Midterm Exam January Summer 2018, questions and answers PDF

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OUR LADY OF FATIMA UNIVERSITY 5. Dela Paz Norte, City of San Fernando (P) COLLEGE OF BUSINESS AND ACCOUNTANCY Midterm Examination in APP III Accounting Proficiency Program III Shade the letter that corresponds to your answer. STRICTLY NO CHEATING. GENERAL INSTRUCTIONS: 6. SITUATIONAL ANALYSIS: 1. 2....

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OUR OURLADY LADYOF OFFATIMA FATIMAUNIVERSITY UNIVERSITY

Dela DelaPaz PazNorte, Norte,City Cityof ofSan SanFernando Fernando(P) (P) COLLEGE COLLEGEOF OFBUSINESS BUSINESSAND ANDACCOUNTANCY ACCOUNTANCY

Midterm Midterm Examination Examination in in APP APP III III Accounting Accounting Proficiency Proficiency Program Program III III

Shade the letter that corresponds to your answer. STRICTLY NO CHEATING. GENERAL

INSTRUCTIONS:

SITUATIONAL ANALYSIS:

1. Real property taxes should not disregard increases in the value of real property occurring over a long period of time. To do otherwise would violate the canon of a sound tax system referred to as: A. Theoretical justice B. Administrative Administrative feasibility feasibility C. Fiscal adequacy D. Symbiotic relationship 2. Chak Chak Rita, Rita, aa student student activist, activist, wants wants to to impugn impugn the the validity validity of of aa tax tax on on text text messages. messages. Aside Aside from from claiming claiming that that the the law law adversely adversely affects affects her her since since she she sends sends messages messages by by text, text, what what may may she she allege allege that that would would strengthen strengthen her her claim claim to to the the right right to to file file aa taxpayer’s suit? A. That That she she is is entitled entitled to to the the return return of of the the taxes taxes collected from her in case the court nullifies the tax measure. B. That she is filing the case in behalf of a substantial number of taxpayers. C. That That text text messages messages are are an an important important part part of of the the lives of the people she represents. D. That That tax tax money money is is being being extracted extracted and and spent spent in in violation violation of of the the constitutionally constitutionally guaranteed guaranteed right right to freedom of communication. 3. Mr. Mr. Malas Malas sells sells shoes shoes in in Marikina Marikina through through aa retail retail store. store. He pays pays VAT VAT on his his gross gross sales to to the the BIR and and the the municipal municipal license license tax tax based based on on the the same same gross gross sales sales to to the the City City of of Marikina. Marikina. He He comes comes to to you you for for advice because he thinks he is being subjected to double double taxation. taxation. What What advice advice will will you you give? give? A. Yes, Yes, there there is is double double taxation taxation and and itit is oppressive. B. The The City City of of Marikina Marikina does does not not have have this this power. power. C. Yes, Yes, there there is is double double taxation taxation and and this this is is illegal illegal in in the Philippines. D. Double Double taxation taxation is is allowed allowed where where one one tax tax is is imposed imposed by by the national government and the other by the local government. 4. X, X, aa management management expert expert was was hired hired by by aa Philippine Philippine corporation corporation to to assist assist in in its its organization organization and and

5. Z, Z, an American American singer, was was en e week week at at the the Eastern Eastern Philippine Philippin returned returned to to the the USA. USA. For For inco inco shall be classified as: A. Resident alien B. Non-resident alien engage engag C. Non-resident alien not business D. Resident citizen 6. Who Who among among the the following following i taxable on income within and A. Tado, a native of General Genera an overseas contract wor B. Thelma Thelma Thunder, Thunder, naturali natural married married to to aa Filipino. Filipino. Sh S Olongapo City since 1970 C. Ferrero Ferrero de de la la Goya, Goya, Spanis Spani Madrid, Madrid, Spain, Spain, spent spent aa oo trip in Boracay. D. Melly Melly Lee, Lee, Taiwanese Taiwanese concert in Manila. 7. A A citizen citizen of of the the Philippines Philippines wa wa in 2011. On May 15, 201 Philippines Philippines to to reside reside permane permane His income for the year was: A –From From Jan. 1, 2012 to May B–From From May 15, 2012 to Dec Which of the following is wron taxable on on his his “A “ A. He is not taxable B. He He isis considered considered aa resid resi income. C. He He is considered a non“A” income.

