ACCTAX1

ACCTAX1
Problem 1 - Concept of income and when taxable
a. Requirement No. 1 (20A1)

Income of Mabuhay Corporation -
Income of Mr. Segundo -
Requirement No. 2 (20A1)

Capital contribution received by Mabuhay Corporation from Mr. Segundo, its shareholder.
Properties received by Mabuhay Corporation

Cash 250,000.00
Land (fair market value) 800,000.00
Total 1,050,000.00
Shares issued by Mabuhay Corporation/Received by Mr. Segundo
No. of shares 10,000.00
Par value 100.00
Capital stock 1,000,000.00
Additional paid-in capital 50,000.00
Note: Discuss the concept of income and gain, capital, and receipt.
b. Requirement No. 1 (20A1)

Income of Mabuhay Corporation
Income of Masaya Corporation
Advance rentals (January to May)
Monthly rentals (June to November)
Monthly rental 1,000,000.00
No. of months 6.00
Pre-termination penalty
Monthly penalty 100,000.00
No. of months 13.00
Total income
Requirement No. 2 (20A1)

Mabuhay Corporation
Receipts:
Security deposit refunded on December 1, 20A1, not an income
Masaya Corporation
Receipts:
Taxable income
Security deposit received on January 1, 20A1, not an income
Note: Discuss the following:

Security deposit received by Mabuhay Corporation is a return of capital.
Security deposit received by Masaya Corporation is not an income since it is refundable.
Advance rentals received by Masaya Corporation are taxable upon receipt.
c. Requirement No. 1
Income of Mabuhay Corporation (20A1)
Income of Masaya Corporation:
Advance rentals (October 20A1 to February 20A2)
Monthly rentals (March to August 20A2)
Monthly rental 100,000.00
No. of months 6.00
Security deposit applied as rental (September)
Total
Requirement No. 2
Mabuhay Corporation
Receipts
Security deposit refunded on October 1, 20A2, not an income
Total deposit 200,000.00
Applied as rental (100,000.00)
Refunded
Masaya Corporation
Receipts:
Taxable income:
Advance rentals taxable upon receipt
Taxable income:
Monthly rentals
Security deposit applied as rental
Total income
Not an income:
Security deposit received on October 1, 20A1
Note: Discuss the following:

Security deposit received by Masaya Corporation is not an income since it is refundable.
Advance rentals received by Masaya Corporation are taxable upon receipt.
d. Requirement No. 1
Income of Masaya Banking Corporation
Principal
Interest rate
Total income
Requirement No. 2
Mabuhay Corporation
Receipts:
Loan proceeds received on January 1, 20A1, not an income
Masaya Banking Corporation

Receipts:
Interest income
Loan repayment on December 31, 20A1, not an income, return of capital
e. Requirement No. 1
Sales
In foreign currency 100,000.00
Exchange rate, December 1, 20A1 48.00
In Philippine peso 4,800,000.00
Cost of sales 3,000,000.00
Gain
Realized foreign exchange gain
January 31, 20A2
In foreign currency 100,000.00
Exchange rate, December 1, 20A1 51.00
Collection 5,100,000.00
Accounts receivable at December 1, 20A1 rate 4,800,000.00
Gain
Requirement No. 2
Mabuhay Corporation
Receipts
Tax-exempt income
Since it is enjoying ITH, its gain from sale of goods is tax-exempt. Realized foreign exchange g
It is arguable that the realized foreign exchange gain is part of its BOI-registered activities enjo
It is arguable that the PEZA rules may be used to support the position that realized foreign exc
Unrealized gain is not considered income for income tax purposes. Considered income when r
Masaya Corporation
Receipts:
f. Requirement No. 1
Income of security guards
Requirement No. 2
Mabuhay Corporation
Taxable income
Income of security guards but not income of Mabuhay
Total receipts
Masaya Corporation
Receipts/Income
Security guards
Receipts/Income, tax-exempt since minimum wage earner
g. Requirement No. 1
Selling price
Cost
Gain
Requirement No. 2
Mabuhay Corporation
Total receipts - constructive receipt when deposited to the bank account
Cost
Overpayment
Taxable income
Masaya Corporation
Receipt - refund of overpayment
-
5,000,000.00
6,000,000.00
1,300,000.00
12,300,000.00
2,000,000.00
12,300,000.00
2,000,000.00
20A1 20A2
- -
500,000.00
600,000.00
100,000.00
500,000.00 700,000.00
100,000.00
500,000.00
600,000.00
- 100,000.00
700,000.00
200,000.00
5,000,000.00
5%
250,000.00
5,000,000.00
250,000.00
5,000,000.00
20A1 20A2
1,800,000.00
300,000.00
- 5,100,000.00
1,800,000.00 300,000.00
ealized foreign exchange gain may also be tax-exempt.
OI-registered activities enjoying ITH.
n that realized foreign exchange gain is part of BOI-registered activities.
Considered income when realized.
- -
10,000.00
-
200,000.00
10,000.00
200,000.00
210,000.00
200,000.00
1,000,000.00
300,000.00
700,000.00
-
1,200,000.00
(300,000.00)
(200,000.00)
700,000.00
200,000.00
ACCTAX1
Problem 2 - Condonation of debt
Situation A
Requirement No. 1 Before After
condonation condonation
Assets 1,900,000.00 1,900,000.00
Liabilities 1,600,000.00 1,240,000.00
Net asset 300,000.00 660,000.00
Net asset before condonation 300,000.00

Condoned loan 360,000.00
Net asset after condonation 660,000.00
Liabilities after condonation

Accounts payable 400,000.00
Outstanding loan 840,000.00
Total 1,240,000.00
Net asset position before and after condonation, hence, condonation is considered taxable income.
Amount of loan 1,200,000.00

Condoned percentage 30%
Income 360,000.00
Outstanding loan 840,000.00
Requirement No. 2
Not subject to donor's tax since condonation is considered income subject to income tax.
Situation B
Assets 190,000.00 190,000.00
Liabilities 1,600,000.00 400,000.00
Net asset (1,410,000.00) (210,000.00)
Net asset before condonation (1,410,000.00)

Condoned loan 1,200,000.00
Net asset after condonation (210,000.00)

Outstanding loan -
Total 400,000.00
Capital deficiency position before and after condonation, hence, no taxable income is realized from condo

Loan condoned 1,200,000.00
Requirement No. 2
Not subject to donor's tax.
Situation C
Assets 550,000.00 550,000.00
Liabilities 1,600,000.00 400,000.00
Net asset (1,050,000.00) 150,000.00
Net asset before condonation (1,050,000.00)

Condoned loan 1,200,000.00
Net asset after condonation 150,000.00

Outstanding loan -
Total 400,000.00
Net asset position after condonation, hence, condonation is considered taxable income.

Loan condoned, taxable 1,200,000.00 TO CHECK IF ENTIRE 1.2 MILLION WILL BE TAXAB
Requirement No. 2
Not subject to donor's tax since condonation is considered income subject to income tax.
d taxable income.
me is realized from condonation.

ILLION WILL BE TAXABLE OR ONLY TO THE EXTENT OF THE NET ASSET OF 150,000
ACCTAX1
Problem 3 - Award of damages
Requirement No. 1
Income subject to income tax
Unpaid salaries 500,000.00
Unpaid commissions 120,000.00
Attorney's fees and other costs 250,000.00
Actual cost 200,000.00 50,000.00
Moral and exemplary damages 300,000.00
Total 970,000.00
Requirement No. 2
Award not considered income
Attorney's fees and other costs (actual) 200,000.00 actual costs reimbursed not taxab
Total 200,000.00
sts reimbursed not taxable
ACCTAX1
Problem 4 – Compensation for services; allowances; facilities or privileges
Situation A
Income of Ms. Maganda:
Compensation 200,000.00
Commissions 70,000.00
Tips and gratuities 50,000.00
Transportation allowance 40,000.00
Representation allowance 30,000.00
Bonuses 60,000.00
Courtesy discounts - May not be considered income (relative
Total 450,000.00
Situation B
Income of Ms. Maganda:
Compensation 200,000.00
Commissions 70,000.00
Tips and gratuities 50,000.00
Transportation allowance - Company expense since properly liquid
Representation allowance - Company expense since properly liquid
Bonuses 60,000.00
Courtesy discounts - May not be considered income (relative
Total 380,000.00
e considered income (relatively small value) based on BIR DA-331-2000.
expense since properly liquidated.

expense since properly liquidated.
e considered income (relatively small value) based on BIR DA-331-2000.

ACCTAX1
Problem 5 – Compensation for services: cash and in kind
Compensation/Services Amount
a. Repair services 50,000.00
b. Repair services 48,000.00
c. Repair services 45,000.00
d. Annual salary 3,000,000.00

Bonus
No. of shares 1,000.00
FV in 20A1 175.00 175,000.00
Total 3,175,000.00
e. Annual salary 1,000,000.00

Meals 50,000.00
Living quarters
Monthly value 5,000.00
No. of months 12.00 60,000.00
1,110,000.00
f. Annual salary 1,000,000.00 1,000,000.00

Meals 50,000.00
Living quarters
Monthly value 5,000.00
No. of months 12.00 60,000.00
110,000.00
g. Face value of the note 50,000.00

Discount (5,000.00)
Discounted value 45,000.00
Discount 5,000.00
h. Cancellation of debt as consideration for repair services 60,000.00
i. Condonation of debt is not an income since there is no consideration -

Distinguish this from Problem 2 on condonation of debt. It appears that there is no donative
intent in Problem 2. The condonation may be with business consideration.
Description
Cash compensation received
Fair market value of goods received
Stipulated price
Fair market value of stocks at the time the services were rendered [Section 2.78.1(A)(1) of RR No. 2-98]

Living quarters and meals received
Living quarters and meals received

Not compensation since provided for the convenience of the employer.
Not compensation since provided for the convenience of the employer.
20A1 income
20A2 income
ACCTAX1
Problem 6 – Income from dealings in property
Building Equipment
Selling price 3,500,000.00
Book value, January 1, 20A1 3,000,000.00
Depreciation, 20A1
Life 10.00 4.00
Fraction of year 0.50 150,000.00 0.75
Book value, at the time of sale 2,850,000.00
Gross income 650,000.00
Equipment Land Total
400,000.00 1,800,000.00
400,000.00
75,000.00
325,000.00 1,000,000.00
75,000.00 800,000.00 1,525,000.00
ACCTAX1
Problem 7 – Rental income
Situation A
Requirement No. 1
RPT 20,000.00
Total monthly rental 220,000.00
No. of months 12.00
Annual rental 2,640,000.00
Method 1 - FMV reported at the time of completion

20A1 Annual rental 2,640,000.00
FMV of building 5,000,000.00
Gross income 7,640,000.00
20A2 until end of lease term

Annual gross income 2,640,000.00
Method 2 - Spread over the lease term

Amortization of income from improvement commences at the completion of the improvement.
Total cost of building 5,000,000.00
Accumulated depreciation
Cost 5,000,000.00
Divided by: Life 40.00
Annual depreciation 125,000.00
Multiplied by: Lease term 14.25 1,781,250.00
Depreciated value 3,218,750.00
Divide by: Lease term 14.25
Annual income on the improvement 225,877.19
20A1 Income on the improvement
Annual income 225,877.19
Multiplied by: Fraction of year 0.25
56,469.30
Total gross income 2,696,469.30

Annual income from improvement 225,877.19
Situation B
Requirement No. 1
RPT 20,000.00
No. of months 12.00

20A2 until 20A7

20A8 Rental income

No. of months 9.00 1,980,000.00
Penalty 1,200,000.00

Amortization of income from improvement commences at the completion of the improvement.
Cost 5,000,000.00
56,469.30
20A2 until 20A7

20A8 Rental income

No. of months 9.00 1,980,000.00
Penalty 1,200,000.00
Cost of building 5,000,000.00
Depreciated life 7.00 875,000.00
Book value of building at termination 4,125,000.00
Income reported
Lapsed lease term 7.00 1,581,140.35
Income to be reported 2,543,859.65
Annual amortization 225,877.19
No. of months proportion 0.75
169,407.89
5000000 125000
-1781250
3218750
225877.19298
2640000
2696469.2982 1980000 -875000
4125000
-1581140.3509
2543859.6491
169407.89474
5893267.5439
ACCTAX1
Problem 7 – Rental income
Alternative but View 1 may not be correct; View 2 appears to be proper.
Situation A
Requirement No. 1
RPT 20,000.00
No. of months 12.00



View 1 - Amortization of income from improvement commences at the start of the lease term.
Cost 5,000,000.00
Divide by: Lease term 15.00 Not clear if this will commence from the star
Rental income 2,640,000.00
View 2 - Amortization of income from improvement commences at the completion of the improvement.
Cost 5,000,000.00
56,469.30
Situation B
Requirement No. 1
RPT 20,000.00
No. of months 12.00

20A2 until 20A7

20A8 Rental income

No. of months 9.00 1,980,000.00
Penalty 1,200,000.00

View 1 - Amortization of income from improvement commences at the start of the lease term.
20A1 until 20A7
Cost 5,000,000.00
Divide by: Lease term 15.00 Not clear if this will commence from the star
20A8 Rental income

No. of months 9.00 1,980,000.00
Penalty 1,200,000.00
Income reported
View 2 - Amortization of income from improvement commences at the completion of the improvement.
Cost 5,000,000.00
56,469.30
20A2 until 20A7

20A8 Rental income

No. of months 9.00 1,980,000.00
Penalty 1,200,000.00
Income reported
l commence from the start of the lease term or start of completion of the improvement
l commence from the start of the lease term or start of completion of the improvement
ACCTAX1
Problem 8 – Rental, dividend and interest income
Requirement No. 1
Rental income of Durian
Rosas
Common stock 5,000,000.00
Rate 10% 500,000.00
Dahlia
Loans payable 3,500,000.00
Rate 6% 210,000.00
RPT 100,000.00
Insurance 150,000.00
Total gross income 960,000.00
Requirement No. 2
Rosas
Dividend income related to rent 500,000.00
Dividend income arising from forgiveness of indebtedness 800,000.00
Total dividend income 1,300,000.00
Requirement No. 3
Interest income 210,000.00
ACCTAX1
Problem 9 – Dividend
Requirement No. 1
Dividend per share 4.00
No. of shares 1,000,000.00
Total 4,000,000.00
Requirement No. 2
Total dividend 4,000,000.00
Source:
20A0 net income 1,500,000.00
Net income prior to 20A0 2,500,000.00
ACCTAX1
Problem 10 – Proceeds of life insurance and return of premiums
Requirement No. 1
a. None -
b. Proceeds 3,000,000.00
Premium payments 15,000.00
No. of quarters 40.00 600,000.00
c. None -
d. Premium payments 15,000.00

No. of quarters 22.00
Total payments 330,000.00
None -
Requirement No. 2
Proceeds of life insurance 3,000,000.00 20A1
Premiums returned 600,000.00 After 10th policy year
Policy dividend 30,000.00 20A1
Cash surrender value 150,000.00 20A1

ACCTAX1
Problem 11 – Gift, bequest and devises
Requirement No. 1
Amount included in gross income
No. of months 6.00 600,000.00
Dividend income 300,000.00
Total 900,000.00
Requirement No. 2
Exclusion from gross income
Land 3,000,000.00
Cash 1,000,000.00
Jewelry 800,000.00
Shares of stock 1,500,000.00
Total 6,300,000.00
ACCTAX1
Problem 12 – Retirement benefits, pensions and separation pay
Nature of payment Requirement No. 1 Requirement No. 2

Inclusion Exclusion
a. Retirement pay 3,000,000.00

Back wages 300,000.00
Commutation of vacation leave credits 200,000.00
Commutation of sick leave credits 100,000.00
Total 300,000.00 3,300,000.00
b. Retirement pay 3,000,000.00

Total 3,600,000.00 - Tax Code provision sho
c. Retirement pay 3,000,000.00

Total 3,600,000.00 - Retirement plan provis
Tax Code is the minim
d. Retirement pay 3,000,000.00
Total 3,600,000.00 - Tax Code provision sho
e. View 1 - RA No.7641 applies since no BIR-registered retirement plan.

