CPAR

CPA Review School of the Philippines

FINAL PRE-BOARD EXAMINATION
Taxation BATCH 89
Instructions: Choose the BEST answer for each of the following items. Mark only one answer for each
item on the Special Answer Sheet provided. Strictly no erasure allowed.

1. Which statement below on compromise of tax liability is correct? Compromise of a tax liability
is
a. Available only at the administrative level
b. Available only before trial at the CTA
c. Available even during appeal, provided that prior leave of court is obtained
d. Still available even after the court decision has become final and executory

2. The Commissioner of Internal Revenue issued a BIR ruling to the effect that the transaction is
liable to income tax and value added tax. Upon receipt of the ruling, a taxpayer does not agree
thereto. What is his proper remedy?
a. File a petition for review with the CTA within 30 days from receipt thereof
b. File a motion for reconsideration with the Commissioner on Internal Revenue
c. File an appeal to the Secretary of Finance within 30 days from receipt thereof
d. File an appeal to the Secretary of Justice within 30 days from receipt thereof

3. The Commissioner of Internal Revenue may not inquire into the bank deposits of a taxpayer,
except when the taxpayer
a. Files a fraudulent return
b. Offers to compromise the assessed tax based on erroneous assessment
c. Offers to compromise the assessed tax based on financial incapacity to pay
d. Did not file his income tax return for the year

4. Which statements is false under the VAT law?

a. A VAT registered person will be subject to VAT for his taxable transactions, regardless of
his gross sales or receipts
b. A person engaged in trade or business selling taxable goods or services must register as a
VAT person, when his gross sales or receipts for the year exceed Php3,000,000
c. A person who issued a VAT registered invoice or receipt for a VAT exempt transaction is
liable to the 12% VAT as a penalty for the wrong issuance thereof
d. Once a doctor of medicine exercises his profession during the year, he needs to register as
a VAT person and to issue VAT receipts for professional fees received.

5. IBP Bank extended loans to debtors during the year, with real properties of the debtors being
used as collateral to secure the loans. When the debtor failed to pay the unpaid principal and
interest after several demand letters, the bank foreclosed the same and entered into contract of
lease with tenants. The bank is subject to the tax as follows:
a. 12% VAT on the rental income, but exempt from the 7% gross receipts tax
b. 7% gross receipts tax on the rental income, but exempt from VAT
c. Liable to both the 12% VAT and 7% gross receipts tax
d. Exempt from both the 12% VAT and 7% gross receipts tax
6. Except for one transaction, the rest are exempt from value added tax, which one is subject to
value added tax?
a. Sales of chicken by a restaurant owner who did not register as a value added tax person and
whose gross annual sales is Php 1.2M
b. Sales of copra by a copra dealer to a coconut oil manufacturer who did not register as a
value tax person and whose gross annual sales is Php 5M
c. Gross receipts of a CPA during the year amounted to Php 1M, the CPA registered as a value
added tax person in January, before practicing his profession
d. Sales of a book store during the year amounted to Php 10M, it did not register as a value
added tax person with BIR

7. Under the VAT system, there is no cascading because the tax itself is not again being taxed.
However, in determining the tax base on sale of taxable goods under the VAT system
a. The professional tax paid by the professional is included in gross receipts
b. The other percentage tax paid by the taxpayer is included in gross selling price
c. The excise tax paid by the taxpayer before withdrawal of the goods from the place of
production or from customs custody is included in the gross selling price
d. The documentary stamp tax paid by the taxpayer is included in the gross selling price or
gross receipts

8. A pawnshop shall now be treated, for business tax purposes

a. As a lending investor liable to the 12% VAT on its gross receipts form interest income and
from gross selling price from sale of unclaimed properties
b. Not as lending investor, but liable to the 5% gross receipts tax imposed on a non-bank
financial intermediary under Title VI (Other Percentage Taxes)
c. As exempt from 12% VAT and 5% gross receipts tax
d. As liable to the 12% VAT and 5% gross receipts tax

9. Mr. V, a retiree, bought 10,000 CDA shares that are unlisted in the local stock exchange for Php
10/share. In 2019, the said shares had a book value of Php 60/share. In view of a car accident,
Mr. V had to sell his CDA shares but he could sell the same only for Php 50/share. The sale is
subject to tax as follows:
a. 15% capital gains tax on the capital gain from sale of Php 40/share (selling price less cost)
b. 15% capital gains tax on the capital gain of Php 50/share (book value less cost)
c. 15% capital gains tax on the capital gain from sale of Php 40/share (selling price less cost)
plus donor’s tax on the excess of the fair market value of the shares over the consideration
d. Graduated income tax rates on the net taxable income from the sale of the shares.

