Solution manual Transfer and Business Taxes by Valencia Chapter 11 - Percentage Taxes PDF

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SUGGESTED ANSWERSChapter 11: PERCENTAGE TAXESCHAPTER 11PERCENTAGE TAXESProblem 11– False – Non-VAT business is not allowed to have Input VAT. False – expressly exempted from business tax. True True False – 3% tax on gross receipts within. Gross receipts outside the Philippines is not subject to busi...

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BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS

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Chapter 11: PERCENTAGE TAXES

CHAPTER 11

PERCENTAGE TAXES Pr obl em 11–1 1. Fal se–NonVATbusi nessi snotal l owedt ohaveI nputVAT. 2. Fal se–expr essl yexempt edf r om busi nesst ax. 3. Tr ue 4. Tr ue 5. Fal se–3% t axongr ossr ecei pt swi t hi n.Gr ossr ecei pt sout si det hePhi l i ppi nesi snotsubj ect t obusi nesst axi nt hePhi l i ppi nes. 6. Fal se–2% per c ent aget ax. 7. Fal se–t heVATr at eshoul dbe12%. 8. Fal se–expenseoft heservi ceconsumer 9. Fal se–10% onf or ei gni nsur ancecompany 10.Fal se – Gr oss r ecei pt s on cabar e tand ni ght cl ubs ar e now i ncl uded i n 12% VAT t axabl e t r ansact i ons. 11.Fal se–onl ygr ossr ecei pt swi t hi n. 12.Tr ue Pr obl em 11–2 1. Fal se–mi ni mum quar t er l yr ecei pt soract ualquar t er l ygr ossr ecei pt swhi cheveri shi gher . 2. Tr ue 3. Fal se–gr ant sf r om t hegover nment 4. Fal se–Subj ectt oVATf orbei ngr egi st er edasVAT 5. Fal se–exempt 6. Tr ue 7. Fal se–amusementt axesr angi ngf r om 10% t o30% 8. Tr ue 9. Fal se–Hor ser ace’ scostofwi nni ngt i cketi sdeduc t i bl e 10.Tr ue Pr obl em 11–3 1. Fal se–busi nesst ax. 2. Tr ue 3. Fal se–3% per c ent aget ax. 4. Tr ue 5. Fal se–t heper c ent aget axf or mspar tofsel l er ’ sexpense 6. Tr ue 7. Fal se–The½ of1% i sappl i cabl ef orsal eofshar esofst ocki nt hest ockexchange. 8. Tr ue 9. Tr ue 10.Fal se–7% per cent aget ax 11.Fal se–wi t hi n20days

Problem 11 – 4 1.B 2.C 3.B 4.C 5.B 6.D 7.C

8.A 9.D 10.D 11.D 12.C 13.B 14.C

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS

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Chapter 11: PERCENTAGE TAXES

Pr obl em 11–5 C Per cent aget ax( P40, 000x3%)x12 Pr obl em 11–6 Exempt

P14, 400

A

Pr obl em 11–7

C

Busi nesst ax( P540, 000x3%)

P16, 200

Not e:Theact ualsal ehasnotyetr eachedt heVATt hr eshol dexceedi ngP1, 500, 000i nayear .

Pr obl em 11–8

A

Per cent aget ax( P28, 000/112%)x3% VAT( P28, 000/9. 3333) Sur c har ge( P3, 000x50%) Busi nesst ax

Pr obl em 11–9

C

Per cent aget axpayabl e( P500, 000x3%)

Pr obl em 11–10

P 750 3, 000 1, 500 P5, 250

P15, 000

C

Per cent aget axdue( P54, 000+P18, 000+P36, 000)x3%

Pr obl em 11–11 D Per cent aget ax( P65, 700x3%)x5

P3, 240

P9, 855

Shoul dbeP9, 855i nst eadofP9, 859. Pr obl em 11–12 D Taxi( P98, 600x3%)x10 Bus( P1, 000, 000x3%) Commoncar r i ert axdue Pr obl em 11–13 D Tot algr ossr ecei pt s( P1, 000, 000+P6, 000, 000) Mul t i pl i edbyappl i cabl ebusi nesst axr at e Tot albusi nesst ax

