ACCOUNTING COMPUTATIONS 2021 2022 PDF

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(]f tvera a: 4 tChoose the letter of the correct answer. 1. It arises when two or more heirs or beneficiaries inherit and und!vided property froma decedent, or when a donor makes a gift of an undivided property in favor of two or more donees a c. Joint account b d. Co-ownershipAnswer: DWhen will an ...

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Choose the letter of the correct answer. a 1. It arises when two or more heirs or beneficiaries inherit and und!vided property from decedent, or when a donor makes a gift of an undivided property in favor of two or more donees a. Partnership b. Trust

c. Joint account d. Co-ownership

Answer: D When will an inherited property be considered as owned by an unregistered partnership? When the property remained undivided for more than ten (10) years. I. It. When no attempt was ever made to divide the same among the co-heirs, nor was the property under administration proceedings nor held in trust a. Only condition I is required. b. Only condition it is required c. Conditions I and ll are required d. None of the above

Answer: C Use the followin data for the next three 3 uestions: Pedro, Juan, and Antonio are heirs of Luna who died on November 1, 2018. The properties of Luna comprised solely of real property valued at P50,000,000 at the time of his death. The property is subject to lease earning rental income. During 2019, the property remained undivided and it derived a net rental income of P15,000,000. 3. For income tax purposes, the heirs will be tax on net rental income from the inherited property for the year 2019 as: a. Partners in a commercial partnership b. Partners in a general professional partnership c. Partners in an unregistered co-partnership d. Co-owners

Answer: D 4.

What amount should be reported as taxable income of the co-ownership in 2019? a. P50,000,000 c. P14,980,000 b. P15,000,000 d. PO

• 5.

Answer: D

What amount should each heir report in their individual returns as their share in the net

rental income of the property they inherited in 2019? a. P50,000.000 c P10,000.000 b. P15,000,000 d. P5,000,000

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Answer: D J. Share of each co owner = P15M/3 = P5,000,000 -

6. Income received by the estate during the period of administration or settlement of the

estate, for tax purposes is known as a. Income of the estate b. Income of the heirs c. Income of the trustee d. Income of the testator •

7.

Answer: A

Statement 1: Where the estate is under judicial administration, the income of the estate shall be taxable to the fiduciary or trustee. Statement 2: Where the estate is not under judicial administration, the income of the estate shall be taxable to the heirs and beneficiaries a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true •

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Statement 1: The amount of income of the estate for the taxable year, which is properly paid or credited during such year to any legatee, heir, or beneficiary, is a special item of deduction from the gross income of the estate. Statement 2: An allowance paid to a widow or heir out of the corpus of the estate, is not deductible from the gross income of the estate. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true Answer: D Corpus of the estate means share in inheritance, non-deductible from estate's gross income.

9.

Statement 1: When an estate, under administration, has income-producing properties, the annual income of the estate becomes part of the taxable gross estate. Statement 2: When an estate, under administration, has income-producing properties and its income during the year is distributed to the heirs, the income so distributed is taxable to the heirs as part of their gross income for the year. are false a. Statements 1 2& is true but statement 2 is false b. Statement 1 Statement 1 is false but statement 2 is true c. Statements 1 and 2 are true d.

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•:• Answer: C Annual income of the estate is subject to income tax, but not to estate tax ( a transfer tax) Inheritance and donation are not classified as income, hence n ot subject to income tax. rules in determining the taxable income and the 10. The following statements refer to the i applicable income tax liability of an estate. Which of the statements is correct? I. II

The items of gross income of the estate are the same items as the items o f gross income of individual taxpayers. Deductions from the gross income of the estate are the same as the items o f

deductions allowed to an individual taxpayer. In addition to the allowable deductions under Section 34 of the Tax Code, the estate is allowed to deduct the amount of income of the estate during the taxable year that is paid or credited to the legatee, heir or beneficiary. IV.฀ The amount of income of the estate during the year that is paid or credited to the legatee, heir or beneficiary is subject to final withholding tax of 15%. c. I. 11,111 and IV d. None of the above

a land II only b I. H and Ill only

Answer: "B" Item "IV" is false. Income of the estate during the year that is paid or credited to the legatee, heir or beneficiary is subject to creditable withholding tax of 15%. not a final tax. 11. Which of the following is included in the income of the estate of a decedent? a. Income received by the estate of a deceased person during the period of administration or settlement of the estate. b. Excess of selling price over the appraised value placed upon the property at the ti me of death. where the property was sold after the settlement of the estate. c. Appreciation in the value of property passed to the executor or administrator upon death of decedent d. Delivery of property in kind to legatee or devisee. •:'• Answer: A