Retirement pay 3,000,000.00
Total 3,600,000.00 - RA No. 7641 - at least
View 2 - Minimum requirements under the Tax Code may apply.

Total 300,000.00 3,300,000.00 Tax Code provision ma
f. Retirement pay 3,000,000.00

Total 300,000.00 3,300,000.00 Meets both RA No. 764
g. View 1 - RA No.7641 applies since no BIR-registered retirement plan.

Total 3,600,000.00 - RA No. 7641 - at least
View 2 - Minimum requirements under the Tax Code may apply.

Retirement pay - 3,000,000.00
Back wages 300,000.00 -
Commutation of vacation leave credits - 200,000.00
Commutation of sick leave credits - 100,000.00
Total 300,000.00 3,300,000.00 Tax Code provision ma
h. Retirement pay - 3,000,000.00

Back wages 300,000.00 -
Commutation of vacation leave credits - 200,000.00
Commutation of sick leave credits - 100,000.00
Total 300,000.00 3,300,000.00 Meets both RA No. 764
i. Separation pay 3,000,000.00

Back wages 300,000.00 -
Total 300,000.00 3,300,000.00
j. Separation pay 3,000,000.00

Back wages 300,000.00 -
Total 300,000.00 3,300,000.00
Tax Code provision should apply, at least 10 years of service.
Retirement plan provision should apply, at least 60 years old. Plan or Tax Code, whichever is conservative.
Tax Code is the minimum requirement.
Tax Code provision should apply, at least 50 years old.
RA No. 7641 - at least 60 years old, 5 years of service.
Tax Code provision may apply.
Meets both RA No. 7641 and Tax Code.

RA No. 7641 - at least 60 years old, 5 years of service.
Tax Code provision may apply.
Meets both RA No. 7641 and Tax Code.

ACCTAX1
Problem 13 – Prizes and awards
Nature of payment Requirement No. 1

Inclusion
Most outstanding elementary school teacher

a. SEA Games gold medalist in track and field
Loyalty service award for 20 years of service with his employer 20,000
Prize for winning department store raffle 100,000
Prize for winning talent competition in a variety show 150,000
Total 270,000.00
Requirement No. 2
Exclusion
100,000.00
1,000,000.00
1,100,000.00
ACCTAX1
Problem 14 – 13th month pay and other benefits; de minimis benefits; SSS contributions; de minimis benefits
Requirement No.1 Requirement No. 2 Total

Included Excluded
a Gross compensation 353,460.00 6,540.00 360,000.00
13th month pay 30,000.00 30,000.00
14th month pay 30,000.00 30,000.00
Bonuses 47,000.00 13,000.00 60,000.00
Rice subsidy 18,000.00 18,000.00
Productivity incentive 12,000.00 12,000.00

Loyalty award 5,000.00 10,000.00 15,000.00
Medical allowance for the employee 8,000.00 8,000.00
Daily meal allowance 12,000.00 12,000.00

Total 417,460.00 127,540.00 545,000.00
*COMPUTATIONS ARE WRONG FOR 1 AND 2
Note 1: SSS contributions *CORRECT SOLUTION (EXCLUSIO

Mandatory monthly contribution 545.00 SSS
No. of months 12.00 De Minimis Benefits
Total 6,540.00 Threshold
Total Exclusions
Note 2: 13th month pay and other benefits threshold
13th month pay 30,000.00 *CORRECT SOLUTION (INCLUSIO
14th month pay 30,000.00 Gross Compensation
Productivity Incentive 12,000.00 Excess Threshold
Loyalty award 5,000.00 Total Inclusions
Bonuses 60,000.00
Total 137,000.00
Less: Threshold 90,000.00
Excess 47,000.00
Note 3: De Minmis Benefits

Rice Subsidy 18,000.00
Loyalty Award 10,000.00
Meal Allowance 12,000.00
Medical Allowance 8,000.00
Total De Minimis Benefits 48,000.00
Requirement No.1 Requirement No. 2 Total

Included Excluded
b. Gross compensation 233,460.00 6,540.00 240,000.00
13th month pay 15,000.00 15,000.00
14th month pay 15,000.00 15,000.00
Bonuses 40,000.00 40,000.00
Rice subsidy #REF! #REF! #REF!

Loyalty award 15,000.00 15,000.00
Medical allowance for the employee 4,000.00 5,000.00 9,000.00
Daily meal allowance 4,750.00 6,250.00 11,000.00

Total #REF! #REF! #REF!
*COMPUTATIONS ARE WRONG FOR 1 AND 2
Note 1: SSS contributions

Mandatory monthly contribution 545.00
No. of months 12.00
Total 6,540.00

13th month pay 20,000.00
Bonuses 40,000.00
Rice Subsidy 10,000.00
Medical Allowance 12,000.00
Meal Allowance 3000
Total 120,000.00
Less: Threshold (90,000.00)
Excess Threshold 30,000.00
Note 3: De Minmis Benefits

Rice subsidy 8000.00
Productivity allowance 10000.00
Medical allowance 7000.00
Total De Minimis Benefits 25000.00
Note 7: No. of days

Amount given on overtime 150.00 50.00
Cap:
Minimum wage 500.00
% Cap 25% 125.00 50.00
Excess 25.00 50.00
Inclusion Exclusion
Not on overtime 3,500.00
Overtime 1,250.00 6,250.00
Total 4,750.00 6,250.00
minimis benefits
Check Difference
NOTES:
360,000.00 - See Note 1 DE MINIMIS BENEFITS THRESHOLDS
30,000.00 - See Note 2 1 Monetized Unused Vac
30,000.00 - See Note 2 2 Monetized VL/SL to GO
60,000.00 - See Note 2 3 Medical cash allowance
18,000.00 - 4 Rice subsidy
5 Uniform and clothing a
12,000.00 - See Note 3 6 Actual Medical allowan
15,000.00 - See Note 4 7 Laundry Allowance
8,000.00 - *8 Employee Achievemen
9 Gifts during Christmas
12,000.00 - 10 Daily meal allowance fo
545,000.00 - *11 Productivity incentives
* If Employe Achievemen
CT SOLUTION (EXCLUSIONS) If productivity incentive
6540.00 Note 1
48000.00 Note 3
90000.00
144540.00
CT SOLUTION (INCLUSIONS)
353,460.00
47,000.00 Note 2
400,460.00
Check Difference
240,000.00 - See Note 1

20,000.00 (5,000.00) See Note 2
20,000.00 (5,000.00) See Note 2
40,000.00 - See Note 2
18,000.00 #REF! See Note 3
10,000.00 - See Note 4

15,000.00 -
10,000.00 (1,000.00) See Note 5
12,000.00 (1,000.00) See Note 7

385,000.00 #REF!
*CORRECT SOLUTION (EXCLUSIONS)

SSS 6540.00 Note 1
De Minimis Benefits 25000.00 Note 3
Threshold 90000.00
Total Exclusions 121540.00
*CORRECT SOLUTION (INCLUSIONS)

Gross Compensatio 233,460.00
Excess Threshold 30,000.00 Note 2
Total Inclusions 263,460.00
Total
7,500.00
6,250.00
1,250.00
ITS THRESHOLDS
Monetized Unused Vacation Leave to PRIVATE EMPLOYEES ONLY Not exceeding 10 DAYS
Monetized VL/SL to GOV'T. OFFICIALS AND EMPLOYERS
Medical cash allowances to DEPENDENTS of employees 1500/sem or 250/month
Rice subsidy 2000/month or 50 kg of rice
Uniform and clothing allowance 6000/yr
Actual Medical allowance (liquidated by invoices) 10000/yr
Laundry Allowance 300/month
Employee Achievement Awards (IN KIND) 10000/yr
Gifts during Christmas and major anniversary celebrations 5000/yr
Daily meal allowance for OT, night, or graveyard shift 25% of basic minimum wage
Productivity incentives and CBA 10000/yr
If Employe Achievement awards are in cash, the whole amount is taxable.

If productivity incentives and cba EXCEED 10000, the whole amount will be taxable.
ACCTAX1
Problem 15 – FBT on housing privileges
Hotel charges for January and February are not subject to FBT. These are considered charges for temporary housing.
a. & b. Lease contract can be entered into between Libertad and the lessor, or Mr. Aruga and the lessor.
Requirement Nos. 1 & 2 First Quarter Second Quarter Third Quarter
Monthly rental 120,000.00 120,000.00 120,000.00
No. of months 1 3 3
Total 120,000.00 360,000.00 360,000.00
Monetary value percentage 50% 50% 50%
Monetary value 60,000.00 180,000.00 180,000.00
% for GMV 65% 65% 65%
Grossed-up monetary value 92,307.69 276,923.08 276,923.08
FBT rate 35% 35% 35%
FBT 32,307.69 96,923.08 96,923.08
Requirement No. 3
Jan & Feb Temporary housing benefits 300,000.00
Cash
Mar to Dec Fringe benefits expense 120,000.00

Cash
Mar to Dec FBT expense 32,307.69

FBT payable
April FBT payable 32,307.69

Cash
July & Oct FBT payable 96,923.08

Cash
c.
Fair value 10,000,000.00 10,000,000.00 10,000,000.00
Zonal value 8,500,000.00 8,500,000.00 8,500,000.00
Higher 10,000,000.00 10,000,000.00 10,000,000.00
Percentage 5% 5% 5%
Value 500,000.00 500,000.00 500,000.00
Monetary value 250,000.00 250,000.00 250,000.00
% for GMV 65% 65% 65%
No. of months 1/12 0.25 0.25
GMV for the quarter 32,051.28 96,153.85 96,153.85
FBT rate 35% 35% 35%
FBT 11,217.95 33,653.85 33,653.85
Requirement No. 3
Cash
FBT payable

Cash

Cash
d.
Acquisition cost 10,000,000.00 10,000,000.00 10,000,000.00
Percentage 5% 5% 5%
Value 500,000.00 500,000.00 500,000.00
Monetary value 250,000.00 250,000.00 250,000.00
% for GMV 65% 65% 65%
No. of months 0.08 0.25 0.25
GMV for the quarter 32,051.28 96,153.85 96,153.85
FBT rate 35% 35% 35%
FBT 11,217.95 33,653.85 33,653.85
Requirement No. 3
Cash
Mar Condominium unit 10,000,000.00

Cash
Installment payable

FBT payable

Cash

Cash
Dec Interest expense 333,333.33

Interest payable
e.
Requirement Nos. 1 & 2
Acquisition cost 10,000,000.00
Zonal value 12,500,000.00
Higher 12,500,000.00
% for GMV 65%
Grossed-up monetary value 19,230,769.23
FBT rate 35%
FBT 6,730,769.23
Requirement No. 3
Cash
Mar Fringe benefits expense 10,000,000.00

FBT expense 6,730,769.23
Cash
FBT payable
Apr FBT payable 6,730,769.23

Cash
f.
Acquisition cost 10,000,000.00
Fair market value 12,500,000.00
Zonal value 12,000,000.00
Highest 12,500,000.00
Consideration 6,000,000.00
Benefit 6,500,000.00
% for GMV 65%
Grossed-up monetary value 10,000,000.00
FBT rate 35%
FBT 3,500,000.00
Requirement No. 3
Cash
Mar Condominium unit 10,000,000.00

Cash
Mar Cash 6,000,000.00

Fringe benefits expense 4,000,000.00
Condominium unit
Mar FBT expense 3,500,000.00

FBT payable
Apr FBT payable 3,500,000.00

Cash
rges for temporary housing.
ga and the lessor.