P29, 580 30, 000 P59, 580

P7, 000, 000 12% P 840, 000

Not e:Commoncar r i erbyseai ssubj ectt oVATof12%. Pr obl em 11–14 A Per cent aget ax( P10, 000, 000x3%) VAT( P6, 000, 000+P1, 000, 000)x12% Aver agebusi nesst axi nayear Di vi dedbynumberofquar t eri nayear Est i mat edaver agebusi nesst axperquar t er

P 300, 000 840, 000 P1, 140, 000 4 P 285, 000

Pr obl em 11–15 C Per cent aget ax( P10, 000, 000x3%)

P300, 000

Pr obl em 11–16 A Out si def ort r i p-Mani l at oUSA( P1, 000, 000x3%)

P30, 000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS

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Chapter 11: PERCENTAGE TAXES

I nt hePhi l i ppi nesf ort r i p–Mani l at oUSA( P1, 100, 000x3%) Phi l i ppi nebusi nesst ax

Problem 11 – 17

C

Per cent aget ax–wat erf r anchi se( P1, 000, 000x2%) Pr obl em 11–18 B Per cent aget ax–wat erf r anchi se( P2, 000, 000x2%) Per cent aget ax–r adi of r anchi se( P10, 000, 000x3%) Tot alper cent aget ax Pr obl em 11–19 B Per cent aget ax( P5, 000+P2, 000)x10% Pr obl em 11–20 Exempt

P20, 000

P 40, 000 300, 000 P340, 000

P700

A

Pr obl em 11–21 D Servi cechar ge( P75, 000/10%) Per cent aget ax( P750, 000x10%) Tot alcol l ect i on Pr obl em 11–22 P -0-

D

Pr obl em 11–23

D

Per cent aget ax( P200, 000x10%)

Pr obl em 11–24

33, 000 P63, 000

P750, 000 75, 000 P825, 000

P20, 000

D

Amusementt ax( P500, 000+P200, 000+P100, 000)x18% Pr obl em 11–25 1. A Per cent aget ax( P2, 000, 000+P1, 000, 000)x10%

P144, 000

P300, 000

2. D Exempt Pr obl em 11–26 B Per cent aget ax[ P1, 000, 000-( P200, 000/100) ]x10%

P99, 800

Pr obl em 11–27 A Per cent aget ax( P100, 000–P1, 000)x10%

P9, 900

Pr obl em 11–28 B Per cent aget ax[ P1, 000, 000x. 005)

P5, 000

Pr obl em 11–29 D P -0 .Thesal ei ssubj ectt ocapi t algai nst axbecauset heshar esofst ockwer esol ddi r ec t l yt o t hebuyer . Pr obl em 11–30 C Per cent aget ax[ 400, 000xP12)x1% 400, 000/1, 150, 000=34. 5% mor et han331/3% =1% per cent aget ax.

P48, 000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS

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Chapter 11: PERCENTAGE TAXES

Pr obl em 11–31 D Per cent aget ax[ P600, 000x4%)

P24, 000

( 600, 000/20) /( 2, 600, 000/20)=23% =4% per cent aget ax. Pr obl em 11–32 B I nt er es ti ncomewi t hmat ur i t ymor et han5year s( P400, 000x1%) Lease hol di ncome( P300, 000x7%) Tot algr ossr ecei ptt ax

P 4, 000 21, 000 P25, 000

Not e:Thenett r adi ngl ossi sdeduct i bl eonl yf r om t r adi nggai noft hesamet axabl eyear . Pr obl em 11–33 D I nt er es ti ncomewi t hmat ur i t yl esst han5year s( P600, 000x5%) Royal t yi ncome( P300, 000x7%) Gai nf r om sal eofder i vat i ves( P200, 000x7%) Tot algr ossr ecei ptt ax

P30, 000 21, 000 14, 000 P65, 000

Not e:Thenett r adi ngl ossf or2005i snotdeduc t i bl ef r om t r adi nggai nof2006. Pr obl em 11–34 A Per cent aget ax[ P62, 400/( 100%1%3%)x3%

P 1, 950

Pr obl em 11–35 C Netpayment( P200, 000x( 100% -1% -2%)

P194, 000

Problem 11 – 36 Gr ossr ecei pt s( P480, 000+P190, 000+P100, 000+P2, 000, 000+P2, 500, 000) Mul t i pl i edbyappl i cabl ebusi nesst axr at e-VAT Busi nesst axl i abi l i t y

P5, 270, 000 12% P 632, 400

Not e:Sal e ofservi ce shoul d be based on gr oss r ecei pt s( col l ect i ons)whi l e sal e off oods and bever agesshoul dbebasedongr osssal es( r ev enues) .

