Midterm exam answer - tax PDF

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MIDTERM EXAMINATIONS (120 MINUTES)ACCOUNTANCY DEPARTMENT A resident citizen had the following properties: Properties in Mexico, Pampanga P 2,000, Properties in Hong Kong 1,500, What is the amount subject to Philippine property tax? a. 3,500, b. 2,000, c. 1,500, d. 0 Which of the following forms of e...

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TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT 1. A resident citizen had the following properties: Properties in Mexico, Pampanga P 2,000,000 Properties in Hong Kong 1,500,000 What is the amount subject to Philippine property tax? a. 3,500,000 b. 2,000,000 c. 1,500,000 d. 0 2. Which of the following forms of escapes will more likely to result in loss of revenue to the government? a. Shifting b. Capitalization c. Transformation d. Tax exemption 3. Tax minimization cannot be achieved by a. Tax planning b. Selection of transaction c. Maximization of tax credits and loss carry-overs d. Offsetting of losses and income of subsidiaries 4. Which of the following tax saving practices could result in a BIR assessment? a. Practicing tax avoidance b. Maximizing tax incentives c. Engaging in tax dodging schemes d. Entering into compromise with the government 5. Income tax is not a/an a. National tax b. Excise tax c. Specific tax d. Revenue tax 6. Tax classified as to object does not include a. Poll b. Property c. Excise d. Direct 7. Which is not source of tax law? a. Judicial decisions b. Local ordinance c. BIR Rulings d. Opinions of tax practitioners

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT 8. The collection of the VAT importation is a primary responsibility of a. BIR b. Department of Finance c. Secretary of Finance d. Bureau of Customs 9. An order imposed by the Commissioner of Internal Revenue upon persons to produce certain documents a. Subpoena duces tecum b. Jeopardy assessment c. Closure order d. Oplan Kandado 10. Which is not a local government tax collecting unit? a. Provincial treasurer b. City or municipal treasurer c. Regional treasurer d. Barangay treasurer 11. Which is not a taxpayer’s income tax return? a. BIR Form 1701 b. BIR Form 1702 c. BIR Form 1707 d. BIR form 1601-C 12. This is a settlement for violations in lieu of criminal prosecution to violations of the NIRC? a. Interest b. Surcharge c. Compromise d. All of these 13. Which statement is false? a. A general professional partnership is a withholding agent but not an income taxpayer. b. A government agency is an income taxpayer but is not a withholding agent. c. A foreign government agency is neither an income taxpayer nor a withholding agent d. A private corporation 14. The term capital assets includes a. Stock in trade or other property included in the taxpayer’s inventory. b. Real property not used in the trade or business of the taxpayer. c. Real property primarily used for sale to customers in the ordinary course of trade or business. d. Property used in the trade or business of the taxpayer and subject to depreciation. 15. Lots being rented when subsequently sold are classified as

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT a. Capital assets b. Liquid assets c. Ordinary assets d. Fixed assets 16. What is the asset classification of a lot purchased to be used as a future building site for his business but remained unused for 5 years due to political instability in the area? a. Ordinary asset b. Capital asset c. Financial asset d. Non-financial asset 17. What a. b. c. d.

is the asset classification of a fully depreciated truck that is still in use? Ordinary asset Capital asset Financial asset Non-financial asset

18. What a. b. c. d.

is the asset classification of a foreclosed collateral property held by the bank? Ordinary asset Capital asset Financial asset Non-financial asset

19. What a. b. c. d.

is the asset classification of a church building? Ordinary asset Capital asset Financial asset Non-financial asset

20. Novel prize received for civic achievement. a. Not taxable b. Taxable c. Subject to final tax d. Subject to capital gains tax 21. Income derived from smuggling. a. Subject to regular income tax b. Exempted c. Subject to final taxes for it is a form of a prize d. Deductible against wagering gains 22. Hazard pay received by MWE. a. Not taxable b. Taxable c. Subject to final tax

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT d. Subject to capital gains tax 23. Share in net income of unincorporated partnership or joint venture. a. Not taxable b. Taxable c. Subject to final tax d. Subject to capital gains tax 24. Share in net income of associate or subsidiary. a. Return of capital b. Return on capital c. Subject to final tax d. To be reported in the income tax return 25. Board of director’s fee a. Not taxable b. Taxable c. Subject to final tax d. Subject to capital gains tax 26. Which is not an element of an employer-employee relationship? a. Power to dismiss b. Power of control c. Selection and engagement of employees d. Freedom of means of job accomplishment 27. Which is not an employee classification as to function? a. Minimum wage earner b. Rank and file employee c. Managerial employee d. Supervisory employee 28. Who is an employee? a. Consultant b. TV talents and artists c. Corporate directors holding line function d. Consignees 29. Which a. b. c. d.