10. The total net amount paid for the salaries and wages amounted to P9,000,000 after effecting
following deductions for employees:
SSS premiums contributions P420,000
Philhelath premiums contributions 100,000
Pag-ibig premiums contributions 180,000
Creditable withholding tax 300,000
In addition, the corporation provided its expat president for operations P300,000 cash as fringe
benefit. The allowable deduction for salaries and benefits is
a. P10,000,000
b. P10,400,000
c. P10,300,000
d. P10,461,538
11. Katherine Kunt sold his piano, a capital asset which he purchased in 2000 at a cost of P50,000.
The terms of sale show:
Downpayment - January 15,2014 ------------------ P20,000
Installment - February 15,2014 ------------------ 20,000
- February 15,2015 ------------------ 40,000
- February 15,2016 ------------------ 40,000
A will report a taxable gain on above sales in 2014 of
a. P11,667
b. P23,333
c. P35,000
d. P70,000

12. A, insured his life for P10M. in case A dies, the proceeds of the life insurance shall be:
a. Excluded from gross estate if the beneficiary is the estate, executor or administrator
whether revocable or irrevocable
b. Part of gross income if the beneficiary is a third person and the designation is revocable
c. Part of the gross estate if the beneficiary is a third person and the designation is irrevocable
d. Excluded from gross income whether beneficiary is revocable or irrevocable

13. Which of the following is not a power vested in the Bureau of Internal Revenue?
a. The assessment and collection of all national internal revenue taxes, fees and charges
b. The enforcement of all forfeitures, penalties and fines
c. The granting of tax exemptions and other tax incentives to taxpayer
d. The execution of judgements in all cases decided in its favor by the Court of Tax Appeals
and the ordinary courts

14. Tax credit for foreign tax paid is allowed on

a. Income tax paid by non-resident citizen
b. Estate tax paid by a resident alien
c. Income tax paid by non-resident alien
d. Donor’s tax paid by non-resident alien

15. Which of the following is not considered as transaction deemed sale?

a. Transfer, use or consumption not in the ordinary course of business of goods or properties
originally intended for sale or for use in the course of business
b. Distribution or transfer to shareholders or investors as share in the profits of the vat-
registered person or to creditors in payment of debt
c. Consignment of goods if actual sale is not made within 60 days following the date such
goods were consigned
d. Retirement from or cessation of business, with respect to capital goods existing as such of
retirement or cessation

16. Which of the following is subject to VAT?

a. Sale of passenger or cargo vessels and aircraft for domestic or international transport
operations
b. Sale of agricultural and marine food products in their original state
c. Sales by agricultural cooperatives duly registered with the Cooperative Development
d. Sale of fuel, goods and supplies by persons engaged in international shipping or air
transport operations.

17. HEAD Transport Corporation has land, sea and air transport operations. To improve its
services, which of the following importation is subject to vat?
a. 20 units of airconditioned buses
b. 12 units of life-saving, safety and rescue equipment for shipping transport operation
c. 10 airplanes
d. 5 ships
18. The importation of the following is subject to VAT, except
a. vegetable, cows and shrimps
b. Logs, woods and abaca
c. Shells, corals and tobacco
d. Cotton, orchids and bamboos

19. The importation of the following is exempt from VAT, except

a. grapes, apples and oranges
b. poultry and livestock
c. race horse, fighting cocks and zoo animals
d. rice, corn and coffee beans