Problem 11 – 37 Mi ni mum quar t er l yamount–Ci t yt axi( P98, 600x2) Mul t i pl i edbyper c ent aget axr at e Per cent aget axpayabl e–2nd quar t er( answer )

P197, 200 3% P 5, 916

Thet ot alact ualgr ossr ecei pt sandr el at edper cent aget axesf r om Apr i lt oJune( 2nd quar t er )wer e l owert hant hemi ni mum,hencenotappl i cabl e.

Pr obl em 11–38 Taxuni t s 1 2 3 4 5 Tot alamount=hi gheramount Mul t i pl i edbyper c ent aget ax

Ac t ual 100, 000 80, 000 95, 000 90, 000 105, 000 470, 000

Mi ni mum 98, 600 98, 600 98, 600 98, 600 98, 600 493, 000 3%

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS

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Chapter 11: PERCENTAGE TAXES

Per cent aget ax

14, 790

Not e:Thehi gheroft heaggr e gat e/t ot alamountoft heact ualgr ossr ecei pt sormi ni mum amount i ssubj ectt oper cent aget ax.

Pr obl em 11–39 Gr ossr ecei pt s( P2, 500, 000+P5, 000, 000+P3, 000, 000+P1, 500, 000) Mul t i pl i edbycommoncar r i er ’ s( byai r/sea)VATr at e Busi nesst ax

P12, 000, 000 12% P 1, 440, 000

Not es: 1. Common car r i er s by ai r and sea r e l at i ve t ot he t r anspor tofpassenger s wi t hi nt he Phi l i ppi nesi ssubj ectt o12% VAT.Tr anspor tofpassenger sbyl andhoweveri ssubj ectt o 3% per c ent aget ax. 2. I nt er nat i onalai r car r i er s and i nt er nat i onalshi ppi ng car r i er s doi ng busi ness i nt he Phi l i ppi nesshal lpayat axoft hr eeper c ent( 3%)oft hei rquar t er l ygr ossr ec ei pt s.

Problem 11 – 40 Gr ossr ecei pt s( P100, 000+P50, 000+P150, 000+P200, 000) Mul t i pl i edbyappl i cabl ebusi nesst axr at e Busi nesst axf ort hequar t er

P500, 000 12% P 60, 000

Not e:R. A.9337c hangedt hebusi nesst axr at eofdayandni ghtc l ubf r om 18% t o12% VAT.

Pr obl em 11–41 Gr ossr ecei pt s Mul t i pl i edbyappl i cabl ef r anchi set axr at e–VAT Fr anchi set ax

P50, 000, 000 12% P 6, 000, 000

Pr obl em 11–42 Act ualgr ossr ecei pt sf r om busi nessoper at i ons Fi r s tquar t er( P3, 000, 000+P4, 000, 000) Mul t i pl i edbyappl i cabl ebusi nesst axr at e Fr anchi set axdue–fir s tquar t er

P7, 000, 000 12% P 840, 000

Not e:Dur i ngt het axabl eyear ,i t sgr ossr ecei pt sexceededP10, 000, 000.

Problem 11 – 43 Gr ossr ecei pt s Mul t i pl i edbyper c ent aget axr at ecol l ect ed Per cent aget axt ober e mi t t ed

P500, 000 10% P 50, 000

Problem 11 – 44 Tot algr ossr ecei pt s( P600, 000+P400, 000) Mul t i pl i edbyper c ent aget axf orpr of essi onalbasket bal lor gani z at i on Per cent aget ax

P1, 000, 000 15% P 150, 000

Pr obl em 11–45 Tot algr ossr ecei pt s( P800, 000+P300, 000+P500, 000+P50, 000) Mul t i pl i edbyappl i cabl ebusi nesst axr at ef orcockpi t s Tot albusi nesst ax

P1, 650, 000 18% P 297, 000

Pr obl em 11–46

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS

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Chapter 11: PERCENTAGE TAXES

I ncomet axoncockfight i ngwi nni ngs( P500, 000x20%) Per cent aget axonhor ser aci ngwi nni ngs( P800, 000x10%) I ncomet axonhor ser aci ngwi nni ngs( P800, 000x20%) Tot alt axonwi nni ngs

P100, 000 80, 000 160, 000 P340, 000

Problem 11 – 47 1.