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COMPUTATION OF INCOME TAX DUE and PREPARATION OF INCOME TAX RETURN Use the following data for the next two (2) questions:

Namahinga Nah died leaving an estate worth P10,000,000, The estate is under administration. In 2020, the properties in the estate earned a gross income of P1,200,000 and the estate incurred expenses of P600,000, Felipe, the only heir, received P200,000 from the income of the estate. 12. How much is the income tax due of the estate? a. P30,000 c. P50,000 b. P40,000 d. P60.000

Answer: A Solution: Gross income OPEX Income of the estate distributed to Felipe Estate's taxable net income Income Tax Due (Tax Table for individuals)

P1,200.000

(600,000) (200,000) P400,000 P30,000

13. Assume that Felipe also earned net income of P500,000 from his trading business. What amount should Felipe report as his taxable income for the year? c. P530,000 a. P200,000 P500,000 d. P700,000 b.

Answer: D Solution: Gross income from trading business Amount received from the income of the estate Taxable net income of Felipe

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P500,000 200,000 P700,000

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INCOME TAX OF A TRUST 14. Which of the following statements is not correct? a. II

c d

An irrevocable trust is subject to income tax. An irrevocable trust is taxed in the same manner as an individual taxpayer. An irrevocable trust is taxed at a rate of 30% of net taxable income None of the above

Answer: D 15. Mr • Nag-aalangan created a trust naming his eldest son, Kadudaduda as beneficiary. If the eldest son could not abide with the terms provided in the trust instrument, Mr. Nagaalangan has the power to cancel the trust agreement. For the current taxable year, the trust earned a net income of P1,000,000. On the other hand, Mr. Nag-aalangan earned a compensation income of P1,500,000 and business income of P1,000,000. The taxable income of the trust is a. P1,000,000 b. P980,000

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c. P950,000 d. nil

Answer: D If the trust agreement is revocable, its income shall be taxable to the grantor

16. Based on the above data, how much is the taxable income of Mr. Nag-aalangan? a. b.

P3,450,000 P3,500,000

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c. P2.450,000 d. nil

Answer: B Solution Gross income-trust Compensation income Business income Net Taxable income-Grantor

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P1,000,000 1,500,000 1,000,000

P3,500,000

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PREPARATION OF INCOME TAX RETURN of a TRUST Use the following data for the next two (2) questions• On January 1, 2020, Pedro established a trust fund for the benefit of his daughter, Ana. Pedro appointed Atty. Digong as the trustee. The property transferred to the trust is a piece of and with a dormitory earning rental income. During the year, the trust earned P40,000,000 revenues and incurred expenses of P10,000,000. Out of the trust's income, Atty Digong transferred P10,000,000 to Ana. During the year, Ana earned compensation income of P2,500,000, 17. How much is the taxable income of the trust? a. P30,000,000 c. P19,980,000 b. P29,980,000 d. P20,000,000

Answer: D Gross income-trust Expenses Income of the trust given to Ana Net Taxable Income-trust

P40,000,000 (10,000,000) (10,000.000) P20,000,000

18. How much is the taxable income of Ana? a. P2,950,000 c. P13,000,000 b. P12,950,000 d. P11,450,000

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Answer: C Compensation income Income of the trust distributed to Ana Net Taxable Income-Ana

P2,500,000 10,000,000 P12,500,000

19. The taxable income of the trust if it is administered abroad is c P19,980,000 a. P30,000,000 d. P21,480,000 b. P29,980,000

Answer: A P40,000,000 (10,000,000) Expenses NA Income of the trust given to Ana P30,000,000 Net Taxable Income-trust In case of a trust administered in a foreign country, the amount of the income of the estate or trust for the taxable year which is distributed currently by the fiduciary to the beneficiaries is not deductible from the gross income of the estate or trust. Gross income-trust

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20. Based on the preceding number, the taxable income of Ana should be: c. P11,500,000 a. P2,950,000 d. P11,450,000 P2,500,000 b.

