Académique Documents
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Culture Documents
6. D 10. A
7. D 11. D
8. C 12. B
9. D
16. B
17. D
18. B
19. D
20. C
1. B
2. D Gross Profit on Sales 800,000
Less: Deductible Expenses 440,000
Provision for Bad Debts 50,000 490,000
Add: Allowed Deduction for Recoveries
of Accounts Receivable 30,000
Net Income Before Income Tax 340,000
1.4. D
2.3. A
3. B Rent P36,000
Leasehold Improvement
Cost 600,000
Less: Depreciation for 15 years
(600,000/30)*15} 300,000
Book value, end of the lease 300,000
300,000/15 20,000
Yearly Income P56,000
1 1
2 0
3 0
4 0
5 1
6 0
7 1
8 1
9 0
10 0
11 1
12 0
13 1
14 1
15 1
16 1
17 0
18 1
19 1
20 1
2. No, because in this case, the convenience of employer rule has been applied.
3. No, because the value of the living quarter is part of Kulas' taxable compensation income.
4
a. No, because de minimis benefits are not subject to income tax as well as withholding tax on compensating incom
b. No, because the rice allowance is considered as de minimis benefit which is exempted from the fringe benefit tax
5. P 0.00, none of the items were qualified to be part of gross income of Karen Leon.
6
a. No, because there is a condition that he has to comply
b. No, because there is a condition that he has to comply
c. Yes, if it is part of compensation income to employees
1 Managerial
2 Managerial
3 Supervisory
4 Rank and File
5 Managerial
6 Managerial
7 Supervisory
8 Supervisory
9 Rank and File
10 Rank and File
11 Rank and File
12 Managerial
13 Managerial
14 Supervisory
15 Rank and File
1 C
2 C
3 B
4 D
5 D
6 A
7 B
8 B
9 D
10 C
1. B Reimbursement by the
employer 11700
Divided by 65%
3. B Salary of 14000
MS
ding tax on compensating income of rank and file employees.
mpted from the fringe benefit tax.
EXERCISE 7-1. TRUE OR FALSE QUESTIONS
1.TRUE
2. TRUE
3. FALSE
4. FALSE
5. FALSE
6. FALSE
7. TRUE
8. TRUE
9. FALSE
10. TRUE
11. TRUE
12. TRUE
13. FALSE
14. TRUE
15. TRUE
Expenses -410,000.00
Net Income 240,000.00
Passenger jeepney inherited
Gross receipts 90,000.00
Expenses -65,000.00
Inccome 25,000.00
Proceeds of matured life insurance
Face value 200,000.00
Premiums paid -120,000.00
Income 80,000.00
Income subject to tax ₱ 349,500.00
2. NOT TAXABLE
3. NOT TAXABLE
4. NOT TAXABLE
5. TAXABLE
6. NOT TAXABLE
7. NOT TAXABLE
8. NOT TAXABLE
9. TAXABLE
1. D
2. B face value ₱ 500,000.00
13. D
14. A
15. D
16. C loss of income ₱ 300,000.00
17. A salary ₱ 40,000.00
loss of car (800,000-750,000) 50,000.00
income ₱ 90,000.00
18. C salary (10,000*6) ₱ 60,000.00
19. D
20. B Anthony (400,000+1,000,000) ₱ 1,400,000.00
(30,000,000+12,000,
Pacman 000) ₱ 42,000,000.00
13. C
14. C
15. D
16. D
17. D
18. A face value ₱ 1,000,000.00
premiums paid (100,000*12) 1,200,000.00
₱ 200,000.00
19. C
20. A salary (3,500*5.5) ₱ 19,250.00
allowance (1,000*5.5) 5,500.00
income 24,000.00
income subject to tax ₱ 48,750.00
21. C
22. B
23. D
EXERCISE 7-7. PROBLEMS ON MINIMUM WAGE
1. Mr. CSO
None. He is a minimum wage earner and his
a. benefits does'nt exceeds 90,000.
b. overtime pay ₱ 80,000.00
night shift differential 30,000.00
hazard pay 15,000.00
holiday pay 15,000.00
total 140,000.00
exemption (90,000.00)
income subject to tax ₱ 50,000.00
The income from his grocery store are
2. Mr. Aching should be included in his taxable income.
3. Ms. De los Santos No. She is a minimum wage earner.
No. because at that time she is a minimum
4. MWE wage earner.
Yes. Because their rate is different in NCR.
