensation income 400,000 - Rent income 300,000 200,000 Interest income-bank 20,000 30,000 Royalty 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 a resident alien, 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
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.
TAXATION – TEST BANK
b. P1,180,000 d. P1,390,000
31. A Japanese who is staying in the Philippines for 183 days 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
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. Which is a large taxpayer?
a. A taxpayer with quarterly VAT of P900,000 b. A taxpayer with annual income tax of P900,000 c. A taxpayer with annual excise tax due of P900,000
d. A taxpayer with annual withholding tax remittances of P900,000 34. Which is an incorrect statement regarding situs of income?
a. Interest income is earned in the residence of the debtor. b. Royalty is earned where the intangible is employed.
c. Service income is earned in the domicile of the taxpayer. d. 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 upon the performance of an act, the
enjoyment of a privilege or the engagement in a profession is known as
a. income tax. c. excise tax. b. license. d. transfer tax.
37. Which of the following distinguishes license from tax? a. Unlimited in imposition
b. Imposed for revenue
c. Does not necessarily renders business illegal in case of non-payment
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
non-assignable.
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. The Commissioner of Internal Revenue is not authorized to a. interpret the provisions of the National Internal Revenue Code b. promulgate Revenue Regulations.
c. terminate an accounting period.
d. prescribe presumptive gross receipts.
44. The provisions in the Constitution regarding taxation are a. Grants of the power to tax
b. Limitations to the power to tax
c. Grants and limitations to the power to tax d. 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. Which of the following normally pays real property tax?
a. Bantay Bata, a non-profit charitable institution b. Jesus Crusade movement, a religious institution
c. University of Pangasinan, a private proprietary educational institution
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. Which of the following is not an inherent limitation of the power to tax?
a. Tax should be levied for public purpose.
b. Taxation is limited to its territorial jurisdiction. c. Tax laws shall be uniform and equitable.
d. Government agencies and instrumentalities are exempt from tax. 51. Which of the following is not within the scope of tax
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.
52. Which of the following is not an inherent limitation of the power of taxation?
a. International Comity; c. Territoriality; b. Veto power of the President; d. Public purpose test. 53. Which is not subject to income tax?
a. Harvested fruits b. Sold crops
c. Offset of indebtedness for services rendered d. Damages recovered in a patent infringement suit
54. Which is not a tax obligation of an individual taxpayer engaged in business?
a. File and pay monthly business tax b. File and pay monthly income tax c. File and pay annual income tax
d. Withhold and 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 for P6,000,000. The property has a zonal value of P5,000,0000 and assessed value of P3,000,000. The same property was acquire for P7,000,000 and has a present appraisal value of P6,500,000 at the date of sale. What is the capital gains tax to be filed through BIR Form 1706?
a. P 0 c. P 360,000
b. P 300,000 d. P 390,000
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 in properties, made the following dispositions during the year.
Property Holding period Gain (loss)
Land 5 years P 200,000
Car 1year and 8 months 30,000
Laptop 8 months (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 dealer, had the following dealings in properties in 2015:
Properties
Date of acquisition
Date of
sale Gain (Loss) House and lot 2/25/2010 2/27/2015 P 400,000 -Commercial lot 8/12/2011 3/14/2015 ( 100,000) Personal car 7/18/2014 5/12/2015 80,000 -Personal i-Phone 1/14/2014 7/3/2015 ( 40,000)
Compute the ordinary gain and the net capital gain subject to regular income tax.
a. P480,000; P0 c. P400,000; P60,000 b. P400,000; P80,000 d. P300,000; P60,000 62. What is the amount of ordinary loss?
a. P 0 c. P 100,000
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63. Mr. Andonicus, a dealer of household appliances, made the following dispositions of properties during 2015:
Properties
Date of acquisition
Date of
sale Gain (Loss) Leasehold right 12/2/2012 2/27/2015 P 50,000 Taxi franchise 7/10/2010 3/14/2015 100,000 Electric oven 6/15/2015 7/15/2015 80,000 Residence 1/14/2014 7/3/2015 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 P 540,000
13th month pay 45,000
14th month pay 45,000
Total of monthly rice allowances during the year 20,000
Commission from employer 12,000
Christmas gift 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 preceding problem, compute Cute’s capital gains tax.
a. P 0 c. P 45,000
b. P 25,000 d. P75,000
70. Markus Ngineus, single, is a managerial employee of Microna & Softpa Company. He received the following employee benefits in 2014:
Salaries P 4,000,000
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Fixed allowances 200,000
Car designated for the use of Markus 2,500,000 House and lot, transferred in the name of Markus 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 P 500,000
Long-term capital gain 80,000
Short-term capital gain 45,000
Ordinary gain 20,000
Long-term capital loss ( 90,000)
Short-term capital loss ( 30,000)
Ordinary loss ( 40,000)
Other business expenses ( 200,000)
Net income P 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 P 700,000
Cost of sales 300,000
Gross profit P 400,000
Capital gain on the sale of land 100,000
Total gross income P 500,000
Other deductible expenses 100,000
Contributions expenses:
- Government priority project 50,000 - Non-accredited non-profit institution 45,000
- Foreign foundation 25,000
Net income P 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. Which is not taxable on unrelated activities?