Fourt Quarter Total
120,000.00
3
360,000.00 1,200,000.00
50% 50%
180,000.00 600,000.00
65% 65%
276,923.08 923,076.92
35% 35%
96,923.08 323,076.92
300,000.00
120,000.00
32,307.69
32,307.69
96,923.08
Fourt Quarter
10,000,000.00
8,500,000.00
10,000,000.00
5%
500,000.00
50%
250,000.00
65%
384,615.38
0.25
96,153.85
35%
33,653.85
300,000.00
11,217.95
11,217.95
33,653.85
Fourt Quarter
10,000,000.00
5%
500,000.00
50%
250,000.00
65%
384,615.38
0.25
96,153.85
35%
33,653.85
300,000.00
2,000,000.00
8,000,000.00
11,217.95
11,217.95
33,653.85
333,333.33
300,000.00
10,000,000.00
6,730,769.23
6,730,769.23
300,000.00
10,000,000.00
10,000,000.00
3,500,000.00
3,500,000.00
ACCTAX1
Problem 16 – FBT on motor vehicles
a&b
Requirement Nos. 1 & 2 First Quarter
Monetary value 1,200,000.00
GMV % 65%
GMV 1,846,153.85
FBT rate 35%
FBT 646,153.85
Requirement No. 3
Jan Fringe benefits expense 1,200,000.00
Cash 1,200,000.00
FBT 646,153.85
FBT payable 646,153.85
Apr FBT payable 646,153.85

Cash 646,153.85
c
Monetary value 1,200,000.00 1,200,000.00 1,200,000.00
GMV% 65% 65% 65%
GMV 1,846,153.85 1,846,153.85 1,846,153.85
Divide by: No. of years 5 5 5
Annual GMV 369,230.77 369,230.77 369,230.77
Divide by: No. of quarters 4 4 4
Quarterly GMV 92,307.69 92,307.69 92,307.69
FBT rate 35% 35% 35%
FBT 32,307.69 32,307.69 32,307.69
Requirement No. 3
1-Jan Prepaid fringe benefits expense 300,000.00
Cash 300,000.00
Quarterly Fringe benefits expense 60,000.00

Prepaid fringe benefits expenses 60,000.00
Quarterly FBT expense 32,307.69


Cash 32,307.69
d
Acquistion cost 1,200,000.00
Amount shouldered by employee 200,000.00
Monetary value 1,000,000.00
GMV % 65%
GMV 1,538,461.54
FBT rate 35%
FBT 538,461.54
Requirement No. 3
Jan Fringe benefits expense 1,000,000.00
Cash 1,000,000.00
FBT 538,461.54
Apr FBT payable 538,461.54

Cash 538,461.54
e
Acquisition cost 1,200,000.00 1,200,000.00 1,200,000.00
Divide by: No. of years 5.00 5.00 5.00
Annual value 240,000.00 240,000.00 240,000.00
Monetary value 120,000.00 120,000.00 120,000.00
Divide by: No. of quarters 4 4 4
Quarterly monetary value 30,000.00 30,000.00 30,000.00
Divide by: GMV% 65% 65% 65%
Quarterly GMV 46,153.85 46,153.85 46,153.85
FBT rate 35% 35% 35%
FBT 16,153.85 16,153.85 16,153.85
Requirement No. 3
1-Jan Transportation equipment 1,200,000.00
Cash 1,200,000.00
Quarterly Depreciation expense 75,000.00

Accumulated depreciation 75,000.00


Cash 16,153.85
f
Monthly rental 35,000.00 35,000.00 35,000.00
Multiply by: No. of months 3.00 3.00 3.00
Quarterly value 105,000.00 105,000.00 105,000.00
Multiply by: Monetary value % 50% 50% 50%
Quarterly monetary value 52,500.00 52,500.00 52,500.00
Divide by: GMV% 65% 65% 65%
Quarterly GMV 80,769.23 80,769.23 80,769.23
FBT rate 35% 35% 35%
FBT 28,269.23 28,269.23 28,269.23
Requirement No. 3
Monthly Rental expense/Fringe benefits expense 35,000.00
Accumulated depreciation 35,000.00


Cash 28,269.23
Fourth Quarter Total
1,200,000.00
65%
1,846,153.85
5
369,230.77
4
92,307.69 369,230.77
35% 35%
32,307.69 129,230.77
129,230.77
1,200,000.00
5.00
240,000.00
50%
120,000.00
4
30,000.00
65%
46,153.85 184,615.38
35% 35%
16,153.85 64,615.38
64,615.38
(4 years depreciation per problem)

35,000.00
3.00
105,000.00
50%
52,500.00
65%
80,769.23 323,076.92
35% 35%
28,269.23 113,076.92
113,076.92
ACCTAX1
Problem 17 – Expense accounts; household personnel; life insurance; membership fees, dues and other expenses
Requirement No. 1 Personal Business

Car repairs and maintenance 20,000.00 20,000.00
Representation expenses 12,000.00 4,000.00 8,000.00
Transportation expenses 7,500.00 7,500.00
Supplies expenses 5,000.00 5,000.00
Groceries 5,250.00 5,250.00
Driver’s salaries 5,500.00 5,500.00
Maid’s salaries 2,500.00 2,500.00
Laundry expenses 1,500.00 1,200.00 300.00
Membership fees in PICPA 3,000.00 3,000.00
Membership fees in Rotary Club 1,500.00 1,500.00
Membership fees in Tennis Club 6,000.00 6,000.00
PRC license fee 1,000.00 1,000.00
Personal life insurance premium 3,000.00 3,000.00
Total 73,750.00 28,950.00 44,800.00
Monetary value of fringe benefits 28,950.00
Requirement No. 2
Monetary value of fringe benefits 28,950.00
GMV percentage 65%
GMV 44,538.46
Tax rate 35%
Tax 15,588.46
Requirement No. 3
Various expenses 44,800.00
Fringe benefits 28,950.00
Cash 73,750.00
FBT expense 15,588.46


Cash 15,588.46
Various expenses (group life) 1,000.00

Cash 10,000.00
De minimis benefits 10,000.00

Cash 10,000.00
and other expenses
Remarks
Issue on whether only 50% will be business, or the entire 100% will be considered business expense. Arguably and aggressive
Only P300 is considered "de minimis". The P300 should be granted monthly. Since this is granted quarterly, only P300 will be "d
Already exceeding P10,000 cap on medical benefits

Arguably and aggressively, 100% may be considered business expense.
rterly, only P300 will be "de minimis".

ACCTAX1
Problem 18 – Car plan, car lease
Requirement Nos. 1 and 2
Mr. Hidalgo First Quarter Second Quarter Third Quarter

Acquisition cost Php1,000,000.00 Php1,000,000.00 Php1,000,000.00
Less: Amount shouldered by em 300,000.00 300,000.00 300,000.00
Amount shouldered by Rizal Php 700,000.00 Php 700,000.00 Php 700,000.00
Monetary Value % 50% 50% 50%
Annual Monetary value Php 350,000.00 Php 350,000.00 Php 350,000.00
Divide by: Number of years 5.00 5.00 5.00
Annual Monetary value Php 70,000.00 Php 70,000.00 Php 70,000.00
Divide by: Number of quarters 4 4 4
Quarterly monetary value Php 17,500.00 Php 17,500.00 Php 17,500.00
Divided by % of GMV (65%) 65% 65% 65%
Grossed-up Monetary Value Php 26,923.08 Php 26,923.08 Php 26,923.08
Multiplied by FBT Rate (35%) 35% 35% 35%
Fringe Benefit Tax Php 9,423.08 Php 9,423.08 Php 9,423.08
Ms. Karisma First Quarter Second Quarter Third Quarter

Total rent Php 75,000.00 Php 75,000.00 Php 75,000.00
Monetary Value % (50%) 50% 50% 50%
50% of rent Php 37,500.00 Php 37,500.00 Php 37,500.00
Less: Amount shouldered by em 15,000.00 15,000.00 15,000.00
Quarterly monetary value Php 22,500.00 Php 22,500.00 Php 22,500.00
OR
Total rent Php 75,000.00 Php 75,000.00 Php 75,000.00
Monetary Value % (50%-20%) 30% 30% 30%
Actual monetary value ₱22,500.00 ₱22,500.00 ₱22,500.00
Actual Monetary Value ₱22,500.00 ₱22,500.00 ₱22,500.00

Divided by % of GMV (65%) 65% 65% 65%
Grossed-up Monetary Value Php 34,615.38 Php 34,615.38 Php 34,615.38
Multiplied by FBT Rate (35%) 35% 35% 35%
Fringe Benefit Tax Php 12,115.38 Php 12,115.38 Php 12,115.38
Quarter FBT First Quarter Second Quarter Third Quarter

Car plan Php 9,423.08 Php 9,423.08 Php 9,423.08
Car lease 12,115.38 12,115.38 12,115.38
Total Php 21,538.46 Php 21,538.46 Php 21,538.46
Requirement No. 3
Jan Transportatio #REF!
Receivable f #REF!
Cash #REF!
Monthly Cash #REF!

Receivable from employ #REF!
Monthly Cash 5,000.00

Rent payable 5,000.00
Monthly Rent expense 20,000.00

Rent payable 5,000.00
Cash 25,000.00


Cash 21,538.46
Fourth Quarter
Php1,000,000.00
300,000.00
Php 700,000.00
50%
Php 350,000.00
5.00
Php 70,000.00
4
Php 17,500.00
65%
Php 26,923.08
35%
Php 9,423.08
Fourth Quarter
Php 75,000.00
50%
Php 37,500.00
15,000.00
Php 22,500.00
Php 75,000.00 Based on BIR ruling. Ruling appears to be inconsistent with another ruling involving car l
30% Alternative solution is presented under Problem 19A which is consistent with rentals.
₱22,500.00 Problem 19 is the correct solution, Problem 19A is an alternative which may be arguable
₱22,500.00
65%
Php 34,615.38
35%
Php 12,115.38

Php 9,423.08 Php 37,692.32
12,115.38 48,461.54
Php 21,538.46 Php 86,153.86
sistent with another ruling involving car lease (see above calculation).
19A which is consistent with rentals.
is an alternative which may be arguable.
ACCTAX1
Problem 19 – Foreign travel, holiday expenses and educational assistance

First Quarter Second Quarter
Mr. Fresco
Foreign travel
Airfare, first class (30% taxable) 36,000.00
Hotel charges 30,000.00
Food expenses 6,000.00
Other incidentals 10,000.00
Educational assistance 37,500.00
Ms. Halaman
Educational assistance 70,000.00
Total monetary value 189,500.00 -
GMV% 65% 65%
GMV 291,538.46 -
FBT rate 35% 35%
FBT 102,038.46 -
Requirement No. 3
Foreign travel expenses (business) 259,000.00

Cash 259,000.00
Fringe benefits expense - foreign travel 82,000.00

Cash 82,000.00
Educational assistance expense 250,000.00

Cash 250,000.00
Fringe benefits expense - Educational assistance 107,500.00

Cash 107,500.00
FBT expense 102,038.46

Cash 102,038.46
Third Quarter Fourth Quarter Total
36,000.00
30,000.00
6,000.00
10,000.00
37,500.00 75,000.00
-
37,500.00 - 157,000.00
65% 65% 65%
57,692.31 - 241,538.46
35% 35% 35%
20,192.31 - 84,538.46
(net of 30% airfare)

ACCTAX1
Problem 20 – Fringe benefits received by certain individuals; applicable tax rate
Subject to regular rates

Total Taxable
Rental of housing facilities 3,000,000.00 1,500,000.00
Rental of assigned cars (fleet of cars) 2,200,000.00 1,100,000.00
Rice subsidy 300,000.00
Membership fees in professional organization 200,000.00
Membership fees in sports club 100,000.00 100,000.00
Clothing allowance 120,000.00
Total 5,920,000.00 2,700,000.00
GMV% 65%
GMV 4,153,846.15
FBT rate 35%
FBT 1,453,846.15
Entitled to 15% tax
Remarks
Total Taxable
3,600,000.00 1,800,000.00 50% taxable
2,160,000.00 1,080,000.00 50% taxable
225,000.00 De minimis
150,000.00 Non-taxable
75,000.00 75,000.00
90,000.00 P1,000 per employee is taxable
6,300,000.00 2,955,000.00
85%
3,476,470.59
15%
521,470.59 1,975,316.74
ACCTAX1
Problem 21 – Employee benefits; timing of deduction; lesser deduction, withholding tax requirements; illegal expense
Note: Discuss the "all events test" requirements under US jurisprudence (three requisites for deductibility - fixing of liability; reas
Amount Deductible Non-deductible

Salaries and wages 5,000,000.00 5,000,000.00 -
Special bonuses 2,000,000.00
2,000,000.00
Regular bonuses 3,000,000.00 3,000,000.00 -
Other employee benefits -
De minimis 2,000,000.00 1,500,000.00 500,000.00
Other benefits 1,200,000.00 1,200,000.00 -
Facilitation fees 300,000.00 - 300,000.00
20A1 P&L 13,500,000.00
Prior year's P&L
Special bonuses 2,600,000.00 2,600,000.00
Regular bonuses 200,000.00 200,000.00

Total 2,800,000.00 13,300,000.00 3,000,000.00
ng tax requirements; illegal expenses
s for deductibility - fixing of liability; reasonable accuracy; economic performance test).
Arguable that "all events test" requirements not met, but gray area. Conservatively, non-deductible and
will never be tax-deductible in the future since not properly subjected to withholding tax in the proper
period.
All events test requirements met and properly subjected to withholding tax
Amount in excess of the threshold is non-deductible since not subjected to withholding taxes
Illegal expenses are not deductible.
Arguable that "all events test" requirements met in 20A1, but gray area. Conservatively, non-deductible
and will never be tax-deductible in the future since not properly subjected to withholding tax in the
proper period.
Not deductible. Deductions cannot be postponed. Deductions in 20A0 of P1,000,000 is allowed
although it is less than the actual amount of P1,200,000
ACCTAX1
Problem 22 – Stock options, equity settled transaction
Market Value Exercise Price Instrinsic value No. of shares

20A1
20A2
20A3
20A4 48.00 30.00 18.00 80,000.00
20A5 43.00 38.00 5.00 45,000.00
20A6 49.00 43.00 6.00 25,000.00
Note: Point out issue that the benefits may either be subject to FBT or withholding tax on compensation. Will be discussed in de
Monetary value GMV% Deductible expense
No deduction since no exercise
1,440,000.00 65% 2,215,384.62 Deductible when exercised
225,000.00 65% 346,153.85 Deductible when exercised
150,000.00 65% 230,769.23 Deductible when exercised
n compensation. Will be discussed in detail under Tax on Individuals.

