Prelim Answer KEY - tax PDF

Preview

Summary

For numbers 1 to 2 KAHASOL CORPORATION had the following items of expense and expenditures in 2020: Purchase of equipment (paid in cash) P 200, Freight on purchase of equipment (paid in cash) 20, 2020 salaries expense paid this period (cash expenses) 50, Supplies bought in 2019, half was used in 202...

Description

For numbers 1 to 2 KAHASOL CORPORATION had the following items of expense and expenditures in 2020: Purchase of equipment (paid in cash) P 200,000 Freight on purchase of equipment (paid in cash) 20,000 2020 salaries expense paid this period (cash expenses) 50,000 Supplies bought in 2019, half was used in 2020 16,000 Depreciation expense on property 24,000 2020 expenses, not paid this period (accrued expense) 12,000 2021 expenses, paid this period (prepaid expenses) 18,000 1. How much is the total deductions for cash basis of accounting? a. 76,000 b. 90,000 c. 40,000 d. 102,000 2. How much is the total deductions for accrual basis of accounting? a. 102,000 b. 90,000 c. 56,000 d. 46,000 For numbers 3 to 7 Miss Dona Emiliano leases an office space from Tower Realty. The lease contract specified a P 100,000 monthly rent over a period of 3 years. An advanced three-month payment is required which is broken down as follows: First month of lease Last month of lease Security deposit Total initial payment, excluding taxes

P 100,000 100,000 100,000 P 300,000

3. How much is the rent expense to be recorded by the VAT registered lessee assuming that the lessor is VAT registered? a. 110,000 b. 100,000 c. 300,000 d. 200,000 4. How much is the withholding tax to be remitted by the VAT registered lessee assuming that the lessor is VAT registered? a. 5,000 b. 0 c. 10,000 d. 15,000 5. How much is the payment due to the non-VAT lessor assuming that the lessee is VAT registered? a. 300,000 b. 312,000 c. 314,000 d. 290,000

6. How much is the payment due to the non-VAT lessor assuming that the lessee is non-VAT registered? a. 112,000 b. 290,000 c. 300,000 d. 288,000 7. How much is the withholding tax to be remitted by the non-VAT lessee assuming that the lessor is non-VAT registered? a. 12,000 b. 5,000 c. 10,000 d. 50,000

For numbers 8 to 12 A VAT registered taxpayer charged P 78,400 to a client for rental. 8. How much is the gross sales? a. 0 b. 78,400 c. 70,000 d. 8,400 9. How much is the output VAT? a. 8,400 b. 9,408 c. 0 d. 7,500 10. The collection of the rental is recorded by crediting a. Rent income 78,400 b. Rent income 70,000 c. Output VAT 9,408 d. Rent income 87,808 11. How much is subject to regular tax? a. 78,400 b. 70,000 c. 87,808 d. 62,500 12. Assuming the taxpayer is non-VAT, how much is subject regular tax? a. 62,500 b. 87,808 c. 70,000 d. 78,400 For numbers 13 to 15 WAHAHAK INC,. a non-VAT domestic corporation, reported the following: Rental income, net of 5% Professional fees, net of 10% Interest income, net of 20% final tax Dividends from domestic corporation Business expenses

P 475,000 360,000 40,000 10,000 500,000

13. How much is the total gross receipts? a. 835,000 b. 885,000 c. 950,000 d. 900,000 14. How much is the final tax? a. 12,000 b. 10,000 c. 0 d. 50,000 15. How much is the income tax still due/ (refund)? TAXABLE INCOME PER YEAR P 250,000 and below Above P 250,000 to P 400,000 Above P 400,000 to P 800,000 Above P 800,000 to P 2,000,000 Above P 2,000,000 to P 8,000,000 Above P 8,000,000 a. 30,000 b. (35,000) c. 55,000 d. 120,000

INCOME TAX RATE 0% 20% of the excess over P 250,000 P 30,000 + 25% of the excess over P 400,000 P 130,000 + 30% of the excess over P 800,000 P 490,000 + 32% of the excess over P 2,000,000 P 2,410,000 + 35% of the excess over P 8,000,000