is not a mandatory deduction? Philihealth contributions Social Media System Home development mutual fund Union dues

30. Which is taxable item of compensation to a MWE? a. Basic pay

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT b. Hazard pay c. Overtime d. Sabbatical leave pay 31. A person who is not regularly engaged in trade or business made a casual sale of property for P 100,000. What will be the invoice price of the sale? a. P100,000 b. P103,000 c. 112,000 d. Either b or c 32. Mr. Amariliento produces an excisable article for sale in the Philippine market. Which is incorrect with respect to his business taxation? a. He will pay excise tax without regard whether he is a VAT or non-VAT taxpayer. b. Hi is subject to either VAT or percentage tax c. He pays excise tax in addition to VAT and percentage tax d. He pays excise tax in addition to VAT or percentage tax For numbers 33 to 36 33. Valderrama Company, a non-VAT taxpayer paying 3% tax, exceeded the VAT threshold on September 2020. It generated P300,000 and P400,000 sales in October and November and paid respectively P12,000 and P28,000 input VAT in these months. It immediately registered to the VAT system at the start of November 2020. Compute the business tax payable in October, assuming no claim for tax credit was filed. a. 27,000 b. 36,000 c. 24,000 d. 9,000 34. Compute the business tax payable in October, assuming it claimed for tax credit and was approved by the BIR. a. 36,000 b. 9,000 c. 27,000 d. 24,000 35. Compute the business tax payable, assuming it filed a claim for tax refund. a. 9,000 b. 27,000 c. 36,000 d. 24,000 36. Compute the business tax payable in November. a. 36,000 b. 12,000 c. 48,000

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT d. 20,000 37. A non-VAT taxpayer paying 3% percentage tax received P104,000 cash and P6,000 CWT from the sale of services. Compute the business tax. a. 3,300 b. 11,786 c. 3,204 d. 13,200 38. A VAT taxpayer received a P52,000 plus P4,000 CWT certificate. What is the output VAT? a. 5,820 b. 6,000 c. 5,571 d. 5,820 39. I. Franchise grantees of telephone for inbound calls are exempt. T II. Operators of cinemas are exempt. F III. Places of exhibitions of professional boxing are exempt. T IV. To be subject to VAT, one has to be registered under the VAT system. F a. Three statements are false b. Only statement I is true c. Statement IV is false d. Statements II and IV are true e. Statements I and II are true f. Statement III is false 40. Mr. Escala owns and operates a taxi unit. He also teaches as an accounting professor at Gensantos Foundation College International and renders management and taxation services to various clients. He is registered as a VAT-taxpayer. In March 2020, he had the following receipts: Compensation income – teaching P 200,000 Receipts from taxi 50,000 Receipts from professional practice 350,000 Total P 600,000 Compute the percentage tax payable. a. 0 b. 1,500 c. 12,000 d. 18,000 41. Based on the previous problem, compute the output VAT. a. 42,000 b. 66,000 c. 72,000 d. 48,000

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT 42. Mr. Duqueza practices his profession as a medical practitioner. He registered as a VATtaxpayer. Mrs. Duqueza, his wife, is a nurse employed by a public hospital. Which is statement is correct? a. Mrs. Duqueza is exempt from business tax b. Mr. Duqueza shall percentage tax c. Mrs. Duqueza shall pay percentage tax d. Mr. Duqueza is exempt from business tax 43. Ozamis Ferries transports passengers and land vehicles between Samar and Cebu. It usually had an average annual receipts of P5,000,000. During the month, it earned a total of P40,000 from customers. The percentage tax is a. 12,000 b. 138,000 c. 0 d. 150,000 44. Mr. Bachelor, a VAT taxpayer, is an operator of four buses plying the route Davao-ButuanTandag-Maasin. In November 2021, the buses remitted a total of P320,000 excluding P30,000 freight and charges for passenger baggage and mails. Compute the common carrier’s tax. a. 9,600 b. 0 c. 10,500 d. 8,700 45. In the immediately preceding problem, compute the business tax if he is non-VAT taxpayer. a. 10,500 b. 13,200 c. 8,700 d. 9,600 46. Premium Europe, a French shipping carrier, had the following receipts on its Philippine operations: Gross receipts from: Incoming voyages Outgoing voyages Total

Passengers P2,000,000 3,000,000 P5,000,000

Baggage Total P 1,500,000 P3,500,000 1,800,000 4,800,000 P3,300,000 P8,300,000

How much is the percentage tax? a. 180,000 b. 144,000 c. 54,000 d. 99,000 47. Somalian Airline, an international air carrier, recorded the following taxable receipts during a month for outgoing flights:

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT

Passengers Mails and baggage Total

From booking agencies in Philippines Abroad P2,000,000 P3,000,000 500,000 1,200,000 P2,500,000 P4,700,000

Total P5,000,000 1,700,000 P6,700,000

Compute the percentage tax payable. a. 75,000 b. 15,000 c. 51,000 d. 78,000 48. Upon a. b. c. d.

the effectivity of CREATE bill, how much is the percentage tax payable? 12,000 67,000 17,000 47,000

49. In a recently completed race, Sta. Monica Hippopotamus noted the following winning tickets:  

Straight bets – P40,000 20 tickets at P100 per ticket Combination bets – P20,000, 2 tickets at P200 per ticket

Compute the percentage tax to be withheld on the winnings a. 5,760 b. 3,800 c. 4,584 d. 0 50. The following sales and purchases were taken from the books of accounts of a VAT taxpayer: April May June Sales P625,000 400,000 P600,000 Purchases 400,000 420,000 200,000 What is the VAT payable in April? a. 0 b. 48,000 c. 75,000 d. 27,000 51. What is the VAT payable in June? a. 45,600 b. 48,000 c. 72,000 d. 72,600

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT For numbers 52 to 55 52. A VAT taxpayer had the following sales and purchases during the month: Sales, excluding VAT Purchases, inclusive of P14,000 VAT

P300,000 280,000

Compute the gross income under each of the following independent cases: The sale is VAT exempt a. 57,000 b. 20,000 c. 34,000 d. 50,000 53. The sale is made to the government a. 41,000 b. 34,000 c. 20,000 d. 50,000 54. The sale is made to regular customers a. 50,000 b. 41,000 c. 20,000 d. 34,000 55. The sale is made by a registrable person a. 41,000 b. 20,000 c. 34,000 d. 50,000 56. On April 2021, a VAT registered realty developer sold a condominium unit at a selling price of P3,600,000. The buyer agreed to pay in 36 monthly instalments. The property had a zonal value of P4,000,000 and assessed value of P3,000,000 at the date of sale. What is the output VAT on every instalment? a. 0 b. 10,000 c. 13,333 d. 12,000 57. A VAT-registered realtor sold a commercial building at a selling price of P20,000,000 payable over 20 monthly instalments of P1,000,000. A sample monthly bill of the relator depicts the following:

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT Installment due Plus: Output VAT Invoice price

P 1,000,000 144,000 P 1,144,000

What is the fair value of the property sold? a. 30,000,000 b. 24,000,000 c. 22,000,000 d. 20,000,000 58. A VAT-registered seller had the following summary of sales and consignments in April: Cash sales Credit sales Sales reported by consignees Unsold January consignment Unsold February consignment Unsold March consignment Unsold April consignment

P200,000 150,000 250,000 30,000 50,000 40,000 65,000

Assuming that the rules on deemed sale was properly applied in prior months, what is the output VAT on April? a. 81,600 b. 75,600 c. 42,000 d. 78,000 59. Kolohe Corporation owns a coliseum which caters to large indoor events. The coliseum had the following receipts during a month:

Source of gross receipts Professional basketball games Professional boxing competitions Amateur basketball games Amateur boxing competitions Musical concerts Religious gatherings Other special events or gatherings

Amount P 400,000 500,000 100,000 150,000 250,000 50,000 120,000

What is love? Kidding aside, what is the output VAT? a. 188,400 b. 71,786 c. 168,214 d. 80,400

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT 60. A VAT-registered seller indicated the following in a VAT invoice evidencing the sale of vegetables: Selling price Output VAT Total amount due

P 5,000 600 P 5,600

What is the output VAT? a. 6,720 b. 0 c. 600 d. 6,520 61. Which is subject to zero-rating? Customer a. Resident alien b. Non-resident foreign corporation c. Non-resident alien d. Non-resident citizen

Place rendered Philippines Philippines Abroad Abroad

Amount € 150,000 $ 10,000 P 1,000,000 ¥ 2,000,000

62. A VAT-registered export trader purchased and sold equipment. The details of the purchase and sale are as follows: Export sales Purchases Input VAT

P 400,000 200,000 12,000

Compute the gross income for income tax purposes. a. 224,000 b. 188,000 c. 200,000 d. 212,000 63. For a taxpayer subject to 25% tax rate, compute respectively the tax benefits of a P60,000 input VAT deduction and a P40,000 input VAT credit. a. P60,000;P40,000 b. P60,000;P10,000 c. P15,000;P40,000 d. P15,000;P10,000 64. A VAT-registered taxpayer made the following sales: Sales destination France Malaysia India