ACCTAX1
Problem 23 – Stock awards, equity-settled transaction
Market Value No. of shares No. of employees Deductible expense

20A1 No deduction
20A2 No deduction
20A3 No deduction
20A4 14.00 200 130 364,000.00 Market value of shares at th
No deduction
No deduction
No deduction
Market value of shares at the time the services were rendered will be used.
ACCTAX1
Problem 24 – Share appreciation rights, cash-settled transactions
Market Value Option Price SAR No. of shares

20A1
20A2
20A3
20A4 20.00 10.00 10.00 10,000.00
Deductible expense
No deduction since no payment
100,000.00 Deductible at the time of payment
ACCTAX1
Problem 25 – Compensation for personal services
Deductible expense
a. Salaries expense 6,500,000.00 Only reasonable amount of salaries will be deductible, the balance may be c
b. No deduction - Non-deductible since no services were rendered. May be deductible if consid
c. Monthly salary 300,000.00

No. of months 13.00
Total salaries 3,900,000.00
Net income 10,000,000.00

Bonus rate 3%
Bonus 300,000.00
Total expense 4,200,000.00
d. Benefits 2,000,000.00 Deductible, considered de minimis since amount involved is less than P5,000
e. Benefits 5,000,000.00 Deductible since properly subjected to withholding tax.
f. Separation pay 2,500,000.00 Deductible, not subject to withholding tax since separation is beyond the con
g. Back wages 3,000,000.00 Deductible in 20A1 although it pertains to 20A0 since it was only during 20A1
ctible, the balance may be considered as dividend
d. May be deductible if considered as benefits granted to Mr. El Nido but these should be subjected to withholding taxes.
t involved is less than P5,000 per employee.
separation is beyond the control of the employees.
since it was only during 20A1 that the back wages were determined and paid.
ding taxes.
ACCTAX1
Problem 26 – Travel expenses; entertainment, amusement and recreation expenses; documentation requirements
Requirement No. 1 Requirement No. 2 Requirement No. 3

Travel Transportation EAR
a Taxi fare 50,000.00
b Bus fare
c Airplane fare - domestic 250,000.00
d Airplane fare - international 125,000.00
e. Hotel and food - domestic 60,000.00
f. Hotel and food - international 55,000.00
g. Fixed representation
h. Restaurant charges 30,000.00
i. Membership fees
j. Restaurant and hotel - prof
k. Tickets 52,000.00
l. Sports club charges 25,000.00
Total 490,000.00 50,000.00 107,000.00
Cap
Gross sales 10,000,000.00
Less: Discounts 240,000.00
Net sales 9,760,000.00
Cap% 1%
Cap 97,600.00
Deductible expense 490,000.00 50,000.00 97,600.00
Requirement No. 5
Cap
Gross sales 10,000,000.00
Less: Discounts 240,000.00
Net sales 9,760,000.00
Cap% 0.50%
Cap 48,800.00
Deductible expense 48,800.00
Requirement No. 6
Goods
Sales 2,000,000.00
Discount (180,000.00)
Net sales 1,820,000.00
Allocable EAR based on sales 16,904.51
Cap
Net sales 1,820,000.00
Cap% 0.50%
Cap 9,100.00
Deductible expense 9,100.00
umentation requirements
Requirement No. 4
Others Non-deductible Total
50,000.00
12,000.00 12,000.00
250,000.00
125,000.00
40,000.00 100,000.00
25,000.00 80,000.00
100,000.00 100,000.00
15,000.00 45,000.00
12,000.00 12,000.00
8,000.00 8,000.00
52,000.00
25,000.00
-
35,000.00 177,000.00 859,000.00
35,000.00
Services Total
10,000,000.00 12,000,000.00
(300,000.00) (480,000.00)
9,700,000.00 11,520,000.00
90,095.49 107,000.00
9,700,000.00 11,520,000.00
1%
97,000.00 106,100.00
90,095.49 99,195.49
Non-deductible since not supported.
Non-deductible since not subjected to withholding tax. Considered

income of employees
ACCTAX1
Problem 27 – Rental and related expenses, repairs and maintenance
Requirement No. 1 20A1 20A2

Total rentals 1,000,000.00
Term (years) 5.00
Annual rentals 200,000.00 200,000.00
Real property tax 30,000.00 30,000.00
Ordinary repairs 100,000.00
Replacement of windows and roofs 200,000.00
Remaining lease term 4.50
Annual amortization/depreciation 44,444.44 44,444.44
Multiplied by: 6/12 0.50
Depreciation/amortization 22,222.22
Leasehold improvement 300,000.00
Remaining lease term 3.75
Annual amortization/depreciation 80,000.00
Multiplied by: 9/12 0.75
Depreciation/amortization 60,000.00
Total deductible expense 352,222.22 334,444.44
Requirement No. 2
Replacement of windows and roofs 200,000.00
Leasehold improvement 300,000.00
Rentals
Rentals
Repairs and maintenance
Depreciation
Depreciation
Depreciation
ACCTAX1
Problem 28 – Security, janitorial, manpower and advertising expenses
Mabini
Security services - service fee expense 30,000.00
Security services - Security guards salaries exp 300,000.00 Salaries of the guards should be recognized as s
Janitorial expense 275,000.00
Manpower services expense 550,000.00
Advertising expense 850,000.00
Service fee expense 150,000.00
Total 2,155,000.00
Other party
Magdiwang - No salaries expense will claimed since it is claim
Maaliwalas
Salaries expense 250,000.00
Maligalig
Salaries expense 500,000.00
Mayaman -
Maligaya -
Note: Regarding advertising services, if Mabini paid Maligaya the entire P1,000,000 and Maligaya paid Mabini P150
s should be recognized as salaries expense on the part of the client of the agency. This is not recognized as income by Magdiwang.
will claimed since it is claimed by Mabini
Maligaya paid Mabini P150,000, Maligaya will have deductible expense of P150,000.
income by Magdiwang.
ACCTAX1
Problem 29 – Expenses of farmers
Ord & nec exp Capital exp

Coconut seedlings and seenuts 700,000.00
Heifer 2,000,000.00
Feeds 350,000.00
Farm machines and equipment 1,200,000.00
Hand tools 250,000.00
Gasoline and fuel 450,000.00
Feeds 600,000.00
Heifer 300,000.00
Land maintenance 800,000.00
Utilities 750,000.00
Other labor expenses 1,500,000.00
Total 4,700,000.00 4,200,000.00
ACCTAX1
Problem 31 – Expenses of private educational institutions
Requirement No. 1
Amount
Rentals 800,000.00
Electricity and other utilities 600,000.00
Repairs and maintenance expenses 500,000.00
Transportation and travel expenses 250,000.00
Professional fees 350,000.00
Communication expenses 120,000.00
Training 100,000.00
Supplies 150,000.00
Security and janitorial 225,000.00
Salaries expense 3,500,000.00
Other employee benefits 1,250,000.00
Construction of building to be used as classrooms 3,000,000.00
Equipment for classrooms and other educational activities 900,000.00
Construction of building to be leased to various businesses 3,500,000.00
Equipment related to building for lease 720,000.00
Total 16,240,000.00
Requirement No. 2
Amount
Rentals 800,000.00
Electricity and other utilities 600,000.00
Repairs and maintenance expenses 500,000.00
Transportation and travel expenses 250,000.00
Communication expenses 120,000.00
Training 100,000.00
Supplies 150,000.00
Security and janitorial 225,000.00
Salaries expense 3,500,000.00
Other employee benefits 1,250,000.00
Construction of building to be used as classrooms 3,000,000.00
Equipment for classrooms and other educational activities 900,000.00
Construction of building to be leased to various businesses 3,500,000.00
Equipment related to building for lease 720,000.00
Total 16,240,000.00
Note: Depreciation not included since it is not ordinary and necessary expense but depreciation expense.
Deductible Non-deductible Capital expenditure
800,000.00
600,000.00
500,000.00
225,000.00 25,000.00
350,000.00
120,000.00
100,000.00
150,000.00
225,000.00 P100,000 should be recorded Securities services - Security guard sa
275,000.00
3,500,000.00
1,250,000.00
3,000,000.00
900,000.00
58,333.33 3,500,000.00
72,000.00 720,000.00
12,125,333.33 25,000.00 4,220,000.00
Deductible Non-deductible Capital expenditure

800,000.00
600,000.00
500,000.00
225,000.00 25,000.00
350,000.00
120,000.00
100,000.00
150,000.00
225,000.00 P100,000 should be recorded Securities services - Security guard sa
275,000.00
3,500,000.00
1,250,000.00
50,000.00 3,000,000.00
90,000.00 900,000.00
58,333.33 3,500,000.00
72,000.00 720,000.00
8,365,333.33 25,000.00 8,120,000.00
ense but depreciation expense.

ervices - Security guard salaries expenses
ervices - Security guard salaries expenses

ACCTAX1
Problem 31 – Interest expense, stipulated in writing, tax arbitrage, related parties
Interest expense on loan from Itik

Principal 1,000,000.00
Interest rate 5% 50,000.00
Non-interest bearing advances -
Interest on preferred shares -
Interest on loan from Surtido -
Total 50,000.00
Non-deductible interest
Interest on bank deposits (20% FWT) 60,000.00
Interest on bank deposits (7.5% FWT) 15,000.00
Total 75,000.00
Rate 33% 24,750.00
Deductible interest 25,250.00

Non-deductible since not stipulated in writing
Non-deductible since classified as equity for tax purposes
Non-deductible since classified as related party; apply grandfather rule; explain further related parties for deduction purposes
Explain further tax arbitrage, how 33% was arrived at.

parties for deduction purposes
ACCTAX1
Problem 33 – Optional treatment of interest, tax arbitrage, interest on unpaid taxes
Issue: If company opts to capitalize interest incurred on acquistion of asset, when should capitalization cease? Position may be
Requirement No. 1 20A1

Amortization of discount on bonds
Discounted amount 8,000,000.00
Effective rate (see computation below) 12.00% 960,000.00
Interest on bank loan

Rate 10%
Annual interest 500,000.00
Time 0.75 375,000.00
Interest on other loans

Rate 14% 560,000.00
Rate 11% 770,000.00
Total 2,665,000.00
Non-deductible interest expense

Investment 3,500,000.00
Rate 8%
Annual interest 280,000.00
Time 0.25
Interest income 70,000.00
Other interest income 300,000.00 370,000.00
Limit 33%
Limit 122,100.00
Deductible interest (excluding interest on deficiency taxes) 2,542,900.00
Interest on deficiency taxes 1,400,000.00
Total deductible interest 3,942,900.00
Computation:
Face value 7,800,000
Proceeds 8,000,000
Discount (200,000)
Effective rate calculation:

Face Value PV Factor Present Value
at 5% 7,800,000 0.78 6,111,300.00
at 6% 7,800,000 0.75 5,828,940.00
Difference 282,360.00
at lower rate (5%)
Proceeds 8,000,000
PV at 5% 6,111,300
Difference (1,888,700)
Ratio (6.69)
Lower rate 5.00
Effective rate (1.69)
Requirement No. 2 20A1

Interest on other loans 560,000.00
Interest on other loans 770,000.00
Total 1,330,000.00
Non-deductible interest 122,100.00
Deductible interest (excluding interest on deficiency taxes) 1,207,900.00
Interest on deficiency tax 1,400,000.00
Total deductible interest 2,607,900.00
capitalization cease? Position may be capitalize all interest for the entire term of the loan.
20A2
960,000.00 Capitalized under Requirement No. 2
500,000.00 Capitalized under Requirement No. 2; other charges, expenses related to loan may not qualify as interest. N
560,000.00
770,000.00
2,790,000.00
450,000.00
33%
148,500.00 Does not apply to interest on deficiency taxes. Interest on deficiency taxes is deductible in full.
2,641,500.00
1,520,000.00
4,161,500.00
<-- idk how nakuha to lol

20A2
560,000.00
770,000.00
1,330,000.00
148,500.00
1,181,500.00
1,520,000.00
2,701,500.00
oan may not qualify as interest. Not part of interest stipulated in writing.
is deductible in full.
ACCTAX1
Problem 33 – Interest paid in advance; periodic amortization of debt
Requirement No. 1
Year Loan balance Principal payment Deductible interest

20A1 2,000,000.00 160,000.00
20A2 1,600,000.00 400,000.00 128,000.00
20A3 1,200,000.00 400,000.00 96,000.00
20A4 800,000.00 400,000.00 64,000.00
20A5 400,000.00 400,000.00 32,000.00
Requirement No. 2
20A1 20A2
Interest on P2million loan 160,000.00
Interest on discounted loan

Discount 100,000.00
Deductible interest - 260,000.00
Requirement No. 3
20A1 20A2
Interest on P2million loan 160,000.00 128,000.00
Interest on discounted loan

Discount 100,000.00
Time 1/12 8,333.33
Discount 100,000.00
Time 11/12 91,666.67
Deductible interest 168,333.33 219,666.67

Since debt is only for one year, just allocate the discount proportionately. However, if debt has term of more
than one year, then find for the effective rate. Use the effective rate to determine the annual interest, then
amortize the annual interest over the number of months in a year using the number of months.
ACCTAX1
Problem 34 – Deductible and non-deductible taxes
Basic Interest Surcharge

Current tax liabilities:
Income tax 3,000,000.00
Value added tax (VAT) 2,700,000.00
Withholding taxes 2,500,000.00
Fringe benefits tax 800,000.00
Documentary stamp tax 1,000,000.00
Excise tax 1,200,000.00
Local business tax 750,000.00
Real property tax 1,400,000.00
Deficiency taxes
Income tax 1,100,000.00 550,000.00
VAT 900,000.00 450,000.00
Withholding taxes 850,000.00 425,000.00 100,000.00
Documentary stamp tax 500,000.00 250,000.00 125,000.00
Local business tax 450,000.00 225,000.00
Provision for possible tax exposure

Income tax 2,000,000.00 1,000,000.00
VAT 1,500,000.00 750,000.00
Withholding taxes 1,200,000.00 600,000.00
Documentary stamp tax 1,000,000.00 500,000.00 250,000.00
Local business tax 900,000.00 450,000.00
Total 25,200,000.00 5,925,000.00 475,000.00
31,600,000.00
Requirement No. 1 Requirement No. 2
Deductible Taxes Other Ded Items Non-deductible
3,000,000.00
2,700,000.00
2,500,000.00
800,000.00
1,000,000.00
1,200,000.00
750,000.00
1,400,000.00
550,000.00 1,100,000.00
450,000.00 900,000.00
425,000.00 950,000.00
500,000.00 250,000.00 125,000.00
450,000.00 225,000.00
650,000.00 325,000.00
3,000,000.00
2,250,000.00
1,800,000.00
1,750,000.00
1,350,000.00
1,200,000.00
5,950,000.00 3,025,000.00 22,625,000.00
31,600,000.00
Notes
The expense recorded is gross of withholding tax

FBT shouldered by the employer effectively is tax deductible
Interest is tax deductible
Basic and surcharge are non-deductible

Basic may arguably be tax deductible since paid during the
year, but there may be issue on timing since the tax pertains
to prior period, interest is tax deductible.
ACCTAX1
Problem 35 – Deductible taxes, VAT on purchases, VAT and duties on importation, capital expenditures

Items Deductible taxes Other ded items
Cost of equipment
VAT on purchase of equipment
Depreciation on equipment 200,000.00
Goods and services 5,000,000.00

VAT on purchases of goods and services
Local business tax 1,200,000.00

License fees 25,000.00
Real property tax 900,000.00
Cost of equipment
VAT on importation
Duties on importation 160,000.00
Depreciation expense 100,000.00
Depreciation on duties on importation 20,000.00
Rental expense 300,000.00
Input tax on rentals

DST on lease agreement 1,201.00
Foreign income tax 380,000.00
Total 2,506,201.00 5,620,000.00

2,666,201.00 5,600,000.00
Requirement No. 4
DST refund 50,000.00 Taxable
Excise tax refund 180,000.00 May not be taxable applying the "tax be
"Tax benefit rule" may be gray area for t

Items Deductible taxes Other ded items
Cost of equipment
VAT on purchase of equipment
Depreciation on equipment 224,000.00
Goods and services 5,000,000.00

VAT on purchases of goods and services 600,000.00
Local business tax 1,200,000.00

License fees 25,000.00
Real property tax 900,000.00
Cost of equipment
VAT on importation
Duties on importation 160,000.00
Depreciation expense - 114,400.00
Depreciation on duties on importation - 20,000.00
-
Rental expense - 300,000.00

Input tax on rentals - 36,000.00
DST on lease agreement 1,201.00
-
Foreign income tax 380,000.00
-
Total 2,506,201.00 6,294,400.00
2,666,201.00 6,274,400.00
expenditures
Requirement No. 3
Taxes as capex Others Notes
1,000,000.00 subject to depreciation
120,000.00 Recorded as input tax
Taxes accrues on January 1.
800,000.00 subject to depreciation

160,000.00 Arguably, this may be capitalized
If capitalized; however, P-0- if outright expense
P95,000/95% = P100,000 monthly rental; withholding

tax is shouldered by Yakap but forms part of rental
expense not as taxes
Recorded as input tax but based on total payments of
72,000.00 P600,000
160,000.00 2,707,200.00 If duties are not claimed as outright expense

If duties are claimed as outright expense
be taxable applying the "tax benefit rule." However, tax benefit rule is not provided under "Taxes" in the Tax Code
efit rule" may be gray area for taxes.
Requirement No. 7
Taxes as capex Others Notes
1,000,000.00 subject to depreciation
120,000.00 120,000.00 subject to depreciation
part of expense
Taxes accrues on January 1.