For numbers 16 to 17 A VAT taxpayer collected a total of P 55,000 cash for services rendered, net of P 1,000 withheld tax by the client evidenced by a BIR Form 2307. 16. How much is the invoice price? a. 55,000 b. 50,000 c. 62,000 d. 56,000 17. How much is the gross receipt? a. 50,000 b. 62,000 c. 56,000 d. 64,000 A VAT taxpayer collected P 85,600 rental from a lessee who withheld 5% creditable withholding tax. 18. How much is the rent income to be credited? a. 85,600 b. 89,600 c. 80,000 d. 0 19. How much is the output VAT? a. 4,000

b. 9,600 c. 13,600 d. 0 20. How much is the cash to be credited by the lessee? a. 85,600 b. 0 c. 80,000 d. 89,600 21. PABAHAY COMPANY, a resident business, renders services to Mr. Wing, a resident person who is not engaged in business. Identify the statuary taxpayer and the type of consumption tax. a. PABAHAY COMPANY – Business tax b. Mr. Wing – VAT on importation c. Mr. wing – Business tax d. PABAHAY COMPANY – VAT on importation 22. S1. S2. S3. S4.

Consumption tax is a tax levied upon business. The sale by non-resident persons in the Philippines is exempt from consumption tax. Business tax is a form of consumption tax. Consumption tax is a form of business tax. a. Only one statement is false b. Two statements are true c. Three statements are true d. Only one statement is true e. All are false f. All are true

23. S1. Consumption tax is more consistent with the ability to pay theory rather than the benefit received theory. S2. The sale by resident in the Philippines is subject to consumption tax. S3. Non-resident sellers are exempt from consumption taxes on their domestic sales. S4. Domestic sellers pay consumption tax to the government. a. Only one statement is false b. Two statements are true c. Three statements are true d. Only one statement is true e. All are false f. All are true 24. S1. S2. S3. S4.

Business tax is imposed on the sales of sellers which is the purchases made by the buyers. Resident foreigners are not subject to VAT on importation. All agricultural or aquaculture inputs are VAT-exempt. The sale of processed agricultural products is vatable. a. Three statements are true b. Two statements are correct c. One statement is incorrect d. All are true

e. Three are not correct 25. S1. The final withholding VAT on importation of services is payable even by those not engaged in business. S2. The VAT on importation and the final withholding VAT can be claimed as Input VAT creditable against Output VAT. S3. In economic reality, the VAT on importation and the final withholding VAT are taxes paid by non-resident sellers. S4. VAT is a deductible tax. a. S1, S2, S4 are true b. S2, S4 are false c. All statements are true d. S1 and S2 are false e. One statement is true f. One statement is false g. S1 is only the false statement h. All statements are false

For numbers 26 to 28 The records of Don Mondragon show the following for 2020: Business income, before P 320,000 business expenses Rental income, net 5% withholding tax Dividend income from a domestic corporation Winnings from Phil. Charity Sweepstake Office Other sales transactions: Factory equipment: Selling price Cost in 2014 Accumulated depreciation

P 200,000 300,000 60,000

Land used as parking lot: Selling price Cost in 2016

300,000 180,000

Jewelry: Selling price Cost in 2018

250,000 180,000

Investment in bonds: Selling price (June 2020) Cost in October 2019

300,000 310,000

Unused lot: Selling price Cost in 2017

800,000 900,000

Shares traded in the stock exchange:

P 560,000 95,000 20,000 400,000

Selling price Cost in 2018

220,000 300,000

Shares not-traded in the stock exchange: Selling price 300,000 Cost in 2019 180,000 26. How much is the final tax? a. 75,000 b. 66,000 c. 82,000 d. 44,500 27. How much is the capital gains tax? a. 90,000 b. 82,500 c. 1,320 d. 66,000 28. How much is the stock transaction tax? a. 1,800 b. 1,320 c. 6,600 d. 0 29. S1. S2. S3. S4.