D.

He He isis considered considered aa resid resi and “B” income.

8. Amando, Amando, aa staff staff auditor auditor of of Ini In took took and and passed passed the the exam exam Internal Internal Auditor Auditor (CIA). (CIA). The The resigned from his job and left 10, 2014 to work work as an an int establishment establishment in in Melbourne, Melbourne, tax tax purposes, which which of of the the fo f correct correctwith withrespect respectto toAman Aman

A. He He shall shall be be classified classified as as n the whole year of 2014. B. His His classification classification as as aa no n start in 2015. C. He He shall shall be be classified classified as as n the year 2014 with re derived from sources w

operation for which he had to stay in the Philippines for an indefinite period. His coming to the Philippines was for a definite purpose which in its

D

He He shall shall be be classified classified as as n the year 2014 with re d i d f

D. Only Only statement statement 22 is is true. true. 10. Your Your client client owns aa row row of apartments. apartments. He He complains to you that he is being required to pay four (4) kinds of of taxes taxes on on this this line line of of business business alone. alone. From From the the list list given by your client, which of the following taxes has

B. Monte Cristo Catholic Cem Ce Catholic Catholic Church; Church; paymen paymen Catholic Church and for t cemetery. C. Happy Trip Memorial

been wrongly imposed to him? A. Real Real estate estate tax tax on on the the land land and building B. Value-added Value-added tax tax on on the the gross gross receipts from from rent C. Community Community tax tax based based on on the the assessed assessed value value of of the apartment house D. Income tax on income from rent 11. The City Council passed an ordinance imposing an

corporation where divide the the shareholders shareholders at at the the en en D. Quita-Quita Quita-Quita memorial memorial PP association consisting different different families; families; each each square square meters meters of of lot, lot, not not for for sale sale to either either member

occupation tax on an air conditioning technician. Pedro is the only person with such occupation in the city. city. He He challenged challenged the the validity validity of of the the ordinance ordinance as as being discriminatory since he is the only one adversely affected. A. The contention of Pedro is justifiable. B. The contention of Pedro is not substantiated

association. 15. Congressman Manny Loloko Mamasapano Mamasapano and and Senator Senator Din Din in in the the House House of of Representa Representa respectively, respectively, increasing increasing the the pp individual individual taxpayers taxpayers as as w w exemption exemption to minimum minimum wage wage

because the rule on uniformity is not violated considering that the ordinance would also be imposed on all air conditioning technician who may come within the jurisdiction of the city. C. The The issue issue on on validity validity or or invalidity invalidity of of the ordinance should be set aside. D. The ordinance is unconstitutional because Pedro

following is correct? A. The senate bill should be house bill. B. The The senate senate and and house house bi b the same time in both hou C. The house bill should be senate bill.

was denied of his right to equal protection of the law. 12. The Facundo School of Arts and Commerce, a proprietary proprietary educational institution institution which is is offering primary, primary, secondary, secondary, and and tertiary tertiary education, education, is is registered registered with with and and accredited accredited by by the the department department of of

D. No priority; each bill can the other. 16. Juan was hired as a staff Company in 1995. On transferred transferred to to Amats Amats and and As A returned back to STD and

education (DepEd) and the Commission on Higher Education (CHED). Which of of the the following following is is exempt exempt from from tax? tax? What What kind of tax? A. The importation of laboratory equipments – from customs duties B. The school building being rented by the school – from real property tax tax

retirement in 2010 at the age Question Question 1: 1: Are Are the the retireme retireme Juan? Question Question 2: Suppose he w employment employment due due to to dishonest dishonest taxable to Juan? Question Question 3: Suppose he w employment employment due due to to the the me me

C.