20. Which of the following properties owned by non-resident alien decedent is not subject to the
rule on reciprocity?
a. Shares of stock in a Philippine domestic corporation
b. Investment in stock in a US corporation 80% of the business of which is in the Philippines
c. Investments in bonds in a US corporation that have acquired business situs in the Philippines
d. 40% share in a Philippine partnership

21. Under absolute community of property, which of the following is a community property?
a. Property inherited by the surviving spouse during the marriage
b. Property bought during the marriage using the money inherited by the decedent before
marriage
c. Personal belongings (e.g. clothes, shoes, etc.) bought during the marriage for the exclusive
use of the decedent
d. Jewelry inherited by the decedent during marriage

22. On April 15, 2015, A filed his income tax return for his 2014 income and paid the tax due
thereon. In 2016, A discovered that he made an overpayment in his income tax return. He filed
a written claim for refund of tax erroneously collected with the CIR on October 1, 2016. On
April 14, 2017, without receiving a decision on his claim for refund, A, filed in the CTA a
petition for review on his claim for refund of tax erroneously collected. Which of the following
is correct?
a. The CTA did not acquire jurisdiction over the petition for review because the appeal is
premature, there being no decision yet on said claim for refund
b. The CTA’s jurisdiction is to review by appeal decisions of the BIR Commissioner so if there
is no decision, there is nothing to review
c. The CTA acquired jurisdiction over the petition since it is the right of a taxpayer to go to the
CTA with or without decision rendered by the BIR Commissioner
d. The CTA acquired jurisdiction over the petition as the pre-emptory period of 2 years within
which a claim for refund is about to expire and the failure of the CIR to act on the claim is
tantamount to denial of the claim

23. A, a VAT taxpayer, sold the following:

Selling Price Book Value
Old warehouse Php 3,000,000 Php 4,000,000
Old factory 6,000,000 5,000,000
Old residential house 8,000,000

The output VAT is

a. Php 1,080,000
b. Php 1,200,000
c. Php 2,040,000
d. Php 0
24. ABC, an international air carrier imported aviation fuel at a total landed cost of Php 500M
thereafter, it sold Php 100M of the importation to DEF, a domestic air carrier. Which of the
following is correct?
a. ABC is subject to VAT on its sale to DEF
b. DEF is considered as an importer of the fuel purchased from ABC
c. The importation and sale made by ABC is exempt from VAT
d. The importation and sale made by ABC will be subject to VAT

25. The following shall be subject to 3% percentage tax

I. Cars for rent or hire driven by the lessee
II. Owners of bancas
III. Owners of animal drawn two wheeled vehicles
IV. Keepers of garage
a. Only I
b. I and II
c. I, II and IV
d. I and IV

26. Radio and television broadcasting companies who have an option to be registered as a value
added taxpayer and the option is exercised, which of the following is correct?
a. It can be revoked within 3 years
b. It can revoked within 5 years
c. It can be revoked within 2 years
d. It can not be revoked

27. The CIR may suspend the business operations and temporarily close the business establishment
of a VAT registered person if there is understatement of taxable sales or receipts by
a. More than 20%
b. 30% or more
c. 20% or more
d. More than 50%

28. The following transactions shall be deemed sales, except

a. Distribution or transfer to creditors in payment of debt
b. Transfer, use or consumption in the course of business of goods or properties originally
intended for sale or for use in the course of business
c. Consignment of goods if actual sale is not made within 60 days following the date such
goods were consigned
d. Retirement from or cessation of business with respect to inventories of taxable goods
existing as of such retirement or cessation

29. One of the following compensation income of an individual taxpayer is NOT an exclusion from
gross income
a. Monetized vacation leaves not exceeding 10 days a year
b. Separation pay of an employee who resigned from his employment
c. Retirement benefits of an employee who has worked for an employer for at least 10 years,
who at the time of retirement is not less than 50 years of age, and who avails of the
retirement for the first time.
d. De minimis benefits