The VAT on importation is a business tax. The final withholding VAT is a business tax. The VAT on importation is 12% of the value added on importation. The VAT on importation is 12% of the receipts from the sale of services abroad. a. S1 is true b. All statements are true c. S2, S4 are false d. S3 is true e. All are true f. S2 is true

30. S1. The importation of ingredients which are intended for the manufacture of goods for human consumption is VAT-exempt. S2. The importation of professional instruments and implements in commercial quantities is VAT-exempt. S3. The importation of equipment, machinery and spare parts for marine vessels are VATexempt. S4. The importation of any agricultural or marine products is VAT exempt. a. All are true b. Three statements are true c. Two statements are false d. One statement is false e. S1, S3 are true f. One statement is true which is S4 g. Three statements are false

For numbers 31 to 33 Christine Abanaga imported a sports car from the US for personal use. She acquired house and lot from her husband after their marriage. The following shows details of the charges of the importation: Purchase price Insurance in transit Freight Total invoice price

$ 50,000 600 800 $ 51,300

Arrastre Bank charge Wharfage dues Brokerage dues Custom’s documentary stamp Import processing fee Total other charges

P 8,500 6,000 900 90,000 265 250 P 105,815

The relevant exchange rate per Bureau of Customs Memorandum Circular is P45:$1. The importation is subject to P 683,510 excise tax and 30% tariff rate. 31. How much is the customs duties? a. 685,550 b. 692,550 c. 693,900 d. 692,650 32. How much is the landed cost? a. 3,796,325 b. 3,795,475 c. 3,791,655 d. 3,790,375 33. How much is the VAT on importation? a. 454,645 b. 454,845 c. 455,559 d. 455,959 34. S1. S2. S3. S4.

VAT is non-deductible. Stock transaction tax is non-deductible. Percentage tax is deductible. Excise tax on the privilege to transfer is deductible. a. All statements are correct b. S1, S4 are only true statements c. All are false d. S2 is the only the true statement e. Three statements are true f. Two statements are false

For numbers 35 to 40 Mr. Veloso, a proprietor of a furniture shop, recorded the following income statement in 2020:

Net sales of finished goods, net of P 18,000 CWTs Sales of scraps and trimmings Total Sales/Revenues/Receipts/Fees Less: Cost of Sales or services Gross income from Business Add: Other income Dividend Income Gain from sale of stocks, net of capital gains tax Interest Income from deposits Gain on sale of machinery held for 6 years Gain on sale of bonds held for 2 years Interest income from bonds Unrealized gain – Financial asset through profit or loss Interest income from Singaporean bank Total Income Less: Administrative and selling expenses Net income

P 2,382,000 200,000 P 2,582,000 1,200,000 P 1,382,000 P 12,000 68,000 16,000 40,000 20,000 14,000 50,000 23,000

243,000 P 1,139,000 600,000 P 539,000

Based on the holding period rule: If the capital asset is held by an individual taxpayer for a period of:  Not more than one year – 100% of the capital gain or loss is recognized.  More than one year – 50% of the capital gain or loss is recognized. TAXABLE INCOME PER YEAR P 250,000 and below Above P 250,000 to P 400,000 Above P 400,000 to P 800,000 Above P 800,000 to P 2,000,000 Above P 2,000,000 to P 8,000,000 Above P 8,000,000 35. How much is the a. 864,000 b. 860,000 c. 887,000 d. 854,000 36. How much is the a. 149,200 b. 138,100 c. 156,100 d. 148,000 37. How much is the a. 42,000 b. 312,000 c. 44,610 d. 78,000 38. How much is the a. 216,100

INCOME TAX RATE 0% 20% of the excess over P 250,000 P 30,000 + 25% of the excess over P 400,000 P 130,000 + 30% of the excess over P 800,000 P 490,000 + 32% of the excess over P 2,000,000 P 2,410,000 + 35% of the excess over P 8,000,000

net taxable net income?

income tax due and payable?

business tax?

total taxes paid by Mr. Veloso?