800,000.00 subject to depreciation
115,200.00 115,200.00 subject to depreciation
160,000.00 Arguably, this may be capitalized
If capitalized; however, P-0- if outright expense
P95,000/95% = P100,000 monthly rental; withholding

tax is shouldered by Yakap but forms part of rental
expense not as taxes
VAT for three months forms part of expense
395,200.00 2,035,200.00 If duties are not claimed as outright expense

If duties are claimed as outright expense
the Tax Code
ACCTAX1
Problem 36 – Various deductible losses
20A0 20A1
a. Selling price 280,000.00
Book value (1,000,000 x 2/5) 400,000.00
Loss on sale 120,000.00
b. Amount settled (USD49x80,000) 3,920,000.00

Original amount (USD47*80,000) 3,760,000.00
Realized forex loss 160,000.00
c. Fire loss 2,500,000.00
d. Book value of building 2,500,000.00

Compensation 2,200,000.00
Fire loss 300,000.00
e. Book value of building 2,500,000.00

Compensation 2,600,000.00
Fire loss
Gain 100,000.00
f. Gain 100,000.00
g. Loss from theft
h. Loss of useful value 750,000.00
i. Inventory write-down
Inventory write-off 300,000.00 350,000.00
j. Selling price 450,000.00

Cost 500,000.00
Loss on sale 50,000.00
Notes
Declaration of loss submitted within 45 days
Deductible in the year insurance was determined
No deduction since gain
May not be taxable based on BIR ruling. However, the

ruling does not have legal basis since it used US
jurisprudence. Provision of US tax law which is the basis
of the ruling is not contained in the Philippine Tax Code
Not deductible since declaration of loss was submitted late
Non-deductible. Effectively deducted as part of cost of sales when sold.

ACCTAX1
Problem 37 – Amount of deductible casualty losses
Requirement No. 1
20A1
a. Book value, 12/31/A0 2,000,000.00
Depreciation, 1/1/A1-6/30/A1 200,000.00
Book value, 6/30/A1 1,800,000.00
Cost of restoration 1,200,000.00
Deductible loss 1,200,000.00
Depreciation expense
Building
b. Book value, 12/31/A0 2,000,000.00

Depreciation, 1/1/A1-6/30/A1 200,000.00
Book value, 6/30/A1 1,800,000.00
Cost of restoration 1,200,000.00
Loss 1,200,000.00
Less: Insurance 1,000,000.00
Deductible loss 200,000.00
Building
c. Book value, 12/31/A0 600,000.00

Depreciation, 1/1/A1-6/30/A1 100,000.00
Book value, 6/30/A1 500,000.00
Cost of restoration 800,000.00
Deductible loss 500,000.00
Equipment
d. Book value, 12/31/A0 600,000.00

Depreciation, 1/1/A1-6/30/A1 100,000.00
Book value, 6/30/A1 500,000.00
Cost of restoration 800,000.00
Loss 500,000.00
Less: Insurance 1,000,000.00
Deductible loss -
Book value before casualty 500,000.00
Excess of replacement cost over BV
Replacement cost 800,000.00
Book value 500,000.00 300,000.00
New cost basis 800,000.00
Divided by: Remaining life 2.50
Equipment
e. Book value, 12/31/A0 450,000.00

Depreciation, 20A1 150,000.00
Book value, 12/31/A1 before capex 300,000.00
Capital expenditures 120,000.00
Book value, 12/31/A1 420,000.00
Depreciation, 20A2 (up to September) 157,500.00
Book value, 9/30/A1 262,500.00
Scrap value 150,000.00
Deductible loss
f. Land, purchase price (including building) 3,500,000.00

Demolition cost 200,000.00
Sale of scraps (120,000.00)
Land, book value
No deductible expense
20A2 20A1 20A2 20A1 20A2
400,000.00 400,000.00
1,600,000.00 1,200,000.00
400,000.00 400,000.00
1,600,000.00 1,200,000.00
200,000.00 200,000.00
400,000.00 200,000.00
260,000.00 320,000.00
640,000.00 320,000.00
112,500.00
3,580,000.00 3,580,000.00
Same as D????
Issue on whether the gain is taxable since the

proceeds were used to restore the property.
ACCTAX1
Problem 38 - Net operating loss carryover (NOLCO)
Situation A
Gross income Deductions NOLCO Taxable income/loss

20A0 2,000,000.00 2,700,000.00 (700,000.00)
20A1 3,500,000.00 3,200,000.00 300,000.00 -
20A2 3,800,000.00 4,000,000.00 (200,000.00)
20A3 4,000,000.00 3,900,000.00 100,000.00 -
20A4 3,800,000.00 5,000,000.00 (1,200,000.00)
20A5 4,500,000.00 4,300,000.00 200,000.00 -
NOLCO utilization
20A0 NOLCO 700,000.00
Application
20A1 (300,000.00)
20A3 (100,000.00)
Expired 300,000.00
20A2 NOLCO 200,000.00

Application
20A3 (100,000.00)
20A5 (100,000.00)
Balance -
20A4 NOLCO 1,200,000.00

Application
20A5 (100,000.00)
Balance 1,100,000.00
Situation B

20A0 2,000,000.00 2,700,000.00 (700,000.00)
20A1 3,500,000.00 3,200,000.00 300,000.00
20A2 3,800,000.00 4,000,000.00 (200,000.00)
20A3 4,000,000.00 3,900,000.00 100,000.00 -
20A4 3,800,000.00 5,000,000.00 (1,200,000.00)
20A5 4,500,000.00 4,300,000.00 200,000.00 -
NOLCO utilization
20A2 NOLCO 200,000.00
Application
20A3 (100,000.00)
20A5 (100,000.00)
Expired -
20A4 NOLCO 1,200,000.00

Application
20A5 (100,000.00)
Balance 1,100,000.00
Situation C
Same answer as Situation A. This is not considered substantial change in ownership since it only involve sale of sha
Situation D

20A0 Magiting 2,000,000.00 2,700,000.00 (700,000.00)
20A1 Magiting 3,500,000.00 3,200,000.00 300,000.00 -
20A2 Magiting 3,800,000.00 4,000,000.00 (200,000.00)
20A3 Magiting 4,000,000.00 3,900,000.00 100,000.00 -
20A4 Magiting 3,800,000.00 5,000,000.00 (1,200,000.00)
20A5 Magiting 4,500,000.00 4,300,000.00

Katipunan 5,500,000.00 5,300,000.00
Total 10,000,000.00 9,600,000.00 400,000.00 -
NOLCO utilization
20A0 NOLCO 700,000.00
Application
20A1 (300,000.00)
20A2 (100,000.00)
Expired 300,000.00
20A2 NOLCO 200,000.00

Application
20A3 (100,000.00)
20A5 (100,000.00)
Balance -
20A4 NOLCO 1,200,000.00

Application
20A5 (300,000.00)
Balance 900,000.00
Situation E

20A0 Magiting 2,000,000.00 2,700,000.00 (700,000.00)
20A1 Magiting 3,500,000.00 3,200,000.00 300,000.00 -
20A2 Magiting 3,800,000.00 4,000,000.00 (200,000.00)
20A3 Magiting 4,000,000.00 3,900,000.00 100,000.00 -
20A4 Magiting 3,800,000.00 5,000,000.00 (1,200,000.00)
20A5 Magiting 4,500,000.00 4,300,000.00

Katipunan 5,500,000.00 5,300,000.00
Total 10,000,000.00 9,600,000.00 400,000.00
NOLCO utilization
20A0 NOLCO 700,000.00
Application
20A1 (300,000.00)
20A2 (100,000.00)
Expired 300,000.00
20A2 NOLCO 200,000.00

Application
20A3 (100,000.00)
20A5
Cannot be carried over 100,000.00
20A4 NOLCO 1,200,000.00

Application
20A5
Cannot be carried over 1,200,000.00
Situation F
Same as Situation D. Ultimate owner is still the same.
e income/loss
NOLCO coming from 20A0
e income/loss
NOLCO coming from 20A2 and 20A4

only involve sale of shares at parent level, not merger or consolidation.
e income/loss

NOLCO can still be carried over after merger since ultimate owner is still the same.
NOLCO can still be carried over after merger since ultimate owner is still the same.
e income/loss
NOLCO cannot be carried over since there is change in ownership.

ACCTAX1
Problem 39 – Bad debts deduction
Situation A
Requirement No. 1 Deduction
Receivable from Bughaw - Not bad-debts since borrower still solvent.
Receivable from Dilaw 820,000.00 P920,000 less P100,000
Receivable from Luntian 750,000.00
Total 1,570,000.00
Requirement No. 2 20A1 20A1 20A1

Taxable income before bad debts 5,000,000.00 1,400,000.00 -
Bad debts deduction 1,570,000.00 1,570,000.00 1,570,000.00
Taxable income (loss) 3,430,000.00 (170,000.00) (1,570,000.00)
Recovery 500,000.00 500,000.00 500,000.00

Without tax benefit - - (1,570,000.00)
Taxable recovery 500,000.00 500,000.00 -
Maximum deduction 1,570,000.00 1,400,000.00 -

Situation B
Requirement No. 1 Deduction
Receivable from Bughaw 350,000.00 P1,200,000 less P850,000
Receivable from Dilaw - Deductible in 20A2
Receivable from Luntian 750,000.00
Total 1,100,000.00
Requirement No. 2 20A2 20A2 20A2

Taxable income before bad debts 3,000,000.00 500,000.00 -
Bad debts deduction 920,000.00 920,000.00 920,000.00
Taxable income (loss) 2,080,000.00 (420,000.00) (920,000.00)
Recovery 500,000.00 500,000.00 500,000.00

Without tax benefit - - (920,000.00)
Taxable recovery 500,000.00 500,000.00 -
Maximum deduction 920,000.00 500,000.00 -

wer still solvent.
ACCTAX1
Problem 40 – Depreciation deduction, change in depreciation method, depreciable lives
20A1
Assets Book value
Land 2,000,000.00
Administration building 3,000,000.00
Factory building 5,000,000.00
Equipment 2,200,000.00
Trademark 1,000,000.00
Motor vehicle 2,000,000.00
Less: Salvage value 200,000.00
Net 1,800,000.00
Motor vehicle
Total
20A2
Assets Book value Capex
Land 2,000,000.00
Administration building 2,800,000.00 500,000.00
Factory building 4,750,000.00
Equipment 2,060,000.00
Equipment 2 1,150,000.00
Trademark 750,000.00
Motor vehicle 1,640,000.00
Less: Salvage value 200,000.00
Net 1,440,000.00
Life 4.00
Motor vehicle
Total
Remaining useful life Dep Exp Capex Book value
2,000,000.00
15.00 200,000.00 2,800,000.00
20.00 250,000.00 4,750,000.00
5.00 440,000.00 300,000.00 2,060,000.00
4.00 250,000.00 750,000.00
360,000.00 1,640,000.00
3,000,000.00
1,500,000.00 300,000.00 17,000,000.00

Book value Remaining useful life Dep Exp Capex Book value
2,000,000.00 2,000,000.00
3,300,000.00 14.00 $440,000.00 2,860,000.00
4,750,000.00 10.00 $863,636.36 3,886,363.64
2,060,000.00 5.00 $686,666.67 1,373,333.33
1,150,000.00 5.00 $333,333.33 816,666.67
750,000.00 3.00 $375,000.00 375,000.00
$576,000.00 1,064,000.00
3,000,000.00
3,274,636.36 - 15,375,363.64
12,375,363.64
ACCTAX1
Problem 41 - Depletion
Requirement No. 1
Cost of mining right 3,000,000.00
Exploration expenditures 800,000.00
Development expenditures 15,000,000.00
Less: Depreciable expenditures 3,000,000.00
Balance 12,000,000.00
Depreciation of development exp (20A1 and 20A2) 600,000.00 12,600,000.00
Total cost 16,400,000.00
Divided by: Expected production 1,000,000.00
Depletion rate 16.40
Requirement No. 2
Production Rate Depletion expense
20A3 12,000.00 16.40 196,800.00
20A4 18,000.00 16.40 295,200.00
20A5 25,000.00 16.40 410,000.00
ACCTAX1
Problem 42 – Charitable and other contributions
Requirement No. 1
Deductible in full
Government for priority activity in education 1,200,000.00
Kulay Foundation 350,000.00
Total 1,550,000.00
Deductible subject to limitation