Per cent aget ax( P0. 50x1, 000, 000)x0. 005

2.

August20,2005=l astdayofr emi t t ancewi t houtpenal t y .

P 2, 500

Problem 11 – 48 Gr ossr ecei pt st axon: Renti ncome( P30, 000x7%) Royal t yi ncome( P20, 000x7%) I nt er e sti ncome( P50, 000+P20, 000+P10, 000)x5% Tot alper cent aget ax

P2, 100 1, 400 4, 000 P7, 500

Pr obl em 11–49 1.

Amount ofi nt er es t ,et c. P200, 000 200, 000 200, 000 200, 000 200, 000

Appl i cabl e t axr at e 1% 1% 1% 1% 5%

Amount Year Remai ni ngmat ur i t y ofi nt er es t ,et c. 2005 4 P200, 000 2006 3 200, 000 2007 2 200, 000 2008 1 200, 000 2009 Lesst han1year 200, 000 Tot algr ossr ecei ptt axasr ecomput ed Less:Gr ossr ecei ptt axpr evi ousl ypai d Gr ossr ecei ptt axst i l ldue

Appl i cabl e t axr at e 5% 5% 5% 5% 5%

Year Remai ni ngmat ur i t y 2005 9 2006 8 2007 7 2008 6 2009 5 Tot algr ossr ecei ptt axpai d 2.

Gr ossr ecei ptt ax P 2, 000 2, 000 2, 000 2, 000 10, 000 P18, 000

Gr ossr ecei ptt ax P10, 000 10, 000 10, 000 10, 000 10, 000 P50, 000 18, 000 P32, 000

Problem 11 – 50 Fr anchi se P 400, 000 3, 000, 000 P3, 400, 000 100, 000 P3, 300, 000

Nonf r anchi se P -0 1, 800, 000 P1, 800, 000 120, 000 P1, 680, 000

1.Tel ephoneser vi ces

10% P330, 000

10% P168, 000

2.Wat erf r anchi se

2% P 66, 000

3% P 50, 400

Begi nni ngr ecei vabl es Add:Revenues Tot al Less:Endi ngr ecei vabl es Gr ossr ecei pt s

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS

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Chapter 11: PERCENTAGE TAXES

3.Fas tf ood( P3, 000, 000x12%) ( P1, 800, 000x12%)

P360, 000 P216, 000

Not e:Thebusi nesst axonf astf oodi sbasedont her evenuebecauset hebusi nessi sa combi nat i onofsal esofgoodsandservi ce.Mor eover ,t hef astf oodbusi nessi ssubj ect t o12% VATbecauset het ot alr evenueexceededt heP1, 500, 000t hr eshol d. Problem 11 – 51

Comprehensive Problem

Col l ect i ons: Revenues Account sr ecei vabl e Advances Gr ossr ecei pt s Comput at i onofper cent aget axes: 1.Commoncar r i erofpassenger s( assumel andt r anspor t )

Cur r ent P 500, 000 300, 000 200, 000 P1, 000, 000

Pr evi ous P300, 000 100, 000 . P400, 000

3% P 30, 000

3% P 12, 000

2.Racet r ack

30% P300, 000

30% P120, 000

3.Boxi ngexhi bi t i on

10% P100, 000

10% P 40, 000

4.Wat erut i l i t i es

2% P 20, 000

2% P 8, 000

5.Li f ei nsur ance

5% P 50, 000

5% P 20, 000

6.Agent soff or ei gni nsur ancecompani es

10% P100, 000

10% P 40, 000

7.Ov er seasdi spat ch

10% P100, 000

10% P 40, 000...