b. 234,100 c. 225,000 d. 215,300 39. If the taxpayer opted to use the 8% commuted tax, how much is his income tax due? a. 0 b. 194,960 c. 193,120 d. 193,920 40. If the taxpayer opted to use the 8% commuted tax instead of the regular income tax option, how much is his tax savings if any? a. 38,860 b. 0 c. 21,140 d. 22,180 41. S1. The transport services of an international carrier is exempt from VAT. S2. Agricultural cooperatives and electric cooperatives are exempt from VAT. S3. The sale of commercial lots where the selling prices do not exceed P 1,991,500 a unit is exempt. S4. Bookstores are totally exempt from VAT. a. b. c. d. e. f. 42. S1. S2. S3. S4.

Two statements are true S1 and S4 are false Two statements are false Three statement are false Three statements are true S3 is only the true statement

Fruit shake is vatable. Boiled eggs are exempt. Cooked rice is vatable. Cotton is exempt. a. b. c. d. e.

One statement is false Three statements are true Two statements are false S3 is false S4 is true

43. Betani Hospital reported P 20,000,000 gross receipts from patient service revenue and an additional P 10,000,000 from other accessory hospital services which includes P 5,000,000 sales of medicine. What is the amount subject to business tax? a. 0 b. 5,000,000 c. 30,000,000 d. 35,000,000

44. A printing press had the following revenues and collections during the month:

Books Advertising magazines Election campaign materials Tarp Total

Revenues P 200,000 250,000 700,000 80,000 P 1,240,000

Collection P 180,000 160,000 400,000 80,000 P 810,000

Determine the vatable amount. a. 780,000 b. 480,000 c. 640,000 d. 1,030,000 45. Malakas Shipping Company leases two of its ferry boats to Mactan Superferries, a domestic transport company. Which is correct? a. The rental income of Malakas is exempt from business tax b. The gross receipt of Mactan on transport of passengers is exempt from business tax. c. The gross receipt of Mactan on transport of cargoes is exempt from business tax d. Both parties are vatable. 46. Assuming that Malakas Shipping Company in the immediately preceding problem is a nonresident lessor, which is correct? a. The rental income of Malakas is subject to final withholding VAT. b. The gross receipt of Mactan on transport of passengers is exempt. c. The gross receipt of Mactan on transport of cargoes is exempt. d. Both parties will be required to pay the VAT. 47. Don Chick is a food franchise with most food menus offering chicken as an ingredient. Don Chik contracted Mr. Barako to produce the chicken needs of its entire food franchise. For quality control purposes, Don Chik gives Mr. Barako the chicks. Mr. Barako raises the chicks for 40 days, then delivers them to Don Chick. The latter paid the former P 400,000 for the first delivery of chickens. Which is correct? a. Don Chick is exempt while Mr. Barako is taxable to business tax b. Mr. Barako is exempt from business tax c. Both are exempt d. Both are taxable 48. WATAHH Credit Cooperative transacts business only with members. It had the following receipts during the month: Interest income from members Rent income from properties

P 210,000 50,000

Compute the amount subject to business tax. a. 0 b. 50,000 c. 210,000

d. 260,000

49. A bus operator had the following receipts during the month: Passengers Cargoes Total

P 140,000 10,000 150,000

Amount subject to business tax is? a. 150,000 b. 0 c. 140,000 d. 10,000 50. A domestic airliner had the following receipts during the month: Passenger fares Cargoes, mails and excess baggage

P 5,000,000 2,000,000

Amount subject to business tax is? a. 0 b. 5,000,000 c. 7,000,000 d. 2,000,000 51. A non-VAT taxpayer made the following sales during the year: Domestic sales Export sales

P 100,000 120,000

Amount subject to business tax is? a. 120,000 b. 220,000 c. 0 d. 100,000 52. In relation to previous question, how much is the business tax? a. 100,000 b. 3,000 c. 6,600 d. 12,000 e. 120,000 f. 220,000 53. A VAT-taxpayer made the following sales during the year: Domestic sales Export sales