30. Gross income from within the Philippines of a resident alien subject to final withholding tax at
source
a. Dividend income from a resident foreign corporation
b. Share from the net income after tax of a domestic general partnership in trade
c. Interest income from investments in bonds
d. Gain from sale of capital assets
31. In which of the following instances may a taxpayer include his income as part of gross income
subject to basic tax at his option
a. When it involves a gain from sale of shares of stock held as capital assets, is not traded in
the stock exchange and the gain does not exceed P100,000
b. When a real property held as capital asset is sold to the government or any of its political
subdivision
c. When it involves a gain from sale or shares of stock held as capital assets and is traded in
the stock exchange
d. When the sale involves a real property held as capital asset

32. The Philippines adheres to promote small scale business as essential to country’s economic
development since the government gave tax exemption for incomes generated from its activities
by Micro Business Enterprises. What, is therefore, a “Micro Business Enterprise?”
a. Any business engaged in production, processing or manufacturing of products or
commodities, including agro-processing, trading and services whose total assets excluding
loans and lands not exceeding Php3,000,000.
b. Any business engaged in production, processing or manufacturing of products or
commodities, including agro-processing, trading and services whose total assets including
loans and excluding lands not exceeding Php3,000,000.
c. Any business engaged in production, processing or manufacturing of products or
commodities, including agro-processing, trading and services whose total capitalization not
exceeding Php3,000,000.
d. Any business engaged in production, processing or manufacturing of products or
commodities, including agro-processing, trading and services whose total capitalization
excluding lands not exceeding Php3,000,000.

Fellacio, PEZA registered enterprise, operating in the Philippines for the year 2018 was given an
income tax holiday for 4 years, presented the following financial data:
Sales to registered activities P5,000,000
Sales to unregistered activities P1,000,000
Cost of sales outside customs territory P3,000,000
Administrative expenses P1,200,000

33. How much is due to National Government, after the income tax holiday period?
a. P75,000
b. P90,000
c. P165,000
d. P180,000

34. How much is due to Local Government, after the income tax holiday period?
a. P50,000
b. P60,000
c. P120,000
d. P42,000

35. What is the VAT treatment for sales within customs territory?
a. sales made by a supplier from the ecozone to a purchaser in the customs territory shall be
considered an importation into the customs territory and therefore vatable importation.
b. sales made by a supplier from the customs territory to a purchaser in the ecozone shall be
treated as exportation from the customs territory shall be zero rated vat.
c. Exempt from VAT if will not breach threshold of 30% from outside customs territory.
d. none, because it is beyond territorial jurisdiction.
 Mang Tits, has an apartment building situated at Mabalacat, Pampanga.
Owner’s Declaration showed the following valuation:
Land - P 9,000,000
Building - P 4,000,000
Assessor’s Value per assessment rolls:
Land – P7,000,000
Building – P6,000,000

Land use Assessment Levels

Residential 20%
Agricultural 40%
Commercial, Industrial and Mineral 50%
Timberland 20%
Special classes: cultural, scientific 15%
Hospital, and water districts 10%

Commercial/Industrial Building
FMV Over But Not Over Assessment Level

300,000.00 30%

300,000.00 500,000.00 35%

500,000.00 750,000.00 40%

750,000.00 1,000,000.00 50%

1,000,000.00 2,000,000.00 60%

2,000,000.00 5,000,000.00 70%

5,000,000.00 10,000,000.00 75%

10,000,000.00 80%

36. How much is the assessed value?

a. P9,000,000
b. P8,000,000
c. P14,000,000
d. P16,000,000

37. How much is the Basic real property tax?

a. P180,000
b. P160,000
c. P90,000
d. P80,000

38. What is the maximum penalty for local

taxes? a. 12%
b. 24%
c. 36%
d. 72%

39. Assessed value shall be classified based on:

 a. actual use
b. owners declaration
c. assessor’s declaration
d. owners declaration or assessor’s value whichever is higher

Anthony Cabe, single, an American but resident of Friendship Road, Angeles, Pampanga, died
in year 2018 left the following properties:
Gross estate in Philippines
Family Home P7,000,000
Agricultural land inherited P8,000,000
Cash and investment P15,000,000

Gross estate Foreign country

Dodge Calibre P12,000,000
Tiny House P8,000,000
Funeral expenses P200,000
Administrative expenses P2,000,000
Claims against the estate P5,000,000
Unpaid mortgage P2,000,000