5. PO2 Iska Lawag No. Her entire salary is not subject to tax.
EXERCISE 7-8. PROBLEM
It is taxable because it is a prize wherein he
a. take action to win it by buying 100 tickets.
30% is the rate.
taxable (1,350,000-20,000) 1,330,000
₱ 130,000.00
(30%*530,000) 159,000.00
₱ 289,000.00
b. Taxable because it is a prize from a raffle.
Exempted because it is a prize wherein he
c.
did'nt take any action to win.
3.) No, St. James Academy Inc. cannot avail the optional standard deduction in computing the income tax.
4.) No, St. James Academy Inc. is not subject to minimum corporate income tax.
5.) Yes, St. James Academy Inc. is not subject to improperly accumulated earnings tax.
1. Definition of Corporation:
a.) The business organization formed by Atienza, Bauzon and Carmona qualifies as
partnerships, no matter how created or organized which is considered as corporation in
income taxation.
b.) The group of five entrepreneurs served as incorporators, therefore what they formed is a corporation.
c.) The two corporations have formed a joint venture because it is clearly stated that after
two-and-a-half years of construction, the organization will be automatically terminated. It
is not taxable as a corporation.
d.) By organizing a new accounting and auditing firms which they named as Gigi, Jayjay
and Associates CPAs, Gigi and Jayjay shall exercise a common profession for certified
public accountants. They have formed a general professional partnership which is not
subject to income tax.
e.) Based on the agreed features in the business organization formed by Almasco, Brioso,
Carullo and Damasco, it is considered as joint stock company and taxable as a
corporation.
2. Classification of a corporation:
Classification Situs of Income Tax Base
a. Domestic corporation Within and without Taxable income
b. Resident foreign Within only Taxable income
corporation
c. Nonresident foreign Within only Gross income
corporation
b. Resident Corporation
Sales (domestic) 3,000,000.00
Less: Cost of goods sold (5,000,000 x 3/10) 1,500,000.00
Gross Income 1,500,000.00
Less: Expenses on domestic sales 1,000,000.00
Taxable income 500,000.00
Rate 30%
Income tax 150,000.00
The income tax payable in 2017 is whichever the higher between the MCIT and the
Normal Income Tax, therefore it is 89,100.*
The excess of MCIT in 2017 is deducted in 2018 Normal income tax because it is higher
than the 2018 MCIT (162,000-12,600 = 149,400).**
Sales ###
Less- Sales returns and allowances ###
Sales Discounts ### ###
Net sales ###
Less: Cost of Sales* ###
Gross income ###
Less: Operating expenses ###
Taxable income ###
Rate of tax 30%
a.) Normal income tax ###
*Cost of Sales
Inventory, Jan.1 2,400,000.00
Purchses ###
Freight in ###
Less: Purchase return and allowan ###
Purchase discounts 7,000.00 ###
Net purchases 1,498,000.00
Total Goods Available for Sale 3,898,000.00
Less: Inventory, Dec.31 1,900,000.00
Cost of Sales 1,998,000.00
7. Predominance test:
a.) The rate of tax that shall be applied to ARTS University is 10% because the revenue
from activities not related to education was 40%, it does not exceed 50% of its gross
income.
b.) If the income from unrelated activities is more than the income from related activities,
the applicable rate is the usual tax rates imposed on corporations which is 30%.