P 100,000 120,000

Amount subject to business tax is? a. 220,000 b. 100,000 c. 0 d. 120,000 54. In relation to previous question, how much is the business tax? a. 26,400 b. 12,000 c. 0 d. 14,000 e. 220,000 f. 100,000 55. A non-VAT recreational center has a senior citizen member. The normal rate for non-senior citizen members is P 2,000 per month. How much shall be billed to senior citizen? a. 1,429 b. 1,600 c. 1,786 d. 1,792 56. A VAT-registered real estate lessor leases a residential house to a family of five with two senior citizens. The house monthly rental is P 10,000 exclusive of VAT. Compute the output VAT to be billed. a. 1,200 b. 720 c. 0 d. 480 57. KAHAGO Company, a VAT registered taxpayer, purchased P 400,000 worth of goods and sold the same for P 800,000. Assuming that the business operation is limited to Philippine residents, what is the total business tax it will report on its sales? a. 24,000 b. 48,000 c. 96,000 d. 0 58. Assuming that the purchases were imports and the sales were export, compute respectively the business tax and the total consumption tax. a. 0; 48,000 b. 24,000; 144,000 c. 24,000; 72,000 d. 144,000; 96,000 59. A business wants to make a P 10,000 profit from the sale of an inventory costing P 30,000. The business is subject to 3% percentage tax. At what amount shall the business invoice the sale? a. 38,800 b. 41,237 c. 41,200 d. 40,000 60. A business taxpayer purchased goods worth P 120,000 from non-residents and sold goods worth P 140,000 for P 180,000. What is the concept of “value added” for VAT purposes?

a. 80,000 b. 120,000 c. 200,000 d. 140,000 e. 60,000 61. In the previous question, what is the basis of percentage tax? a. 120,000 b. 200,000 c. 240,000 d. 180,000 62. Assuming the same data in the above problem, what is the basis of the VAT on importation? a. 80,000 b. 180,000 c. 120,000 d. 140,000 e. 200,000 63. Mr. Silva imported P 300,000 equipment for business use and a P 1,200,000 car for personal use. What is the amount subject to VAT on importation? a. 1,500,000 b. 1,200,000 c. 300,000 d. 0 64. S1. Excise tax on the privilege to do business is a proportional tax. S2. Value added tax is an indirect tax. S3. VAT is a graduated tax. S4. Business tax is a fiscal tax. a. b. c. d. e. f.

Two statements are incorrect Three statements are false Two statements are true S3 and S4 are both true S2 is the only true statement One statement is false

65. The sale of adjacent dwellings to different buyers shall be aggregated as one. a. True b. False c. Maybe d. Crush ka ba ng crush u?

For numbers 66 to 67 66. A certain taxpayer paid the following bill from a VAT registered supplier of office supplies. Half of the office supplies were used in operation during the period: Selling price P 400,000 Plus: Output VAT 48,000 Less: Withholding tax (1%) 4,000 Net cash due 444,000 What is the deductible supplies expense assuming the taxpayer is a VAT-taxpayer? a. 198,000

b. 200,000 c. 400,000 d. 408,000 67. What is the deductible supplies expense assuming the taxpayer is a non-VAT-taxpayer? a. 224,000 b. 198,000 c. 200,000 d. 400,000 68. The non-VAT taxpayer withheld 5% creditable withholding tax on rental payments to various VAT-registered lessors. The total taxes withheld were P 5,600. What is the deductible expense of rental expense? a. 56,000 b. 100,000 c. 112,000 d. 124,440

For numbers 69 to 70 69. ZARAGOZA Company received a bill for P 27,440 from a non-VAT service provider. The payment for the service is subject to 2% creditable withholding tax. How much is the deductible expense if it is a non-VAT? a. 0 b. 26,891 c. 27,440 d. 28,000 70. If the ZARAGOZA is a non-VAT taxpayer, what respectively is the withholding tax and the amount of cash to be paid by the company to the service provider? a. 0; 27,440 b. 548.80; 26,891.20 c. 560; 27,440 d. 537.82; 26,353.18...