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Chapt-8 Deduct From Gross Income

Chapt-8 Deduct From Gross Income

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Published by: humnarvios on Jan 28, 2012
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INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)SUGGESTED ANSWERS
Chapter 8: Deductions from Gross Income
CHAPTER 8
DEDUCTIONS FROM GROSS INCOME
Problem 8 – 1 DEDUCTIBLE OR NONDEDUCTIBLE FROM GROSS INCOME
1. Deductible11. Nondeductible2. Nondeductible12. Deductible3. Nondeductible13. Deductible4. Deductible, in lieu of tax credit (Sec. 34C3, NIRC)14. Deductible5. Deductible15. Nondeductible6. Nondeductible16. Nondeductible7. Nondeductible17. Nondeductible8. Deductible18. Deductible9. Deductible19. Deductible10. Nondeductible20. Deductible
Problem 8 2 TRUE OR FALSE
1.True2.True3.False – Business expenses related to business income outside the Philippines isdeductible also.4.False – Business expense is deductible from gross income.5.True6.True7.True – Once OSD is opted, no capital loss could be deducted from capital gain.8.False – Some business expenses are nondeductible or subject to limit.9.False – Income outside the Philippines by a NRC is not taxable in the Philippines,hence, no allowable deduction is allowed.10.True11.False – Compensation income is not subject to OSD.12.False – NOLCO is not an itemized deduction.13.True – Amortized over the term of the lease14.False – ½ of 1%15.False – 33%16.False – Double –declining method17.True18.True
Problem 8 3 Problem 8 4 Problem 8 5Problem 8 6
1. B1. C1. A1. A2. No choice,OSD=40%2. A2. A2. C3. D3. D3. C3. A4. D4. A4. C4. C5. D5. B5. A5. C6. C6. B6. D6. C7. B7. A7. C7. B8. D8. A8. A8. C9. B 9. D9. B9. C10. C10. A10. C10. C11. C11. D12. D12. B13. C
Problem 8 7 C
Expensed Capitalized
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INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)SUGGESTED ANSWERS
Chapter 8: Deductions from Gross Income
Change of motor of air conditionP60,000Repainting of buildingP10,000Expansion of store50,000Cleaning of computers9,000Repair of furniture 1,000 .P20,000P110,000
Problem 8 8 A
Salaries net of taxP100,000Withholding tax 5,000Deductible business expenseP105,000
Problem 8 9 A
General rule: No personal or business expense is deductible from compensation income.
Problem 8 10D
Depreciation expense (P1,000,000 x 40%)/25P16,000Loss of business equipment 38,000Deductible expenseP54,000
Problem 8 11D
1.ANo personal or business expense is deductible.2.BDepreciation (P20,000 x 10%)P 2,000Repair (P100,000 x 10%)10,000Office supplies 6,000 Total deductionP18,000
Problem 8 12B
Tax laws GAAPSalary expense (P180,000 + P20,000)P200,000P200,000Estimated uncollectible accounts10,000Compromise penalty50,000Depreciation expense30,00030,000Miscellaneous expense . 5,000Deductible from earningsP230,000P295,000Note: For tax purposes, the miscellaneous expense is not deductible because it was notreported last year. For accounting purposes, the miscellaneous expense can be deducted asprior period adjustment from retained earnings.
Problem 8 13C
Gross income (P300,000 + P20,000 + P180,000)P500,000Multiplied by OSD rate 40%Optional standard deductionP200,000
Problem 8 – 14
1.BGross income (P870,000 P10,000 P380,000))P480,000Add: Gains from sale of capital asset 40,000 Total P520,000Multiplied by OSD rate 40%Optional standard deductionP208,0002.BOSDP208,000Less: Operating expense 20,000
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INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)SUGGESTED ANSWERS
Chapter 8: Deductions from Gross Income
Amount of income enjoying tax savingsP188,000
Problem 8 15D
Gross receipts from professionP100,000Rent income 450,000 Total gross incomeP550,000Multiplied by percent of OSD 40%Optional standard deductionP220,000
Problem 8 16C
Operating expense before representation expense(P2,000,000 P300,000)P1,700,000Representation expense ActualP300,000- Limit (P20,000,000 x 0.005)100,000- Lower 100,000Allowable itemized deductionsP1,800,000
Problem 8 17B
Salary expenseP120,000Rent expense24,000Advertising expense6,000Depreciation expense5,000Interest expense60,000 Tax differential on interest income (P30,000 x 33%)( 9,900) Total itemized deductionsP205,100
Problem 8 18A
Gross salaries of employeesP6,000,000Grossed-up monetary value of fringe benefits 1,000,000Deductible salaries and fringe benefits expensesP7,000,000
Problem 8 19D
Allowable deduction fringe benefit expense (P102,000/68%)P150,000
Problem 8 20D
Assume bonus is computed after tax but before bonus. The answer is letter D = P8,143,computed as follows:Net income before charitable contribution (P75,000 +P5,000)P 80,000Less: Deductible contribution (P80,000 x 5%) lower of actual4,000Net income before income tax and bonusP 76,000B=15% (76,000 T) T= 30% (76,000 – B)B=15% [76,000 – 30% (76,000 – B)]B=15% (76,000 24,320 + 30%B)B= 11,400 – 3,420 +0.045BB 0.045B=7,9800.952B=7,980/0.955B= 8,356
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