40. How much is the gross estate?

a. P50,000,000
b. P30,000,000
c. P20,000,000
d. 0

41. How much is the total ordinary deductions?

a. P5,000,000
b. P7,000,000
c. P9,000,000
d. P9,200,000

42. How much is the special deduction?

a. P12,000,000
b. P15,000,000
c. P7,500,000
d. P7,000,000

43. How much is the estate tax due?

a. P1,680,000
b. P1,860,000
c. P2,160,000
d. P2,610,000

44. Azure corporation a domestic corporation duly registered under Philippines laws, made the
following donation for the year as follows:
March 31, Shares of stock of Azure Corporation to its shareholders amounting to Php
25,000,000.
June 30, Land to subsidiary Corporation amounting Php77,000,000.
September 30, Cash to corporate manager and officers total amount of Php11,000,000.
December 31, Php100,000 donation to a private school for the construction of school
building.
What type of tax is imposed on March 31 donation?
a. Final Tax
b. Net Income Tax
c. Donor Tax
d. Exempt from tax
45. What type of tax is imposed on June 30 donation?
a. Final Tax
b. Net Income Tax
c. Donor Tax
d. Exempt from tax

46. What type of tax is imposed on September 30 donation?

a. Final Tax
b. Net Income Tax
c. Fringe Benefit Tax
d. Donor Tax

47. What type of tax is imposed on December 31 donation?

a. Final Tax
b. Net Income Tax
c. Donor Tax
d. Exempt from tax

48. Andrea Pascual, Certified Public Accountant, employed by CAM Corporation in its Internal
Audit Group, has inside information to believe she will profit from the corporation if she
invest in its stockholding’s so she decided to realize what she knows and made the following:
On April of 2021 Purchase 50,000 shares for Php50 of CAM Corporation.
Again Purchase another 50,000 shares for Php60 of CAM Corporation on May 3, 2021
May 8, 2021 CAM declared 10% stock dividend after annual stockholders meeting a day after
book value per share doubled its value.
May 9 Andrea Sold 100,000 shares for Php100
What is the capital gains tax?
a. 750,000
b. 495,000
c. 675,000
d. 0

49. What is the documentary stamp tax?

a.100,000
b. 75,000
c. 50,000
d. 25,000

50. James Deakin, purely engaged in business, on cash basis, had the following for the given year:
Gross Revenue Php800,000
Cost of Sales 200,000
Business expenses 150,000
Other (non-operating) business income:
Interest from bank deposit Php20,000
Gain from sale of capital asset bought more than a year 50,000
How much is James Deakin taxable income if he opted OSD?
a. 530,000
b. 505,000
c. 410,000
d. 385,000

51. Income tax due if he availed the 8% GRT?

a. 68,000
b. 69,600
c. 48,000
 d. 46,000

Bong & Billy are partners in a GPP which realized a Sales of P8,000,000 with corresponding
cost of sales P5,000,000 and Operating Expenses P2,000,000 in year 2018. Bong, single,
benefactor of senior citizen has his own income of P400,000 and cost of sales and expenses
P30,000 and P230,000, respectively. While, Billy, with one qualified dependent generated
P450,000 income and incurred cost of sales and expenses P200,000 and P50,000, respectively.
They share 70:30 in the profits.
Bong and Billy incurred unliquidated expenses of P100,000 & P50,000, respectively, for the
partnership.

52. Taxable income of Bong if he claims itemized deductions:

a. P850,000
b. P840,000
c. P740,000
d. P665,000

53. Taxable income of Billy if he opted for OSD:

a. P500,000
b. P570,000
c. P475,000
d. P495,000

54. A Co. and B Co., domestic corporation, both in the construction business, formed a joint
venture to build houses, a government project duly licensed with PCAB, had the ff:
Joint venture A Co. B Co.
Income Php80,000,000 2,000,000 3,000,000
Expenses 60,000,000 1,200,000 2,000,000

What is the income tax of the Joint venture?