8. A
9. D
10. D
11. C
12. A
13. C
14. D
15. D Gross income ###
Less: Deductions ###
Taxable income ###
Rate of tax 30%
Normal income tax ###
19. D
20. D
4. B
5. D
6. C Minimum corporate income tax 50,000.00
Less: Normal income tax 20,000.00
Excess MCIT 30,000.00
7. A
8. B 2014 ###
2015 5,000.00
2016 ###
Total excess of MCIT over NIT ###
16. B
17. C
18. B Gross income, Philippines 740,000.00
Gross income, U.S.A. 690,000.00
Royalties, U.S.A. 50,000.00
Total 1,480,000.00
Less: Deductions
Expenses, Philippines ###
Expenses, U.S.A. ### 875,000.00
Taxable income 605,000.00
Rate of tax 30%
Income tax due 181,500.00
12. A
13. C
Submitted by:
Leslie G. Aragones
Roda May A. Diño
BSA 4-1
Submitted to:
Chapter 14 - A1
1. True
2. False
3. True
4. True
5. True
6. True
7. True
8. False
9. True
10. True
11. True
12. True
13. False
14 False
15. False
Chapter 14 - A2
1. Two full-time and two part-time employees.
3. Expenses for the taxation books, journals and renewal of license are deductible.
7. Meals ₱ 2,000
Wines & liquors 2,000
Hotel accomodation 4,000
Deductible expense ₱ 8,000
9. The 20% kickback to the government officials is nondeductible as well as the amount of money given to inspectors becau
10. No, because the said cost was used in construction of an additional building which will be a long-term asset of the Unive
However, they can validly claim the depreciation of the property as deduction but not the total cost of the building.
11. They are expenses not deductible from the gross income but rather capitalized to the apartment building.
12. No, the proceeds from the loan was used in personal purposes.
17. No, because Andres has a significant control over Kaibigan Corporation (55%), which makes them “related taxpayers.”
ent building.
the principal, in full or in part.
em “related taxpayers.”
Chapter 14B
1 0
2 0
3 0
4 1
5 0
6 0
7 0
8 0
9 1
10 1
11 0
12 1
13 0
14 0
15 0
4 Asset A ₱ 1,500,000
Asset B (1,500,000-500,000) 1,000,000
Asset C (1,000,000/12x6/12) 41,667
5 Kelly must deduct the loss within 45 days after the occurrence of
such event and immediately deduct it from gross income.
Kelly must deduct the loss within 45 days after the occurrence of
such event and immediately deduct it from gross income.
b. NOLCO ₱ 25,000
Long-term Capital Loss 5,000
Net Operating Loss ₱ 30,000
8 a. Cost of Building
Jose ₱ 4,000,000
Allan ₱ 3,500,000
c. Deductible Loss
Jose None
Allan
Undepreciated cost ₱ 1,500,000
Demolition cost 18,000
Sale of scrap (5,000)
Deductible Loss ₱ 1,513,000
Yes, because the 6000 is the amount actually suffered when the
stocks were disposed of.