A portion of the school building being leased to a fastfood chain –from from real property tax D. The income from operations –from from income tax 13. Assuming that the school in the preceding number is a non-stock, non-profit educational institution. Which of the following is subject to tax? What kind

firms. firms. Will Will the the separation separation pay pay A. No–Yes Yes –No B. No–Yes Yes –Yes Yes C. Yes–No–No D. Yes–No–Yes Yes 17. Purita Purita Barberia Barberia was was retire retire

of tax? A. A portion of the building being leased to a fastfood chain –from from real property tax B. The income from operations –from income tax C. The school building owned by the school –from from

corporation in 2011 and p retirement retirement gratuity gratuity withou withou withholding tax. The corpora in 2010. Can the BIR su retirement retirement gratuity gratuity to to income income st

D

ll tt tt tt The school building being rented by the school – ff ll

1 AA N N ifif th th titi based based on aa reasonable reasonable pensio ld ld dd hh

approved approved private private retirement retirement benefit benefit plan, plan, he he was was paid his retirement benefit. A. Plaridel Plaridel should should withhold withhold income income taxes taxes from from E’s E’s retirement pay. B. E’s E’s retirement retirement pay pay is is excluded excluded from from gross gross income. C.

Plaridel Plaridel should should pay pay the the tax tax on on E’s E’s retirement retirement

pay. D. Since Since EE voluntarily voluntarily retired, retired, the the retirement retirementpay pay he he received received is is not not retirement retirement in in the the true true sense sense but but is part of his compensation income subject to tax. 19. The The City City of of Manila, Manila, claiming claiming that that itit can can impose impose taxes taxes under under the the Local Local Government Government Code, Code, imposed imposed aa tax tax on on banks banks (in (in addition addition to to the the percentage percentage tax tax on on banks banks imposed imposed in in the the National National Internal Internal Revenue Code). Code). The banks banks within within the City City of Manila objected for for the various reasons reasons given below. Which would justify justify the objection of the banks/ A. The power of tax cannot be delegated

23. Mr. Hipon bought a residentia for P120,000. In 2012, curiou curio property property then then cost, cost, he he asked asked reappraise reappraise the the same. same. The The real real that that the the value value of of his his prope prop P1,800,000. How should M P1,680,000 P1,680,000 increase in in his his inc year 2012? A. He should include th revaluation revaluation surplus surplus wh income subject to deferre B. He should include the P1, his his income income indicating indicating t increase in appraisal. C.

He should not include th his his income because because the realized. D. He should not include th his his income ifif the the certifica is not under oath and at a

B. The rule on double taxation C. Uniformity in taxation D. None of the above 20. A motor vehicle accident involved Z Bus Co. and a private private car car of of Mr. Mr. A, A, resulting resulting in in the the death death of of Mrs. Mrs. A, A, physical physical injuries injuries to to Mr. Mr. A, A, loss loss of of earnings earnings of of Mr. Mr. A A for for aa month, month, and and total total loss loss of of the the car car of of Mr. Mr. A. A. From From aa court court litigation, litigation, Mr. Mr. AA received received damages, damages, as as

tax return of Mr. Hipon. 24. Megan Megan Manananggol, Manananggol, as as law law clients clients aa recruitment recruitment agency agency w w a monthly retainer of P15,000 income income tax tax liability, liability, Mananan Mananan retainer retainer to to be be paid paid directly directly whose whose name name isis reported reported in in th th This year, Manananggol ’s gro

follows: P500,000 for the death of the wife, P80,000 for his physical injuries, P50,000 for the period under treatment, treatment, and and P500,000 P500,000 for for the the loss loss of of the the car car that that he bought for P360,000 and had a value of P500,000 at the time of the loss. Which statement is wrong? A. The damages of P500,000 for the death of the wife is not taxable income. B. The damages of P80,000 for physical injuries is

practice, practice, exclusive exclusive of of the the P15 P15 fee is P2,000,000. What What should should be be the the tax tax treatm treatm A. ItIt should should be be reported reported as as income because it was h service and not her son R B. The P15,000 may be dedu ded as as part part of of his his expenses expenses

not taxable. C. The damages of P50,000 for lost earnings is taxable. D. The damages of P500,000 for the loss car is not taxable. 21. Emma Lagu Lagu sued sued Emman Emman Santing for for breach of

service service for her her and and th monthly monthly retainer retainer from from the the C. It should be report ed compensation income sin the payroll of the recruitm recruitm D. It It may may be be deducted deducted as as pa pa

promise promise to to marry. marry. Emman Emman lost lost the the case case and and duly duly P10,000 P10,000 as as moral moral damages damages for for the the mental mental anguish anguish Emma Emma suffered. suffered. Did Did Emma Emma earn earn aa taxable taxable income? income? A. She She had had no no taxable taxable income income since since moral moral damages damages are compensatory. B. She She had had taxable taxable income income since since she she made made aa profit. profit.