a. 6,000,000
b. 20,000,000
c. 1,800,000
d. 0

55. What is the taxable income of the joint venture?

a. 1,800,000
b. 20,800,000
c. 10,800,000
d. 3,240,000

56. If the joint venture is not approved by PCAB, what is the taxable income of the
venture? a. 6,000,000
b. 3,000,000
c. 20,000,000
d. 0

Mr. Jose Marie Fabella signified his intention to be taxed at 8% income tax. In the given year
he earned the following:
Rentals for first 9 months - P250,000/month
Rentals for last 3 months - P1,000,000/month
Proper withholding of tax was made.
57. How much is the tax due on the 3rd quarter?
a. P160,000
b. P180,000
c. P22,500
d. P25,000
58. How much is the gross receipts/percentage tax due on the 4th quarter?
a. 0
b. P67,500
c. P420,000
d. P525,000

59. How much is the tax due on his final return in case Mr. Fabella opted for OSD?
a. P398,000
b. P445,500
c. P745,500
d. P858,000

60. When is he required to update his registration from non-VAT to VAT?

a. October 31, 2018
b. November 30, 2018
c. December 31, 2018
d. January 1, 2019

Dong Company, engaged in restaurant business, uses accrual basis of accounting in its
financial statements. Its operation for the year ended shows the following:
Gross Revenue on account to customers 3,500,000
Gross Receipts from senior citizens, net of 20% discount 400,000
Purchases, directly attributable to customers other than senior citizens, net of VAT 300,000
Purchases, cannot be attributed, net of VAT 200,000
Direct Cost 2,000,000
Purchase of Equipment, used for all services rendered 600,000
Increase in Accounts Receivable (VAT inclusive) 224,000
Operating Expenses 1,000,000

61. Compute the Output VAT?

a. 420,000
b. 468,000
c. 396,000
d. 372,000

62. Compute the creditable input VAT?

a. 132,000
b. 129,000
c. 123,000
d. 120,000

63. Determine the amount of Gross Income?

a. 900,000
b. 2,000,000
c. 3,500,000
d. 4,000,000

64. Determine the amount of allowable deduction?

a. 1,000,000
b. 1,112,000
c. 1,500,000
d. 1,600,000

Wener Company is engaged in a hardware business. It uses accrual basis of accounting in its
financial statements.
Gross Revenue 3,500,000
Sales Returns 200,000
 Increase in Accounts Receivable, VAT inclusive 224,000
Increase in Inventory, net of VAT 150,000
Purchases 1,000,000
Supplies (40% from VAT registered) VAT exclusive 600,000
Services (60% from VAT registered) VAT exclusive 500,000
Other Operating Expenses 200,000

65. Compute the Output VAT?

a. 420,000
b. 396,000
c. 372,000
d. 360,000

66. Determine the creditable input VAT?

a. 120,000
b. 184,800
c. 166,800
d. 108,000

67. Determine the Taxable Income?

a. 1,000,000
b. 1,082,800
c. 1,350,000
d. 1,500,000

68. Imposition of fixed license fee for the sale of Bible and other religious items is a violation of
?
a. exemption of nonprofit organization from taxation
b. exemption of religious organization from property taxation
c. no appropriation for religious freedom
d. non-infringement of religious freedom

69. Applicants availing the 20% discount of senior citizens must present which of
following documents.
I. I. Company ID
II. II. LGU Senior Citizen ID
III. III. Passport
a. True, false, true
b. False, False, true
c. True, true, False
d. False, true, true

70. Gerry Alinog was being prosecuted by the BIR for failure to pay his income tax liability for
Calendar Year 2015 despite several demands by the BIR in March 2017. The information was
filed with the RTC only last June 2022. What is the remedy of Gerry Alinog?
a. Gerry should file a motion to quash the Information on the ground of prescription
b. Gerry should answer the Information
c. Gerry should file a protest with the Commissioner of BIR
d. Gerry should appeal to the CTA

Beginning 1 January 2018:

Tax on column 1 (PHP) Tax on excess (%)