a. Government agencies b. Non-profit corporations
c. Government-owned and controlled corporations d. Non-profit schools
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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. The classification rule is not relevant to a a. cooperative.
b. farmers’ association. c. government school.
d. 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 P 1,000,000
Less: Cost of sales 450,000
Gross income from operations P 550,000 Add: Non-operating income
Dividend income – domestic 50,000
Interest income – bank 20,000
Gain on sale of domestic stocks 30,000 Gain on sale of office equipment 20,000
Total gross income P 670,000
Less: Expenses Interest expense P 40,000 Salaries expense 150,000 Depreciation expense 50,000 Contribution expense 80,000 Pension contribution 50,000
Provision for bad debts 15,000
Entertainment expense 10,000
Office supplies 12,000
Loss on sale of patent 40,000
Total P 447,000
Net income P 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 deductions assuming the taxpayer is a corporation using OSD.
a. P 220,000 c. P 240,000 b. P 228,000 d. P 268,000
TAXATION – TEST BANK
82. An individual taxpayer with two dependents reported the following income:
Gross taxable compensation income P 200,000 Gross income from operations 300,000
Ordinary gain 130,000
Interest income from investment in bonds 50,000
Royalty 20,000
Total income P 700,000
Ordinary loss P 60,000
Capital loss 20,000
Contribution to a non-profit organization 70,000 Donation to government’s priority activity 40,000
Rent expense 17,000
Interest expense 10,000
Other deductions 200,000
Total expenses P 417,000
Net income P 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 P 970,000
Fixed allowances 40,000
13th month pay and other benefits 98,000
Fringe benefits (residential rentals) 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 preceding problem, compute the fringe benefits tax.
a. P 34,000 c. P 17,000 b. P 18,000 d. P 9,000
TAXATION – TEST BANK
88. Which is not subject to final tax to a corporation? a. Interest income – Foreign currency deposit
b. Royalty c. Prizes
d. None of these
89. The following data relates to a corporate taxpayer:
Philippines Abroad Global Gross receipts P 4,000,000 P 3,000,000 P 7,000,000 Direct cost of services 2,000,000 1,500,000 3,500,000 Expenses 1,200,000 1,000,000 2,200,000 Net income P 800,000 P 500,000 P 1,300,000
Income tax paid P 165,000
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:
Hospital related
Non-hospital related
Total Gross receipts and sales P 300,000,000 P 200,000,000 P 500,000,000 Cost of services and
sales 280,000,000 _140,000,000 420,000,000 Gross income P 20,000,000 P 60,000,000 P 80,000,000 Less: Expenses 40,000,000 20,000,000 60,000,000 Deduction incentives 12,000,000 6,000,000 18,000,000 Net income (P32,000,000) P 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:
Within the Phils.
Without the
Phils. Total
Gross receipts and sales P 300,000,000 P 200,000,000 P 500,000,000
Cost of services and sales _ 180,000,000 100,000,000 280,000,000
Gross income P 120,000,000 P 90,000,000 P 210,000,000
Less: Expenses 114,000,000 40,000,000 154,000,000
Net income P 6,000,000 P 50,000,000 P 56,000,000
Total of BIR Form 2307s P 400,000 400,000
Income tax paid *1,500,000 12,000,000 13,500,000
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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 corporation, compute the income tax still due (refundable).
a. P 0 c. P 500,000
b. (P 100,000) d. P 300,000
95. The Calintaan Corporation had the following historical MCIT and RCIT data:
2013 2014 2015 2016
MCIT P 120,000 P 200,000 P 190,000 P 170,000 RCIT P 110,000 P 220,000 P 0 180,000
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 P 164,000
Allowable deductions 7,600,000 Creditable withholding tax 52,000 Estimated income tax payments 87,000
What is the income tax still due to be filed through BIR Form 1702-RT?
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:
Philippines Abroad Total Sales P 2,000,000 P 3,000,000 P 5,000,000 Less: Cost of services 1,200,000 1,800,000 3,000,000 Gross income from operation P 800,000 P 1,200,000 P 2,000,000 Interest on deposits 50,000 250,000 300,000 Total Income P 850,000 P 1,450,000 P 2,300,000 Less: Business expenses 800,000 1,300,000 2,100,000 Net income P 50,000 P 150,000 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
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 income reported the following since it started operation in 2015:
2015 2016 Profit after tax P 200,000 P 150,000 Remittance 80,000 300,000 Compute the branch profit remittance tax in 2016.
TAXATION – TEST BANK
a. P 12,000 c. P 45,000 b. P 38,000 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 a P1,200,000 total deductible expense and the following sales:
Customers
Regular Senior citizens Gross sales P 5,000,000 P 1,200,000
Cost of sales 3,000,000 800,000
Xhelsy adopts a policy of giving senior citizens a 25% discount. Consequently, it granted P300,000 total senior citizens’ discounts during the period.
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-a-School 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.
2013 2014 2015 Compensation income P 20,000 P 220,000 P 80,000 Business gross income 470,000 400,000 500,000 Deductions 500,000 420,000 420,000 Personal exemptions 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 P 100,000 Interest income from time deposit, gross 10,000 Interest income from promissory notes 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 Branch Sales P 7,000,000 P 12,000,000 Less: cost of sales 7,000,000 7,000,000
Gross income P 0 P 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
