CHAPTER 6: FRINGE BENEFIT TAX

Harvy C. Cerda
Richelle C. Cerda
BSA 4-1

EXERCISE 6-2: TRUE OR FALSE QUESTIONS

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

EXERCISE 6-3: DISCUSSION QUESTION/ PROBLEMS

1
Interest on corporate bond 1,000
Salary 12,000
Tip 3,000
Lotto Winning 3,000
Jueteng 8,000
 Stolen from mother's purse 3,000
Total Taxable Income 30,000

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

EXERCISE 6-4: IDENTIFICATION

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

EXERCISE 6-5 THEORY AND COMPUTATION

1. C Fringe Benefit Expense 32500
Add: Fringe Benefit Tax Expense 17500
Total Deductible Expense 50000

2. C Fringe Benefit Tax Expese 17500

Divide: Fringe Benefit Tax Rate 35%
Grossed-Up Monetary Value 50000

3. A the company's general manager

4. B can be recorded by a corporation whether exempt from income tax or not

EXERCISE 6-6: MULTIPLE CHOICE THEORY

1. B Fees in a civic club 9500

Premium on life insurance

where the employee is the
beneficiary 10000
Total Fringe Benefits 19500

Monetary Value 19500

Divided by 65%

Grossed-up monetary value 30000

Rate of Tax 35%
Fringe Benefit Tax 10500

Rice allowance during the

2. B year 96000
Medical cash allowance 16000

Uniform Allowance- rank

and file employees 12000
Fees in a civic club 9500
Premium on life insurance 10000
Uniform Allowance-
company supervisor 4000
 Fringe Benefit Tax Expense 10500
Total Deductions 158000

Rice allowance during the

3. B year 96000
Medical cash allowance 16000

Uniform Allowance- rank

and file employees 12000
Total 124000

4. A
Fringe Benefit Expense 147500

Fringe Benefit Tax Expense 10500

Cash 147500
Fringe
Benefit Tax
Payable 10500

EXERCISE 6-7: MULTIPLE CHOICE THEORY

1 C
2 C
3 B
4 D
5 D
6 A
7 B
8 B
9 D
10 C

EXERCISE 6-8: MULTIPLE CHOICE PROBLEMS

1. B Reimbursement by the
employer 11700
Divided by 65%

Grossed-up monetary value 18000

Rate of Tax 35%
Fringe Benefit Tax 6300

2.D Salary 14000

Free meals 10500
Living Quarters 3000
Total Gross Compensation 27500
Income

3. B Salary of 14000

4.B Ticket Cost ($2000xP50) 100000

Divided by 65%

Grossed-up monetary value 153846.15385

Rate of Tax 35%
Fringe Benefit Tax 53846.153846

5.B Motor Vehicles (P800000/5

years) 160000
Multiply 50%
Monetary Value 80000
Divided by 65%

Grossed-up monetary value 123076.92308

Rate of Tax 35%
Fringe Benefit Tax 43076.923077

6.A Car (10000x50%) 5000

Divided by 65%

Grossed-up monetary value 7692.3076923

Rate of Tax 35%
Fringe Benefit Tax 2692.3076923

7.D Loan (P100000x3%x8/12) 2000

Divided by 65%
 Grossed-up monetary value 3076.9230769
Rate of Tax 35%
Fringe Benefit Tax 1076.9230769

8.B Vacation Trip 36000

Divided by 65%

Grossed-up monetary value 55384.615385

Rate of Tax 35%
Fringe Benefit Tax 19384.615385

9.C Driver Salary 15000

Housemaid Salary 6000
Annual Membership Fees
(P75000/12) 6250
Total Monetary Value 27250
Divided by 65%

Grossed-up monetary value 41923.076923

Rate of Tax 35%
Fringe Benefit Tax 14673.076923

10.B Condominium Unit 2500000

Divided by 65%

Grossed-up monetary value 3846153.8462

Rate of Tax 35%
Fringe Benefit Tax 1346153.8462

11.A Dormitory (10000x50%) 5000

Divided by 65%

Grossed-up monetary value 7692.3076923

Rate of Tax 35%
Fringe Benefit Tax 2692.3076923
Dormitory 10000
Fringe Benefit - Clerk 3000
Total Deductible Expense 15692.307692

12.C Supervisory Employees 195000

Divided by 65%
 Grossed-up monetary value 300000
Rate of Tax 35%
Fringe Benefit Tax 105000

13.B Monthly Salary 500000

Fixed Representation
Allowance 200000
Total 700000

14.D Car 1800000

Divided by 65%

Grossed-up monetary value 2769230.7692

Rate of Tax 35%
Fringe Benefit Tax 969230.76923

15.A Car (P1800000x40%) 720000

Divided by 65%

Grossed-up monetary value 1107692.3077

Rate of Tax 35%
Fringe Benefit Tax 387692.30769
FIT TAX
on compensating income of rank and file employees.
m the fringe benefit tax.