Limitation
Deduction excluding charitable contributions 7,000,000.00
Taxable income before charitable contributions 3,000,000.00
Limitation rate 5%
Maximum deduction 150,000.00
Donations
Government for rehabilitation 500,000.00
Beterano Foundation 200,000.00
Total 700,000.00
Amount deductible (Must not be higher than limit) 150,000.00
Total deduction 1,700,000.00
Requirement No. 2
Taxable income before charitable contributation 3,000,000.00
Less: Charitable contribution 1,700,000.00
Taxable income 1,300,000.00
Requirement No. 3
Deductible in full
Government for priority activity in education 1,200,000.00
Kulay Foundation 350,000.00
Total 1,550,000.00
Deductible subject to limitation

Limitation
Deduction excluding charitable contributions 7,000,000.00
Taxable income before charitable contributions 3,000,000.00
Limitation rate 10%
Maximum deduction 300,000.00
Donations
Government for rehabilitation 500,000.00
Beterano Foundation 200,000.00
Total 700,000.00
Amount deductible (Must not be higher than limit) 300,000.00
Total deduction 1,850,000.00
Requirement No. 4
Taxable income before charitable contributation 3,000,000.00
Less: Charitable contribution 1,850,000.00
ACCTAX1
Problem 43 – Research and development expenditures
Requirement No. 1
July 1, 20A1 1,500,000.00
October 1, 20A1 800,000.00
Deductible 2,300,000.00
Requirement No. 2
July 1, 20A1 1,500,000.00
October 1, 20A1 800,000.00
Total 1,500,000.00 800,000.00
Divided by: 60.00 60.00
Monthly amortization 25,000.00 13,333.33
Multiplied by: 6.00 3.00
Deductible 150,000.00 40,000.00 190,000.00
ACCTAX1
Problem 44 – Pension trusts
Requirement No. 1
20A1
Contribution 3,000,000.00 1,200,000.00
Normal cost 800,000.00 800,000.00 600,000.00
Excess over normal cost 2,200,000.00 600,000.00
Divided by: 10 years 10.00 10.00
Annual amortization of excess
220,000.00
Deductible pension expense 1,020,000.00
Requirement No. 2
Deductible pension expense (benefits paid) 1,200,000.00
20A2
600,000.00
60,000.00
220,000.00
880,000.00
500,000.00
ACCTAX1
Problem 45 – Optional standard deduction (OSD); senior citizen and PWD discounts
Requirement No. 1
Situation A
Gross sales
Sales returns and allowances
Sales discounts (350,000-150,000)
Net sales
Inventory, January 1 300,000.00

Purchases 2,000,000.00
Purchase returns and allowances (100,000.00)
Purchase discounts (150,000.00)
Freight-in 200,000.00
Cost of goods available for sale 2,250,000.00
Inventory, December 31 (250,000.00)
Cost of goods sold
Gross income
OSD rate
OSD
Situation B
No OSD. Not allowed
Requirement No. 2
Situation A
Gross income
OSD
Taxable income
Situation B
Gross income
Senior citizen, PWD discount
Operating expenses, supported by invoices and receipts
Taxable income
Requirement No. 3
Situation A
Gross sales
Sales returns and allowances
Sales discounts
Net sales
OSD rate
OSD
Situation B
No OSD. Not allowed.
Requirement No. 4
Situation A
Gross sales
Cost of sales
Gross income
OSD
Taxable income
Situation B
Gross income
Senior citizen, PWD discount
Operating expenses, supported by invoices and receipts
Taxable income
6,000,000.00
(300,000.00)
(200,000.00) Remove senior citizen and PWD discount since treated as deduction from gross income
5,500,000.00
2,000,000.00
3,500,000.00
40%
1,400,000.00
3,500,000.00
1,400,000.00
2,100,000.00
3,500,000.00
(150,000.00)
(1,000,000.00)
2,350,000.00
aggressive conservative
6,000,000.00 6,000,000.00
(300,000.00)
(200,000.00) Remove senior citizen and PWD discount since treated as deduction
5,500,000.00 6,000,000.00
40% 40%
2,200,000.00 2,400,000.00
Another view another view

5,500,000.00 5,500,000.00 5,500,000.00 5,500,000.00
2,000,000.00 2,000,000.00 No cost of sales per sample in RR No. 16-08
5,500,000.00 5,500,000.00 3,500,000.00 3,500,000.00
2,200,000.00 2,400,000.00 2,200,000.00 2,400,000.00
3,300,000.00 3,100,000.00 1,300,000.00 1,100,000.00
3,500,000.00
(150,000.00)
(1,000,000.00)
2,350,000.00
nt since treated as deduction from gross income
sample in RR No. 16-08
ACCTAX1
Problem 46 – Special deductions: Insurance companies
Requirement No. 1
Liability reserves Reserves Exp Claims exp Total Tax Deductible Expenses
20A0 300,000,000.00
20A1 320,000,000.00 20,000,000.00 80,000,000.00 100,000,000.00
20A2 380,000,000.00 60,000,000.00 75,000,000.00 135,000,000.00
20A3 335,000,000.00 90,000,000.00 90,000,000.00
20A4 400,000,000.00 65,000,000.00 100,000,000.00 165,000,000.00
20A5 375,000,000.00 105,000,000.00 105,000,000.00
Requirement No. 2 Income

20A1 -
20A2 -
20A3 45,000,000.00
20A4 -
20A5 25,000,000.00
ble Expenses
ACCTAX1
Problem 47 – Computation of gain or loss
Requirement No. 1
Land Selling price Cost basis Gain
A 2,000,000.00 1,500,000.00 500,000.00
B 1,800,000.00 1,200,000.00 600,000.00
C 1,600,000.00 800,000.00 800,000.00
Total 5,400,000.00 3,500,000.00 1,900,000.00
Requirement No. 2
Fair market value of asset received 1,750,000.00
Cost basis 1,000,000.00
Gain 750,000.00
Requirement No. 3
Fair market value of asset received 1,400,000.00
Cost basis 1,000,000.00
Gain 400,000.00
ACCTAX1
Problem 48 – Exchanges of properties in merger; subsequent transfers
Requirement No. 1
Makisig - no gain or loss since capital transaction

Tadhana - no gain or loss since merger/tax free exchange Tadhana
FV of shares received
Net assets BV of asset transferred
Accounts receivables 1,000,000.00 Gain but not taxable
Property, plant and equipment 1,500,000.00
Intangible assets 800,000.00
Notes payable (750,000.00)
Net assets 2,550,000.00
Capital stock 2,000,000.00
APIC 550,000.00
Note: Since transaction is non-taxable, cost basis on the part of Makisig will be the same as the cost in the hands of
Matibay
Fair market value of asset received (Makisig shares)
No. of shares 2,000,000.00
FMV per share 1.75
FMV 3,500,000.00
Cost of Tadhana shares 2,000,000.00
Gain 1,500,000.00 Non-taxable gain; or this gain should not be recogniz
Requirement No. 2
July 1, 20A1
Cost basis 1,500,000.00 same as cost in the hands of Tadhana
Taxable gain 500,000.00
September 1, 20A1
No. of shares 2,000,000.00
Selling price per share 2.10
FMV 4,200,000.00
Cost basis 2,000,000.00 same sa cost of Tadhana shares
Gain 2,200,000.00
at net liabilities at gross
FV of shares received 3,500,000.00 750,000.00 4,250,000.00

BV of asset transferred 2,550,000.00 750,000.00 3,300,000.00
Gain but not taxable 950,000.00 s
e same as the cost in the hands of Tadhana.
or this gain should not be recognized for tax purposes.
e hands of Tadhana
adhana shares
ACCTAX1
Problem 49 – Transfer of properties; gain control
Requirement No. 1
Tarsi Sesame
Net assets
Accounts receivables 1,200,000.00 1,000,000.00
Property, plant and equipment 3,500,000.00 2,200,000.00
Intangible assets 1,000,000.00 -
Notes payable (1,300,000.00) (500,000.00)
Net assets 4,400,000.00 2,700,000.00
Capital stock 3,750,000.00 2,250,000.00
APIC 650,000.00 450,000.00
Tarsi Sesame Total

No. of shares 375,000.00 225,000.00 600,000.00
FV of shares 15.00 15.00 15.00
FV of asset received 5,625,000.00 3,375,000.00 9,000,000.00
BV of asset transferred 4,400,000.00 2,700,000.00 7,100,000.00
Gain but not taxable 1,225,000.00 675,000.00 1,900,000.00
% ownership after transfer 37.50% 22.50% 60.00%
Tarsi Sesame Total

No. of shares 375,000.00 225,000.00 600,000.00
FV of shares 15.00 15.00 15.00
FV of asset received 5,625,000.00 3,375,000.00 9,000,000.00
Liabilities assumed 1,300,000.00 500,000.00 1,800,000.00
Sales 6,925,000.00 3,875,000.00 10,800,000.00
BV of asset transferred 5,700,000.00 3,200,000.00 8,900,000.00
Gain but not taxable 1,225,000.00 675,000.00 1,900,000.00
Batibot - no gain or loss (capital transaction)

Tarsi & Sesame - no taxable gai or deductible loss [tax-fre exchange; Sec (40)(2)]
Note: Since transaction is non-taxable, cost basis on the part of Batibot will be the same as the cost in the hands of Tarsi and S
Requirement No. 2
July 1, 20A1
Cost basis 2,200,000.00 same as cost in the hands of Sesame
Taxable gain 500,000.00
More than 50%, hence, tax free
t in the hands of Tarsi and Sesame
ds of Sesame
ACCTAX1
Problem 50 – Capital gains and losses; individuals; corporations
Requirement No. 1
Operating income from business

Interest income on notes receivables
Dividend income
Gain on sale of scraps from business

ORD ASSET Loss on sale of equipment used in business
Taxable income before net capital gain/loss
Gain on sale of jewelry, held for 2 years (50%)
Gain on sale of painting, held of 8 months (100%)
Loss on sale of investment in foreign common shares, held for 3 years (50%)
CAP ASSET Loss on sale of bonds, held for 6 months (100%)
Net
Capital loss carryover
Taxable income
NOTES
Requirement No. 2
Operating income from business

Interest income on notes receivables
Dividend income
Gain on sale of scraps from business

ORD ASSET Loss on sale of equipment used in business
Taxable income before net capital gain/loss
Gain on sale of foreign preferred shares, held for 2 years
Gain on sale of investment in debt securities, held of 8 months
Loss on sale of investment in foreign common shares, held for 3 years
CAP ASSET Loss on sale of bonds, held for 6 months
Net
Taxable income
NOTES
20A1 20A2 20A3
300,000.00 375,000.00
20,000.00 35,000.00
25,000.00 28,000.00
345,000.00 438,000.00
50,000.00 60,000.00 75,000.00
75,000.00 (25,000.00) 80,000.00 (20,000.00) 50,000.00
320,000.00 418,000.00
25,000.00 45,000.00 30,000.00
25,000.00 100,000.00 30,000.00
(37,500.00) (25,000.00) (150,000.00)
(60,000.00) (40,000.00) (100,000.00)
(47,500.00) 80,000.00 (190,000.00)
(47,500.00) 32,500.00
320,000.00 450,500.00
47500 < 320000 47500 carried over 190000 > 175000

Thus, carry over Thus, carry over
47500 175,000.00
20A1 20A2 20A3

300,000.00 375,000.00
20,000.00 35,000.00
25,000.00 28,000.00
345,000.00 438,000.00
50,000.00 60,000.00 75,000.00
75,000.00 (25,000.00) 80,000.00 (20,000.00) 50,000.00
320,000.00 418,000.00
50,000.00 90,000.00 60,000.00
25,000.00 100,000.00 30,000.00
(75,000.00) (50,000.00) (300,000.00)
(60,000.00) (40,000.00) (100,000.00)
(60,000.00) 100,000.00 (310,000.00)
320,000.00 518,000.00
CARRYING OVER OF NET CAP LOSSES FOR CORPORATION ARE IS NOT APPLICABLE.
20A3 20A4
80,000.00 450,000.00
40,000.00 42,000.00
30,000.00 35,000.00
150,000.00 527,000.00
125,000.00
25,000.00 100,000.00 25,000.00
175,000.00 552,000.00
75,000.00
155,000.00
(25,000.00)
(20,000.00)
185,000.00
(175,000.00) 10,000.00
175,000.00 562,000.00
175000 carried over The net capital loss tha can be carried over to the next
succeeding year shall not exceed the taxable income
of the year the net capital loss was incurred.
Eg. Net cap loss = 12000. taxable inc = 10000; carry over = 10000
20A3 20A4
80,000.00 450,000.00
40,000.00 42,000.00
30,000.00 35,000.00
150,000.00 527,000.00
125,000.00
25,000.00 100,000.00 25,000.00
175,000.00 552,000.00
150,000.00
155,000.00
(50,000.00)
(20,000.00)
235,000.00
175,000.00 787,000.00
PORATION ARE IS NOT APPLICABLE.

carried over to the next
ed the taxable income
was incurred.
ble inc = 10000; carry over = 10000
ACCTAX1
Problem 51 – Sale of real property; real estate business; idle assets
Capital expenditures (Inventoriable)

Land 15,000,000.00
Land development costs 5,000,000.00
Housing units 10,000,000.00
Total 30,000,000.00
Divided by: No. of units 30.00
Unit cost 1,000,000.00
Roads and other structures 5,000,000.00
Unit No. of units Total

Sales 3,500,000.00 15.00 52,500,000.00
Cost 1,000,000.00 15.00 15,000,000.00
Gain 37,500,000.00 Ordinary gain since inventory
Sales 12,500,000.00
Cost 8,200,000.00
Gain 4,300,000.00 Ordinary gain even if idle since engaged in real es
Requirement No. 3
No CGT since ordinary assets.
n if idle since engaged in real estate business
ACCTAX1
Problem 52 – Sale of real property; capital and ordinary assets; idle assets; installment method