Taxable Income (PHP)
 Over Not Over

0 250,000 - 0

250,000 400,000 - 20

400,000 800,000 30,000 25

800,000 2,000,000 130,000 30

2,000,000 8,000,000 490,000 32

8,000,000 2,410,000 35

The End.
TAXATION FINAL PRE-BOARD
BATCH 89
ANSWER KEY

1. C
2. C
3. C
4. D
5. B
6. C
7. C
8. B
9. C
10. B
11. C
12. D
13. C
14. B
15. D
16. D
17. A
18. A
19. C
20. B
21. B
22. D
23. A
24. B
25. D
26. D
27. B
28. B
29. B
30. B
31. B
32. B
33. C
34. A
35. A
36. A
37. A
38. D
39. A
 40. A
41. B
42. A
43. B
44. D
45. D
46. C
47. C
48. A
49. A
50. B
51. D
52. B
53. B
54. D
55. C
56. C
57. C
58. A
59. A
60. B
61. C
62. D
63. B
64. B
65. B
66. B
67. B
68. D
69. D
70. B

SOLUTIONS:
10. B
Salaries and Wages P 9,000,000
Add: SSS premiums contribution P 420,000
Philhealth premiums contribution 100,000
Pag-ibig premiums contribution 180,000
Creditable Withholding Tax 300,000
Fringe Benefit 300,000
FBT (P300,000/75%) x 25% 100,000 1,400,000
Allowable deduction P 10,400,000
11. C
Selling Price P 120,000
Cost 50,000
Gain 70,000
Holding Period 50%
Taxable Gain P 35,000

*Disqualified to report on installment because initial payment exceeded 25% of selling price.

23. A
Selling Price – Old Warehouse P 3,000,000
Selling Price – Old Factory 6,000,000
Total 9,000,000
VAT Rate 12%
Output VAT P 1,080,000

*Old doesn’t mean abandoned or no longer being used in business.

33. C

Sales to registered activities P 5,000,000 Sales to unregistered activities P 1,000,000

Allocated Cost of Sales Allocated Cost of Sales
(5M/6M *3M) 2,500,000 (1M/6M *3M) 500,000
2,500,000 Gross Income 500,000
Tax Rate for National Gov’t 3% Less: Allocated Expenses 200,000
(1M/6M *1.2M)
75,000 300,000
Corporate Income Tax Rate 30%
90,000

Share of National Government in GIT P 75,000

5%
Corporate Income Tax 90,000
Total tax due to the National Gov’t P 165,000

Allocation of Cost of Sales is based on 5M registered sales over 6M total Sales.

Allocation of Expenses is based on 1M unregistered sales over 6M total Sales.

34. A
Sales to registered activities P 5,000,000.00
Allocated Cost of Sales 2,500,000.00
P 2,500,000.00
Share of LGU from GIT 5% 2%
Due to Local Government P 50,000.00
36. A Land P 9,000,000
Assessed level 50% P 4,500,000

Building P 6,000,000
Assessed level 75% 4,500,000
Total Assessed Value P 9,000,000

37. A Assessed Value P 9,000,000

Tax Rate 2%
Basic Real Property Tax for P 180,000
Mabalacat City

40. A Family Home P 7,000,000

Agricultural Land 8,000,000
Cash and Investment 15,000,000
Dodge Calibre 12,000,000
Tiny House 8,000,000
Gross Estate P 50,000,000

41. B Claims against the Estate P 5,000,000

Unpaid Mortgage 2,000,000
Total Ordinary Deductions P 7,000,000

42. A Family Home P 7,000,000

Standard Deduction 5,000,000
Total Special Deductions P12,000,000

43. B Gross Estate P50,000,000

Less: Ordinary Deductions 7,000,000
Special Deductions 12,000,000
Net Estate P31,000,000
Tax Rate 6%
Estate Tax Due P 1,860,000
48. A
Selling Price (100,000 shares@P100) P10,000,000
Less: Average cost (100,000 shares@P50) 5,000,000
Gain 5,000,000
CGT Rate 15%
Capital Gains Tax P 750,000

Computation of Average Cost

(50,000 shares@P50) 2,500,000

(50,000 shares@P60) 3,000,000
5,500,000
÷ Total number of shares 110,000
Average cost P 50