salaries salaries and and wages wages paid paid agency in connection business. 25. Mr. Mr. Sabado Sabado owns owns aa vacant vacant pa pa the the land land to to Mr. Mr. Domingo Domingo for for t P120,000 per year. The c Domingo will erect a building

C. She She had had no no taxable taxable income income because because itit was was aa donation.

become become the property property of Mr. Mr. the the lease lease without without compensat compensat

paid paidthe the court’s court’saward awardthat that included, included,among amongothers, others,

D

Sh h d t bl i f P100 000 i income is income from whatever source

h t f th l f th Mr Domingo erects the build

property property at at the the time time the the ownership ownership vested vested in in him.

Assuming Assuming the the shares shares of of stoc stoc Tress in consideration of

C. The The income income realized realized by by Mr. Mr. Sabado Sabado at at the the time time of of expiration expiration of of his his lease lease would would be be the the fair fair market market value value of of the the building building as as reported reported for for real real property tax purposes. D. Mr. Mr. Sabado Sabado does does not not realize realize any any income income at at the the end of the lease period. Mr. Domingo transferred the building to him without

corporation, corporation, what what are are the the tax tax i The value value of of the the stocks stocks f A. The compensation income. B. The The value value of of the the shares shares s

consideration, therefore it is a donation donation which which is is not considered as income. 26. Maring Maring bought bought tax-exempt tax-exempt government government bonds. bonds. As As such such the the interest, interest, she she received received is is not not includible includible as as part of her gross income. Why? A. The interest received is not considered income derived from the use of capital.

D. The shares of stock sh dividends subject to tax. 30. Apolinario, Apolinario, aa resident resident Filipino Filipin (90) (90) year year old old USAFFE USAFFE vete vete

B.

gift gift which which is excluded excluded from fro

C.

The value of the stocks gift.

beneficiaries beneficiaries of of Pres. Pres. Obam Obam

that that gave gave aa US$10,000 US$10,000 cash cash bb veterans. veterans. The The distribution distribution of of

The interest is excluded from gross income for reasons of public policy to encourage purchase of government bonds. C. The The interest interest is is not not taxed taxed because because of of the the redemption of the bond at a premium would be taxable.

made made by by the the U.S. U.S. Veterans Veterans located ocated within within the the premises premises oo comes comes to to your your for for advice advice on on th t cash cash benefit. benefit. You You shall shall tell tell him him A. The amount is part of his hi hence subject to inco

D. To To tax such such interest would would be violative violative of the the non-impairment clause because Maring would not have bought the bond if it were not tax-free. 27. Bentong insured his own life for P1,000,000. He assigned the insurance to Andong for valuable consideration in the amount of P800,000. Bentong died and Andong was able to collect the P1,000,000.

Philippines. B. He He is is not not subject subject to to the the pp tax tax on on the the cash cash benefit benefit bb by by the the U.S. U.S. government government tt pure act of liberality. C. The The amount amount of of the cash payments payments made made to to the the veterans hence excluded

Prior Prior to to Bentong’s Bentong’s death, death, Andong, Andong, had had in in the the

meantime paid P50,000insurance premiums on the policy. What What should should be be the the income income tax tax treatment treatment of of the the P1,000,000 life insurance proceeds considering the above circumstances? The P1,000,000 P1,000,000 is is excluded excluded from from Andong’s Andong’s gross gross A. The income because it is life insurance proceeds. B. Andong should include the P1,000,000 as part of his gross income. C. Andong should report only P150,000 of the P1,000,000 he received because the P800,000 is considered as his expense in earning the income and the P50,000 is considered as return of the premiums he paid. D. Andong should report only P150,000 of the P1,000,000 he received because the P850,000 is considered considered as as aa return return of his his investment. 28. Emotera Corporation took took a keymen insurance insurance on the the life life of of its its president, president, Mr. Mr. Elias Elias Mandurugas. Mandurugas. The The policy designated Mr. Madurugas’ wife as its revocable revocable beneficiary beneficiary in in the the event event of death death of of Mr.

D. He is not subject subject to any k benefit benefit he received received be citizen. THEORIES:

31. The The Philippines Philippines adopted adopted aa se s which means that: A. All All taxable taxable incomes, incomes, rega rega income, income, are are added added toget toget income, and all allow deducted ...