Sales Cost basis Gain
Land A 3,500,000.00 3,000,000.00 500,000.00 Ordinary asset, idle for less than 2 y
Land B 4,000,000.00 3,200,000.00 800,000.00 Ordinary asset, used in business
* Building A 3,000,000.00 4,050,000.00 (1,050,000.00) Ordinary loss, used in business
* Bulilding B 2,000,000.00 4,500,000.00 (2,500,000.00) Capital loss, idle for more than 2 yea
* Building A
Carrying amount 2,800,000.00
Impairment loss 1,400,000.00
Total 4,200,000.00
Tax depreciaiton (14 years) 150,000.00
Cost basis 4,050,000.00
* Building B
Cost 6,000,000.00 Life
Depreciation (Usage only) 1,500,000.00 Used
BV for tax 4,500,000.00 Idle
Rem Life
Total
Requirement No. 3
FMV 2,300,000.00
SP 2,000,000.00
higher 2,300,000.00
CGT rate: 6%
CGT 138,000.00
Requirement No. 4
If declared in full
20A1 138,000.00
20A2 -
20A3 -
Total 138,000.00 October 31, 20A1
If on installment (may qualify as installment sales since intial payments are less than 25%)
October 1, 20A1 200,000.00 10% 13,800.00
February 1, 20A2 300,000.00 15% 20,700.00
June 1, 20A2 400,000.00 20% 27,600.00
October 1, 20A2 500,000.00 25% 34,500.00
February 1, 20A3 600,000.00 30% 41,400.00
2,000,000.00 100% 138,000.00
Deadlines
October 31, 20A1 20A1 13,800.00
March 3, 20A2 20A2 (Mar to Oct) 82,800.00
July 1, 20A2
October 31, 20A2
March 3, 20A3 20A3 41,400.00
138,000.00
Requirement No. 5
Deferred payment sale
Initial payments 600,000.00
Contract price 2,000,000.00
% 30%
20A1 138,000.00
20A2 -
20A3 -
Total 138,000.00 October 31, 20A1
sset, idle for less than 2 years
sset, used in business
oss, used in business (Edited the problem)
s, idle for more than 2 years
3.00
5.00
4.00
12.00
ACCTAX1
Problem 53 – Sale of real property; principal residence; individual
Situation A
Requirement No. 1
Sales 6,000,000.00 Selling Price
Cost basis Cost:
Land 300,000.00
House 1,000,000.00 1,300,000.00
Capital gain 4,700,000.00 Capital Gain
Requirement No. 2
FMV Fair Market Value:
Land 3,200,000.00
House 3,500,000.00
6,700,000.00 Total
Higher 6,700,000.00 Higher Value

CGT rate 6% CGT rate
CGT 402,000.00 CGT
Situation B
Requirement No. 1
Sales 4,000,000.00 Selling Price
Cost basis 650,000.00 Cost
Gain 3,350,000.00 Capital Gain
Requirement No. 2
FMV 4,200,000.00
CGT base 4,200,000.00 Higher Value

CGT rate 6% CGT rate
CGT 252,000.00 CGT
Requirement No. 3
Cost basis 3,800,000.00 Cost Basis
Requirement No. 4
FMV 4,200,000.00
Selling price 4,000,000.00 Selling Price

Cost of new house 3,800,000.00 Cost of New Principal Res
Unutilized portion 200,000.00 Unused Portion/Amount
% Unutilized 0.05
FMV or SP, whichever is higher 4,200,000.00 % of Unused Portion from
Taxable portion 210,000.00 Higher Value (FMV vs Selli
CGT rate 6% Taxable Portion
CGT 12,600.00 CGT rate
Requirement No. 5 CGT
Cost of old residence 650,000.00
Cost of new residence 3,800,000.00
New basis 4,450,000.00 Cost of Old Residence
Cost of New Residence
New Cost Basis
Selling Price 6,000,000.00
Land 300,000.00
House ### 1,300,000.00
Capital Gain 4,700,000.00
Fair Market Value:

Land 3,200,000.00
House 3,500,000.00
6,700,000.00
Higher Value 6,700,000.00

6%
402,000.00

650,000.00
Capital Gain 3,350,000.00
Higher Value ###

6%
252,000.00
Cost Basis ###

Cost of New Principal Residence 3,800,000.00
Unused Portion/Amount 200,000.00
% of Unused Portion from Proceeds 0.05

Higher Value (FMV vs Selling Price) 4,200,000.00
Taxable Portion 210,000.00
6%
12,600.00
Cost of Old Residence 650,000.00

Cost of New Residence 3,800,000.00
New Cost Basis 4,450,000.00
ACCTAX1
Problem 54 – Treasury shares; transfer of property for own shares
Requirement 1
June 1, 20A1
Salamin No. of shares Price Total
Selling price 10,000.00 300.00 3,000,000.00
Cost 10,000.00 200.00 2,000,000.00
Gain 1,000,000.00
October 1, 20A1
Indak No. of shares Price Total
Selling price 10,000.00 420.00 4,200,000.00
Cost 10,000.00 300.00 3,000,000.00
Gain 1,200,000.00
December 1, 20A1
Indak Selling price 15,000.00 350.00 5,250,000.00 FMV of property received
Cost 5,000,000.00
Gain 250,000.00
Requirement 2
Salamin (June 1) Indak (Oct 1) Indak (Dec 1)
Capital Gain 1,000,000.00 1,200,000.00 250,000.00
Tax Rate 15% 15% 15%
Capital Gains Tax 150,000.00 180,000.00 37,500.00
operty received
ACCTAX1
Problem 55 – Disposal of bonds
Situation A
Book value of bonds 5,000,000.00
Redemption price 4,800,000.00
Gain on redemption 200,000.00
Situation B
Loss on redemption (87,595.97)
Principal Effective Interest Coupon interest Discount amort

4,800,000.00
20A1 4,834,844.22 334,844.22 300,000.00 34,844.22
20A2 4,872,316.35 337,472.13 300,000.00 37,472.13
20A3 4,912,404.03 340,087.68 300,000.00 40,087.68
20A4 4,955,289.83 342,885.80 300,000.00 42,885.80
20A5 5,001,169.06 345,879.23 300,000.00 45,879.23

Discount 200,000
Net 4,800,000

PV Factor Present Value
6%
Principal 5,000,000 0.7473 3,736,500
Interest 300,000 4.2124 1,263,720 5,000,220
7%
Principal 5,000,000 0.713 3,565,000
Interest 300,000 4.1002 1,230,060 4,795,060
Difference (higher vs lower rate) 205,160
PV Factor
7% 6%
1 0.9346 0.9434
2 0.8734 0.89
3 0.8163 0.8396
4 0.7629 0.7921
5 0.713 0.7473
4.1002 4.2124
at lower rate (6%)

Net 4,800,000
PV at 6% 5,000,220
Difference 200,220
Ratio 0.98
Lower rate 6.00
Effective rate 6.98 6.98%
Situation C
Gain on redemption 128,707.69
Principal Effective Interest Coupon interest Discount amort

5,300,000.00
20A1 5,245,609.30 245,609.30 300,000.00 (54,390.70)
20A2 5,188,481.01 242,871.71 300,000.00 (57,128.29)
20A3 5,128,707.69 240,226.67 300,000.00 (59,773.33)
20A4 5,066,166.85 237,459.17 300,000.00 (62,540.83)
20A5 5,000,730.38 234,563.53 300,000.00 (65,436.47)

Premium 300,000
Net 5,300,000

PV Factor Present Value
4%
Principal 5,000,000 0.8219 4,109,500
Interest 300,000 4.4518 1,335,540 5,445,040
5%
Principal 5,000,000 0.7835 3,917,500
Interest 300,000 4.3294 1,298,820 5,216,320
Difference (higher vs lower rate) 228,720
PV Factor
4% 5%
1 0.9615 0.9524
2 0.9246 0.907
3 0.889 0.8638
4 0.8548 0.8227
5 0.8219 0.7835
4.4518 4.3294
at lower rate (5%)

Net 5,300,000
PV at 5% 5,445,040
Difference 145,040
Ratio 0.63
Lower rate 4.00
Effective rate 4.63 4.63%
NOTES
situation a issued at face value

no issue bc face value only and redemption price (no discounting)
WE DO NOT CONSIDER MARKET VALUE OF THE BONDS
situation b issued at a lower price (discounting)

Discount will be treated as interest
step 1 BONDS are at a DISCOUNT

step 2: find effectiv Since bonds are disc, effective rate must be higher than 6%
step 3: make the table
step 4: find gain/loss
HOW DID U GET 4834844.22?

*4800000 x 6.98% = 334844.22
*5000000 x 6% = 300000
334844.22-300000 = 34,844.22
*4800000 + 34844.22 = 4834844.22
situation c investor = int exp; issuer = int income
step 1
step 2: find effective rate
step 3: make the table
step 4: find gain/loss
5300000 145,040
0.6341378104
ce (no discounting)
F THE BONDS
tive rate must be higher than 6%

ACCTAX1
Problem 56 – Wash sales
No. of shares Price per share Total

Situation A
Sales 10,000.00 90.00 900,000.00
Cost 10,000.00 100.00 1,000,000.00
Loss - non-deductible (100,000.00)
Situation B
Sales 10,000.00 70.00
Cost 10,000.00 100.00
Loss
Non-deductible loss
Sales 7,500.00 70.00 525,000.00
Dec 21, 20A1 5,000.00 100.00 (500,000.00)
Dec 26, 20A1 2,500.00 100.00 (250,000.00)
Deductible loss
Sales 2,500.00 70.00 175,000.00
Cost 2,500.00 100.00 250,000.00
Situation C
Sales 4,000.00 90.00 360,000.00
Cost 4,000.00 100.00 400,000.00
Loss - non-deductible (40,000.00)
Situation D
Sales 10,000.00 70.00
Cost 10,000.00 90.00
Loss
Non-deductible loss
Sales 10,000.00 70.00 700,000.00
Dec 21, 20A1 5,000.00 90.00 (450,000.00)
Dec 26, 20A1 5,000.00 90.00 (450,000.00)
Total
what if 15k shares were sold
70 90 -20
70 80 -10
700,000.00
1,000,000.00
(300,000.00)
(225,000.00)
(75,000.00)
(75,000.00)
attributed to Dec 15 and Dec 17 purchases but Sep 15 cost was used
700,000.00
900,000.00
(200,000.00)
(200,000.00)
k shares were sold
5000 -100000
7500 -75000
ACCTAX1
Problem 57 – Sale of shares: Specific identification, FIFO, moving average
Situation (a) Specific identificaiton

Date No. of shares Cost/SP
January 1, 20A0 10,000.00 15.00 Purchase
June 15, 20A0 15,000.00 20.00 Purchase
November 30, 20A0 12,000.00 25.00 Sale from June 15, 20A0
July 1, 20A1 7,000.00 28.00 Purchase
October 1, 20A1 10,000.00 30.00 Sale - 7,000 from July 1, 20A1, 3,000 from Jan
November 30, 20A0

Sales 12,000.00 25.00 300,000.00
Cost 12,000.00 (20.00) (240,000.00)
Capital gain 60,000.00
Tax rate 15%
Capital gains tax 9,000.00
October 1, 20A1
Sales 10,000.00 30.00 300,000.00
Cost 7,000.00 (28.00) (196,000.00)
Cost 3,000.00 (15.00) (45,000.00)
Tax rate 15%
Situation (b) FIFO

June 15, 20A0 15,000.00 20.00 Purchase
November 30, 20A0 12,000.00 25.00 Sales
July 1, 20A1 7,000.00 28.00 Purchase
October 1, 20A1 10,000.00 30.00 Sales
November 30, 20A0

Sales 12,000.00 25.00 300,000.00
Cost 10,000.00 (15.00) (150,000.00)
Cost 2,000.00 (20.00) (40,000.00)
Tax Rate 15%
CGT 16,500.00
October 1, 20A1
Sales 10,000.00 30.00 300,000.00
Cost 10,000.00 (20.00) (200,000.00)
Tax rate 15%
Situation (c) Moving average

June 15, 20A0 15,000.00 20.00 Purchase
November 30, 20A0 12,000.00 25.00 Sales
July 1, 20A1 7,000.00 28.00 Purchase
October 1, 20A1 10,000.00 30.00 Sales
November 30, 20A0

Sales 12,000.00 25.00 300,000.00
Cost 12,000.00 (18.00) (216,000.00)
Tax rate 15%
October 1, 20A1
Sales 10,000.00 30.00 300,000.00
Cost 10,000.00 (21.80) (218,000.00)
Tax rate 15%
DATE # OF SHARES
January 1, 20A0 10,000
June 15, 20A0 15,000
om June 15, 20A0 November 30, 20A0 12,000
January 31, 20A1 5,000
July 1, 20A1 7,000
7,000 from July 1, 20A1, 3,000 from January 1, 20A0 October 1, 20A1 10,000
NOVEMBER 30, 20A0 SALE
Selling Price:
# of Shares Sold 12,000.00
Selling Price 25.00
Cost of Shares:
Cost 20.00
Capital Gain
Tax Rate
Capital Gains Tax
October 1, 20A1
Sales 10,000.00
Cost 7,000.00
Cost 3,000.00
Capital gain
Tax rate
Capital gains tax
OCTOBER 1, 20A1 SALE
Selling Price:
Selling Price 30.00
Cost of Shares:
July 1, 20A1 Batch
Cost 28.00
January 1, 20A0 Batch
Cost 15.00
Capital Gain
Tax Rate
Capital Gains Tax
Average cost No. of shares

15.00 10,000.00
18.00 25,000.00
18.00 13,000.00
19.39 18,000.00
21.80
21.80
COST/SELLING PRICE NATURE OF TRANSACTION
PHP 15.00 Purchase from Kanlaon
20.00 Purchase from Kanlaon
25.00 Sale – from 'June 15, 20A0' Batch
23.00 Purchase
28.00 Purchase
Sale – 7,000 from 'July 1, 20A1'
Batch; 3,000 from 'January 1,
30.00 20A0' Batch
PHP 300,000.00
240,000.00
PHP 60,000.00
15%
PHP 9,000.00
30.00 300,000.00
(28.00) (196,000.00)
(15.00) (45,000.00)
59,000.00
15%
8,850.00
PHP 300,000.00
196,000.00
45,000.00
PHP 59,000.00
15%
PHP 8,850.00
ACCTAX1
Problem 58 – Stock dividend; capital gains; installment method
KAPIS CORPORATION
December 31, 20A0 - Kapis Corporation
Sales 25.00 50,000.00
Cost (20.00) 50,000.00
Capital gain
CGT rate
CGT
NOT INCLUDED IN PROBLEM BUT IN CAS OF INSTALLMENT:

Sales 1,250,000.00
% intial payments 8.00%
If declared in full 3,750.01 January 30, 20A1
If installment
First installment 300.00 January 30, 20A1
Second installment 3,450.01 March 2, 20A1
Total 3,750.01
December 31, 20A1 - Kabibe Corporation

Sales
Cost Total cost
Original shares 50,000.00
Dividend (25%) 12,500.00
Total shares
Cost per share
Capital gains
Tax on
CGT