49. A
Selling Price (100,000 shares@P100) P10,000,000
Divided by 200
Base 50,000
DST per document P 2
Total DST P 100,000

50. B
Gross Revenue P 800,000
Less: Optional Standard Deduction 320,000
Taxable Income P 480,000
Add: Other Income
Gain from long-term Capital Asset 25,000
Taxable Income P 505,000

51. D
Gross Receipt/Revenue P 800,000
Add: Other Income 25,000
Taxable Income P 825,000
Less: Tax Exemption 250,000
Tax Base P 575,000
Tax Rate 8%
GRT due P 46,000
52-53. B and B
General Professional Partnership
Income P1,000,000
Bong Billy
Share in Partnership P 700,000 P 300,000
Add: Own Income 400,000 450,000
Less: Cost of Sales 30,000 -
Expenses 230,000 -
OSD - 180,000
Total Taxable Income P 840,000 P 570,000

55. C Income of A company P 2,000,000

Less: Expenses 1,200,000
Net Income of A P 800,000
Share in the Joint Venture 10,000,000
Taxable Income of Joint Venture, A. Co. P10,800,000

57-59. C,A and A

1st Quarter 2nd Quarter 3rd Quarter

Gross Rentals P 750,000 P 1,500,000 P 2,250,000
Less: Deductions 250,000 250,000 250,000
Tax Base 500,000 1,250,000 2,000,000
GRT 8% 8% 8%
Tax due 40,000 100,000 160,000
Less: 5% CWT, if Gross Income
do not exceed 3M 37,500 75,000 112,500
Prior tax paid - 2,500 25,000
Tax still due P 2,500 P 22,500 P 22,500
 In excess of 3M disqualified from GRT
Annual
Gross Rentals P 5,250,000
Less: Deductions OSD 2,100,000
Taxable Income 3,150,000
Apply Progressive Tax Rates .
Tax due 858,000
Less: 10% CWT, if Gross income for the year exceed 3M 300,000
5% CWT prior quarters 112,500
Prior tax paid 47,500
Tax still due 398,000

61. C Gross Revenue on account to customers P 3,500,000

Less: Increase in Accounts Receivable, net of VAT 200,000
Gross Receipts P 3,300,000
VAT Rate 12%
Output VAT P 396,000

62. D Purchases, directly attributable to VAT customers P300,000 x 12% = P 36,000

Purchases, cannot be attributed 200,000 x 12% x 3.5/4 = 21,000
Purchase of equipment 600,000 x 12% x 3.5/4 = 63,000
Creditable input VAT P 120,000

* Allocation is based on vatable sales 3,500,000 over total sales of 4,000,000 (including vat
exempt sales of 500,000 to senior citizen).

63. B Gross Revenue P 3,500,000

Gross Receipts from senior citizens 500,000
Less: Direct Cost 2,000,000
Gross Income P 2,000,000

64. B Operating Expense P 1,000,000

Senior citizen discount 100,000
Input VAT (P200,000 x 12% x (.5/4)) 3,000
(P600,000 x 12% x (.5/4)) 9,000
Total Allowable Deduction P 1,112,000

(allocation is based on vat exempt sales 500,000 over total sales 4,000,000)
65. B Gross Revenue P 3,500,000
Less: Sales Returns 200,000
Net Sales P 3,300,000
VAT Rate 12%
Output VAT P 396,000

66. B Purchases (P1,000,000 x 12%) P 120,000

Supplies (600,000 x 12% x 40%) 28,800
Services (500,000 x 12% x 60%) 36,000
Creditable input VAT P 184,800

67. B Gross Revenue P 3,500,000

Less: Sales Returns 200,000
Net Sales P 3,300,000
Less: Cost of Sales (Purchases1M-150,000 increase inventory)
850,000 Gross Income P 2,450,000
Less: Supplies P 600,000
Services 500,000
Operating Expense 200,000
Input VAT (600,000x12%x60%) 43,200
(500,000x12%x40%) 24,000 1,367,200
Taxable Income P 1,082,800