15 a. Deductible
b. Non-deductible
c. Non-deductible
d. Deductible
EXERCISE 14-3: Multiple Choice Problems (Answers)
1) B
2) B
Solution:
Total Expenses 150,000.00
Multiply by: 70%
Deductible Expense 105,000.00
3) A
4) C
5) C
Solution:
Interest Expense 20,000.00
Less: 33% of interest income 660.00
Deductible Expense 19,340.00
6) D
7) A
Solution:
Gross Income, Philippines 1,000,000.00
Expenses, Philippines 800,000.00 200,000.00
Gross Income, "A" foreign country 400,000.00
Expenses, "A" foreign country 200,000.00 200,000.00
Gross Income, "B" foreign country 300,000.00
Expenses, "B" foreign country 200,000.00 100,000.00 300,000.00
Taxable Income 500,000.00
Rate of Tax 30%
Income Tax Due 150,000.00
Less: Tax Credit
Tax paid "A" foreign Country 80,000.00
Limit (200/500 * 150,000) 60,000.00 60,000.00
Tax paid "B" foreign country 20,000.00 20,000.00
Limit (100/500 * 150,000) 30,000.00
Total credits, 1st limitations 80,000.00
2nd limitation (300/500 * 150,000) 90,000.00
Credit allowed (lower) 80,000
Income Tax Payable 70,000.00
8) B
Solution:
Net Income, Philippines 200,000.00
Net Income, United States 300,000.00
Taxable Income 500,000.00
Rate of Tax 30%
Income Tax Due 150,000.00
Less: Tax Credit
Tax paid, United States 110,000.00
Limit (300/500 * 150,000) 90,000.00
Credit allowed (lower) 90,000.00
Income Tax Payable 60,000.00
9) C
Solution:
Cost 100,000.00
Multiply by:
Depreciation Rate 10%
Remaining Years 4
Book Value 40,000.00
10) A
11) D
Solution:
Book Value 4,000,000.00
Less: Recovery from insurance (2017) 3,500,000.00
Deductible Loss (2017) 500,000.00
12) A
13) A
Solution:
Acquisition cost of land 1,100,000.00
Cost of old building 200,000.00
Demolition Cost 40,000.00
Less: Proceeds from the sale of scrap 15,000.00
Cost of the land 1,325,000.00
14) C
Solution:
Cost 500,000.00
Less: Accumulated Depreciation 300,000.00
Book Value 200,000.00
Replacement cost 300,000.00
Deductible loss (lower) 200,000.00
15) D
Solution:
Gross profit on sales 800,000.00
Add: Recovery on Accounts Receivable 30,000.00
Less: Deductible Expenses 440,000.00
Provisions for Bad 50,000.00 490,000.00
Net Income before income tax 340,000.00
ers)
EXERCISE 14-4: Multiple Choice Problems (Answers)
1) A
2) A
3) D
Solution:
Cost 570,000.00
Less: Scrap Value 70,000.00
Depreciable Amount 500,000.00
Divided by: Useful life 16
Allowable Deduction of Depreciation 31,250.00
4) C
5) C
Solution:
Payment of current pensions 250,000.00
Payment of past pensions
(1,200,000/10 years) 120,000.00
(1,500,000/10 years) 150,000.00
Deductible pension expense 520,000.00
6) D
7) B
8) B
9) B
10) A
Solution:
Sales 1,500,000.00
Cost of Sales (1,500,000 * 40%) 600,000.00
Gross Income 900,000.00
Less: Operating Expense (1,500,000 * 20%) 300,000.00
Net income before other income 600,000.00
Add: Other Income (600,000 * 5%) 30,000.00
Net income before income tax 630,000.00
Rate of Tax 30%
Income tax payable 189,000.00
11) B
Allowances 200,000.00
Business Income 400,000.00
Total 600,000.00
Less: Deductions 150,000.00
Taxable Income 450,000.00
Divided by: 2
Taxable Income (Miravite) 225,000.00
Rate of tax (Tax table) 20%
Income tax payable 45,000.00
12) A
Solution:
2016
Gross Income 420,000.00
Less: Deductions 400,000.00
Income from operations 20,000.00
Less: NOLCO -
Taxable Income 20,000.00
13) B
Solution:
2017
Gross Income 380,000.00
Less: Deductions 300,000.00
Income from operations 80,000.00
Less: NOLCO 20,000.00
Taxable Income 60,000.00
14) D
15) D
wers)
EXERCISE 14-5: Problem (Answer)
Sales 1,200,000.00
Less: Cost of Sales 450,000.00
Gross Income 750,000.00
Less: Operating Expense
Salaries and wages 155,000.00
Travelling expenses 12,000.00
Light, heat and power 24,000.00
Entertainment 13,500.00
Depreciation 5,000.00
Interest Expense 2,500.00
Fire Loss 70,000.00 282,000.00
Income before contributions 468,000.00
Less: Contributions
Deductible subject to limit:
Actual 5,000.00
Limit (468,000 * 5%) 23,400.00 5,000.00
Taxable Income 463,000.00
Rate of tax 30%
Income tax due 138,900.00