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Answer: B.

Compensation income only

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INCOME TAX OF A TRUST CONSOLIDATED ITR Use the follow ►n data for the next two

3 uestions

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2020, Bongbong Jr created two (2) trusts for his minor son, Chiz. During the year, the t In trusts earned net income as follows' 0 P4,000,00 Trust 1 6,000,000 Trust 2 21. How much is the total income tax due of the two Trusts? 0 C. P3,152,20 P3,110,00 a. d. nil b. P3,165,000 •

Answer: A Solution . P4,000,000 6,000,000 P10,000 000

Net income-Trust 1 Net income-Trust 2 Consolidated Taxable Net income Consolidated Income Tax Due (Tax Table) 1 5 t P8,000,000 In excess of P8M @ 35% Consolidated Income Tax Due

22. How much is the income tax due of Trust 1? a. P1,263,440 c. P1,244,000 b. P1,266,000 d. nil •

Answer: C Solution: Consolidated Income Tax Due ALLOCATION Trust 1.4/10 x P3,110,000 Trust 2 Consolidated tax due

P3,110,000 P1,244,000 1,866,000

P3,110,000

23. How much is the income tax due of Trust 2? a P1.895,160 c. P1,891,320 b. P1,899,000 d. P1,866,000 •

Answer: D

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P2,410,000 700,000 P3,110,000

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QUIZZER Choose the letter of the correct answer

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Corporate Taxpayers/Principles 1. RA 10963, otherwise known as the Tax Reform for Acceleration and Inclusion Act (TRAIN Law) took effect on c. December 19, 2017 a December 13, 2017 d January 1, 2018 b December 14, 2017 Answer: D RA 11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE Law) took effect on c. March 27, 2021 a July 1, 2020 d. April 11, 2021 b. March 26, 2021 Answer: ID The CREATE Law took effect on Apnl 11, 2021, however, some of its provisions were specifically provided under the law to take effect at an earlier date, such as the effectivity of the revised RCIT rate of 20% and 25 and the reduced Percentage Tax rate under Section 116 of the Tax Code. as amended

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The term - Corporation" shall include' I One Person Corporation Partnerships, no matter how created or organized II. III. Joint stock companies IV. Joint accounts (ceuntas en participacion) V. Associations VI. Insurance companies VII. Mutual fund companies VIII. Regional operating headquarters of multinational corporations a. I and II only C. I, II, III, IV and V only b. I, II and III only d. All of the above Answer: D are constituted when a group of individuals, acting jointly, establish and operate business enterprise under an artificial name, with an invested capital divided into transferable shares, an elected board of directors, and other corporate characteristics. but operating without formal government authority. a Joint stock companies c. Associations b Joint account companies d. None of the above Answer: A

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is constituted when one interests himself in the business of another by contributing capital thereto, and sharing in the profits or losses in the proportion agreed upon. They are not subject to any formality and may be privately contracted orally or in writing. a Joint stock companies c. Associations b. Joint account d None of the above

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Answer: B

it includes all organizations which have substantially the salient features of a corporation to be taxable as a "corporation." a. Joint stock companies c. Associations b. Joint account d. None of the above •

Answer: C

7, Which of the following is not treated as corporation? a General professional partnership b. A joint venture or consortium formed for the purpose of undertaking construction projects. c. A joint or consortium for engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating consortium agreement under a service contract with the government. d All of the above

Answer: D Generally, a Joint Venture is taxable as a corporation

Partnerships, no matter how created or organized, are taxable as corporations for income tax purposes. Statement 2: Associations and mutual fund companies, for income tax purposes, are excluded in the definition of corporations. a. Only statement 1 is correct b. Only statement 2 is correct c. Both statements are correct d. Both statements are incorrect Statement 1:

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Answer: A No matter how created" simply refer to how the partnership was established, either orally or in writing, registered or unregistered

Which of the following is not a taxable corporation? a. Ana, Lorna and Fe agreed to contribute their money into a common fund to engage in the business of buying and selling consumer goods Their total investment amounted to P300,000 and they did not bother to register their business with the DTI and the SEC.