Terms FOB destination FOB seller FOB buyer

Payment $ 10,000 P 450,000 ¥ 800,000

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT Philippines FOB seller

P 300,000

Exchange rates: $1:P42 and ¥1:P0.50. Compute a. b. c. d.

the total zero-rated sales. P1,270,000 P820,000 P420,000 P1,570,000

65. In the previous problem, compute the VAT. a. P0 b. P90,000 c. P54,000 d. P36,000 66. An exporter entered into the following transactions during the month: Transaction Export sales Export sales 60-day consignment abroad

Amount P 1,000,000 $ 100,000 $ 50,000

Unsold portion

40%

Forex rate = $1: P42.50. Compute the zero-rated sales. a. P5,525,000 b. P6,100,000 c. P0 d. P4,250,000

67. Valdivieso Co. made the following export and foreign consignments: Type of transaction Export sales 1 Export sales 2 Consignment 1 Consignment 2

Amount P1,000,000 $ 80,000 $ 50,000 $ 10,000

Export sales 2 pertains to goods owned by another entity where it was granted 10% export commission. Consignment 1 was sold by foreign consignees during the month. Consignment 2 remained unsold 79 days as of the end of the current month. The applicable exchange rate is P43: $1.

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT Compute the total zero-rated sales or receipts. a. P3,494,000 b. P2,924,000 c. P2,494,000 d. P5,590,000 68. A BSP assay report on a sale of gold nuggets disclosers the following: Gold content (850 x P1,850/gram) Silver content (250 x P38/gram)

P 1,530,000 9,500

Compute the vatable sales. a. P1,539,500 b. P1,572,500 c. P9,500 d. P1,582,000 69. Based on the previous problem, what is the output VAT? a. P189,840 b. P1,140 c. P184,740 d. P188,700 70. Abergonzado Company, a maintenance contractor, had the following receipts from the following clients in June 2020: Receipt from development Bank of the Philippines Receipts from Caledonia, an International carrier Receipts from International Rice Research Institute

P 1,000,000 1,200,000 800,000

Compute the total zero-rated sales or receipts. a. P0 b. P2,000,000 c. P3,000,000 d. P800,000 For numbers 71 to 74 71. Altura sold goods at an invoice value of P123,200 to Beltran on account. The latter sold the same goods to Cantona for P143,000 (VAT exclusive) cash. All of them are VAT registered taxpayers. The accounting entry to record the sales in the books of Beltran will include a. Debit to Cash P 160,160 b. Debit to Cash P 143,000 c. Credit to Sales P 160,160 d. Credit to Sales P 125,840 72. The journal entry in the purchase books of Beltran is

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT a. Credit to accounts payable P 110,000 b. Debit to purchases P 83,600 c. Credit to accounts payable P 96,800 d. Debit to purchases P 110,000 73. In relation to number 72, compute the input VAT. a. P 17,160 b. P 13,200 c. P 14,784 d. P 15,321 74. Assuming that Cantona is non-VAT. In the sale of goods by Beltran to Cantona a. Beltran should record debit Cash of P 125,840 b. Beltran should record debit Cash of P 143,000 c. Cantona should debit Purchases of P 125,840 and a debit input tax of P 17,160 d. Cantona should debit Purchases of P 143,000 For numbers 75 to 77 75. Nasipit Corporation had the following data during the month of February: Net income during the month Collections during the month: From services rendered in January From services rendered in February From services to be performed in March (advances) The business tax payable if it is a bus company a. P12,000 b. P22,800 c. P10,800 d. P21,000 76. The business tax payable if it is a cabaret a. P64,000 b. P64,800 c. P72,000 d. P136,800 77. The business tax payable if it is a race track a. P120,000 b. P228,000 c. P210,000 d. P108,000 For numbers 78 to 79

P 40,000 50,000 300,000 10,000

TAX 102 BUSINESS TAXES MIDTERM EXAMINATIONS (120 MINUTES) ACCOUNTANCY DEPARTMENT 78. Madulag Insurance Company had the following data on collections of premiums and disbursements in a month in 2021: Life insurance Non-life insurance Cash collections P 150,000 P 145,700 Checks 45,000 34,600 Accounts receivable 25,200 58,900 Payments of expenses to VAT businesses 43,000 Payments of expenses to non-VAT businesses 35,000 The amounts indicated pertaining to VAT transactions do not include the VAT. The percentage tax due is a. P8,000 b. P3,900 c. P11,010 d. P9,015 79. The VAT payable is a. P16,476 b. P9,750 c. P28,704 d. P63,730 80. Who is the taxpayer as far as the initial public offering in the local stock exchange of closely held corporations is concerned? a. The purchaser of shares of stock offered in the IPO b. The corporate issuer c. The corporate purchaser d. The local stock exchange...