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Pedro, Juan and Luna, all certified public accountants, agreed to contribute th eir money, property and industry to a common fund with the sole intention of j ointly' exercising their common profession They have registered with the SEC. c. Victorious Bus Company and California Bus Company owns separate franchises t o operate a public utility covering the area of Northern Luzon. To achieve maximu m efficiency of utilizing their assets and to avoid the negative effects of competition, th e two companies agreed to pool their resources together and operate as a sin g l e

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company. Rody and Allan, lawyer and certified public accountants, respectively, agreed to contribute their money, property and industry to a common fund to render service of business process outsourcing. •) Answer: B Pedro, Juan and Luna formed a GPP. one of the exclusions in the definition of Corporation for Taxation purposes

10. Which is not a characteristic of corporate income tax: a. Progressive tax c. General tax d. National tax b Direct tax Answer: A Corporate tax is NOT a progressive tax but a proportional tax. A progressive tax is a tax where the rate increases as the tax base increases. Examples of a progressive tax under the NIRC are, Income tax on individuals, donor's tax (prior to TRAIN Law), estate tax (prior to TRAIN Law) On the other hand, proportional tax is tax in proportion to the amount subject to taxation The tax rate is fixed, regardless of whether the tax base increases or decreases Examples are income tax on corporations. value added tax, percentage taxes, donor's tax and estate tax (upon effectivity of the TRAIN Law) 0

Direct tax is a type of tax where the incidence and impact of taxation fall on the same person The burden of paying the tax can't be shifted by the taxpayer to someone else.

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General tax refers to a general levy by a government that offers no special benefit to the taxpayer, but only a support to governmental programs that benefit all It is a source of pubtic revenue. National tax is a tax imposed by the National government

11. Which of the following is subject to income tax? a. SSS and GSIS b Philippine Health Insurance Corporation (PHIC) c Local Water Districts d. Philippine Amusement and Gaming Corporation (PAGCOR) Answer D ^>

PCSO is taxable upon the effectivity of the TRAIN Law or beginning January 1, 2018 HDMF or Pag-ibig is tax-exempt upon the effectivity of CREATE Law

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12. One of the following is exempt from income tax a. b. c. d.

Proprietary educational institutions Pnvate cemeteries Government educational institutions Mutual savings bank

.7.• Answer: C 13

(Section 30 of the Tax Code, as amended)

Statement 1: Corporations exempt from income tax are not subject to income tax on incomes received which are incidental or necessarily connected with the purposes for which they were organized and operating. Statement 2: Corporations exempt from income tax are subject to income tax on income of whatever kind and character from any of their properties (real or personal) or from any other activity conducted for profit, regardless of the disposition of such income a. Only statement 1 is correct b. Only statement 2 is correct c. Both statements are correct d Both statements are incorrect

Answer: C 14. Which of the following statements is incorrect? "Joint Stock Companies" are constituted when a group of individuals, acting jointly, establish and operate business enterprise a. Under an artificial name. b With an invested capital divided into transferable shares c. An elected board of directors. and other corporate characteristics. d, Operating with formal government authority.

Answer: D 15. A "Joint Account" is constituted when one interests himself in the business of another byland I. Contributing capital thereto. Sharing in the profits or losses in the proportion agreed upon II In They are not subject to any formality It may be privately contracted orally or in writing. IV. c I, II, Ill and IV a. I and II only d. None of the above b I. II and III only .

Answer: C 16 Statement 1: Joint ventures, regardless of the purpose by they were created, are generally exempt from corporate income tax. Statement 2: The share of a co-venturer corporation in the net income of tax exempt joint venture or consortium is subject to corporate income tax. a. Only statement 1 ...