Sales 980,000.00
% intial payments 35.71%
Deferred payment sale 18,000.00 January 30, 20A2
LUNETA CORPORATION
Total Sales
Divided by: Number of shares
Original shares 50,000
Stock Dividend
Original shares 50,000
Multiply by: Dividend rate 0.25 12,500
New cost per share
December 31, 20A0 - Luneta Corporation

Sales 28.00 35,000.00
Cost (20.00) 35,000.00
Capital gain
CGT rate
CGT
When is it due?
Kabibe Company
January 30, 20A1
Luneta Company
January 30, 20A2
Persons deriving capital gains from the sale or

exchange of listed shares of stock not traded
through the Local Stock Exchange
shall file a return within 30 days after each
transaction and a free final consolidated return
of all transactions during the taxable year on
or before the 15th day of the fourt month following
the close of the taxable year.
1,250,000.00
(1,000,000.00)
250,000.00
15%
37,500.00
5% 0.01
10% 3,750.00
3,750.01
y 30, 20A1
y 30, 20A1
Shares
35,000.00 28 980,000.00
1,250,000.00
62,500.00
20.00 35,000.00 700,000.00
280,000.00
100,000.00 5% wsd
180,000.00 10% 18,000.00
18,000.00
y 30, 20A2
1,250,000
62,500
20.00
980,000.00
(700,000.00)
280,000.00
15%
42,000.00
ACCTAX1
Problem 59 – Share swap, property for shares
Requirement No. 1
December 31, 20A0 Tanglaw
Sales (FMV of asset received)
FMV of Talaba shares 50,000.00 27.00 1,350,000.00
Cost Agila shares 25,000.00 (35.00) (875,000.00)
CGT rate 15%
CGT 71,250.00
December 31, 20A0 Maya

FMV of Agila shares 25,000.00 48.00 1,200,000.00
Cost Talaba shares 50,000.00 (17.00) (850,000.00)
CGT rate 15%
CGT 52,500.00
Requirement No. 2
July 1, 20A1 Maya
FMV of Land 1,450,000.00
Cost 20,000.00 (48.00) (960,000.00)
CGT rate 6%
CGT 29,400.00
July 1, 20A1 Loro

Sales (FMV of asset received) 20,000.00 55.00 1,100,000.00
Cost of land 1,000,000.00
Gain 100,000.00
CGT rate 6%
CGT 6,000.00
ACCTAX1
Problem 60 – Income from sources within and without the Philippines
Party Nature of income Within
a. Madjapahit Interest income 800,000.00
b. Hamili Dividend income 1,000,000.00
c. Hamili Dividend income
d. Hamili Dividend income 545,454.55
e. Madjapahit Dividend income 1,000,000.00
f. Madjapahit Management fee income
g. Madjapahit Management fee income 400,000.00
h. Madjapahit Management fee income 664,206.64
i. Hamili Rental income
j. Madjapahit Rental income 600,000.00
k. Madjapahit Royalty income 1,000,000.00
l. Hamili Gain on sale 1,500,000.00
m. Hamili Gross income from sales
n. Hamili Gross income from sales 3,000,000.00
o. Madjapahit Advertising income
p. Madjapahit Gain on sales 1,750,000.00

Outside
Phil Branch Worldwide

1,000,000.00 (d) 20A0 3,000,000.00 5,000,000.00
20A1 4,000,000.00 8,000,000.00
454,545.45 20A2 5,000,000.00 9,000,000.00
12,000,000.00 22,000,000.00
% within 0.55
Dividend income 1,000,000.00
500,000.00 Within 545,454.55
Without 454,545.45
Days
335,793.36 (h) January to June 180.00
July to September 91.00
600,000.00 Total 271.00
Does not matter where the

services are rendered. Know-
how is transferred within
3,000,000.00
Assumed that title transferred

within the Philippines (export
sales)
Since facilities are not located

within but without based on US
1,000,000.00 case (Piedras Negras)
Amount
664,206.64 1-Jan-17 30-Jun-17
335,793.36 1-Jul-17 ###
1,000,000.00
ACCTAX1
Problem 61 – Head office allocated expenses
Requirement 1 Requirement 2
Phil Branch Without
Sales 5,000,000.00 20,000,000.00
Cost of sales 1,500,000.00 8,500,000.00
* Gross income 3,500,000.00 11,500,000.00
Common expenses 4,000,000.00 4,000,000.00

Multiply by: ratio 0.23 0.77
Allocation of Common Expenses 933,333.33 3,066,666.67
Directly attributable expenses 2,000,000.00 6,000,000.00
* Total Expenses 2,933,333.33 9,066,666.67
Gross Income 3,500,000.00 11,500,000.00

Total Expenses (2,933,333.33) (9,066,666.67)
Taxable Income 566,666.67 2,433,333.33
Worldwide
25,000,000.00
10,000,000.00
15,000,000.00
4,000,000.00 Allocated based on gross income

1.00
4,000,000.00
8,000,000.00
12,000,000.00
15,000,000.00
(12,000,000.00)
3,000,000.00
ACCTAX1
Problem 62 – Classification of individual taxpayers
Requirement No.1
a. Mr. Acacia Non-resident citizen Jan to June 14, 20A1

Resident citizen June 15 to Dec 31, 20A1
Total
b. Mrs. Bravo Resident citizen Jan to March 14, 20A1

Non-resident citizen March 15 to Dec 31, 20A1
c. Mr. Camilo Resident citizen Jan to March 31, 20A1

April 1 to December 31, 20A1
d. Mrs. Delta Non-resident alien not engaged June to September 30, 20A1
in trade or business
e. Mr. Edukado Non-resident alien engaged in June 20A1 to May 20A2

trade or business
f. Mrs. Ginto Non-resident alien engaged in November 20A1 to August 20A2

trade or business
g. Mr. Kabesa Resident alien
h. Mrs. Lila Resident alien

Within Without Taxable
350,000.00 450,000.00 350,000.00
500,000.00 300,000.00 800,000.00
850,000.00 750,000.00 1,150,000.00
120,000.00 100,000.00 220,000.00

150,000.00 300,000.00 150,000.00
270,000.00 400,000.00 370,000.00
250,000.00 950,000.00 1,200,000.00

500,000.00 500,000.00
250,000.00 1,450,000.00 1,700,000.00
350,000.00 - 350,000.00
700,000.00 - 700,000.00
300,000.00 - 300,000.00
360,000.00 - 360,000.00
1,080,000.00 - 1,080,000.00
ement No. 3
BIR RULING NO. 517-11: Local company employees assigned to render services abroad who were present in
the foreign country for more than 183 days do not qualify as non-resident cirizens and are ths subject to
Philippine income tax in relation to their companesation income from their assignment abroad.
ACCTAX1
Problem 63 – Tax on compensation income; resident citizen
Requirement No. 1 & 2 Gross income Total

Included Excluded
a Gross compensation 173,460.00 6,540.00 180,000.00
13th month pay 15,000.00 15,000.00
14th month pay 15,000.00 15,000.00
Bonuses 8,000.00 52,000.00 60,000.00
Rice subsidy 18,000.00 18,000.00
Clothing allowance 4,000.00 4,000.00
Loyalty award 7,000.00 10,000.00 17,000.00
Medical allowance for the employee 9,000.00 9,000.00
Medical allowance for dependents 3,500.00 1,500.00 5,000.00
Total 203,960.00 141,040.00 345,000.00
Personal exemption (50,000.00)
Premium deduction (2,400.00) 4,200.00
Taxable compensation income 151,560.00
Tax on 140,000.00 22,500.00

11,560.00 25% 2,890.00
Total 151,560.00
Income tax 25,390.00

No. of months 12.00
Total 6,540.00

Bonuses 60,000.00
Total 90,000.00
Threshold 82,000.00
Excess 8,000.00
Note 3: Becomes entire taxable since it exceeds P10,000
Note 4: Cap is P10,000 if given in kind
Note 5: Cap is P1,500 per year

Amount given 5,000.00
Cap 1,500.00
Excess 3,500.00
Gross income Total

Included Excluded
b. Gross compensation 173,460.00 6,540.00 180,000.00
13th month pay 15,000.00 15,000.00
14th month pay 15,000.00 15,000.00
Bonuses 45,000.00 45,000.00
*At B128 Rice subsidy 5,000.00 13,000.00 18,000.00
Clothing allowance 4,000.00 4,000.00
Loyalty award 10,000.00 10,000.00
Medical allowance for the employee 4,000.00 5,000.00 9,000.00
Medical allowance for dependents 3,500.00 1,500.00 5,000.00
Daily meal allowance 4,750.00 6,250.00 11,000.00
Total 200,710.00 119,290.00 320,000.00
Premium deduction (2,400.00) 4,200.00
Tax on 140,000.00 22,500.00

8,310.00 25% 2,077.50
Total 148,310.00
Income tax 24,577.50

No. of months 12.00
Total 6,540.00

Bonuses 45,000.00
Total 75,000.00
Excess de minimis
Medical allowance to dependents 3,500.00
Meal allowance 1,250.00 16,750.00
Total 91,750.00
Cap 82,000.00
Excess 9,750.00 Can be attributed either to rice subs
Allocated as:
Medical allowance to dependents 3,500.00
Meal allowance 1,250.00
Total 9,750.00
Note 3: Cap is P1,500. Quarter/Month Annual Exclusion

Amount given once a quarter 4,500.00 18,000.00
Cap 1,500.00 6,000.00 6,000.00
Excess 3,000.00 12,000.00
Amount absorbed by P82,000 7,000.00 7,000.00
Excess - part of gross income 5,000.00
Total exclusion 13,000.00
Note 4: Exclusion since below cap of P10,000
Note 5: Only P5,000 was liquidated
Note 6: Cap is P1,500 per year

Amount given 5,000.00
Cap 1,500.00
Excess 3,500.00
Note 7: No. of days

Amount given on overtime 150.00 50.00
Cap:
Minimum wage 500.00
% Cap 25% 125.00 50.00
Excess 25.00 50.00
Inclusion Exclusion
Not on overtime 3,500.00
Overtime 1,250.00 6,250.00
Total 4,750.00 6,250.00
*Rice subsidy must have been exempted due to it being within the threshold limit of 1500 per month or 4500 quarter
1 a Gross compensation
13 month pay
Check Difference 14 month pay
Bonus
180,000.00 - See Note 1 Rice subsidy
15,000.00 - See Note 2 Clothing allowance
15,000.00 - See Note 2 Porductivity incentive
60,000.00 - See Note 2 Loyalty Award
18,000.00 - Medical allowance(employee)
4,000.00 - Medical allowance(dependents)
12,000.00 - See Note 3 Daily meal allowance
17,000.00 - See Note 4 Total
9,000.00 - Insurance
5,000.00 - See Note 5 Exemptions
10,000.00 - Taxable income
345,000.00 - tax schedule
Excess at 25%
Tax
Fixed tax
2 Income tax
1 b Gross compensation
13 month pay
14 month pay
Bonus
Rice subsidy
Clothing allowance
Porductivity incentive
Loyalty Award
Medical allowance(employee)
Medical allowance(dependents)
Daily meal allowance
Total
Insurance
Exemptions
Taxable income
tax schedule
Excess at 20%
Tax
Fixed tax
2 Income tax
Check Difference
180,000.00 - See Note 1
15,000.00 - See Note 2
15,000.00 - See Note 2
45,000.00 - See Note 2
18,000.00 - See Note 3
4,000.00 -
8,000.00 - See Note 4
10,000.00 -
9,000.00 - See Note 5
5,000.00 - See Note 6
11,000.00 - See Note 7
320,000.00 -
attributed either to rice subsidy, medical allowance and/or meal allowance

Total
7,500.00
6,250.00
1,250.00
0 per month or 4500 quarterly

Taxable Excluded Total
173,460.00 6,540.00 180,000.00
15,000.00 15,000.00
15,000.00 15,000.00
8,000.00 52,000.00 60,000.00
18,000.00 18,000.00
4,000.00 4,000.00
12,000.00 12,000.00
7,000.00 10,000.00 17,000.00
9,000.00 9,000.00
3,500.00 1,500.00 5,000.00
10,000.00 10,000.00
203,960.00 141,040.00 345,000.00
(2,400.00) (1,800.00) (4,200.00)
(50,000.00) (50,000.00)
151,560.00 139,240.00 290,800.00
(140,000.00)
0.25
2,890.00
22,500.00
25,390.00
Taxable Excluded Total

173,460.00 6,540.00 180,000.00
15,000.00 15,000.00
15,000.00 15,000.00
45,000.00 45,000.00
18,000.00 18,000.00
4,000.00 4,000.00
8,000.00 8,000.00
3,000.00 7,000.00 10,000.00
4,000.00 5,000.00 9,000.00
3,500.00 1,500.00 5,000.00
4,750.00 6,250.00 11,000.00
188,710.00 131,290.00 320,000.00
(2,400.00) (1,800.00) (4,200.00)
(50,000.00) (50,000.00)
136,310.00 129,490.00 265,800.00
(70,000.00)
0.20
13,262.00
8,500.00
21,762.00
ACCTAX1
Problem 63 – Tax on compensation income; resident citizen
Situation A
Requirement 1 Taxable Nontaxable De Minimis Other Benefits
Gross Compensation 173,460.00 6,540.00
Bonuses 60,000.00
Productivity Incentive 12,000.00
Loyalty Award 10,000.00 7,000.00
Medical allowance. - employee 9,000.00
Medical allowance - dependent 3,000.00 2,000.00
Daily meal allowance 10,000.00
Subtotal 173,460.00 6,540.00 54,000.00 111,000.00
Threshold of othe benefts -90,000.00
Taxable other benefits 21,000.00 21,000.00
Total 194,460.00 6,540.00 54,000.00
Supplementary Solutions
Gross Compensation 180000.00
SSS Contribution
Monthly contribution 545.00
Months in a year 12.00 -6540.00
Taxable Gross Compensation Income 173460.00
Total Loyalty Award 17000.00

Threshold for de minimis -10000.00
Excess Loyalty Award 7000.00
Quarterly Medical Allowance - Dependents 1250.00

Quarters in a semester 2.00
Medical allowance in a semester 2500.00
Excess Medical Allowance per semester 1000.00
Semesters in a year 2.00
Excess Medical Allowance 2000.00
Minimum wage per day 500.00

Threshold rate 25%
Daily meal allowance threshold 125.00
Daily meal allowance gien 100.00
Requirement 2
Income Tax Withheld -
Situation B
Requirement 1
Taxable Nontaxable De Minimis Other Benefits
Gross Compensation 353,460.00 6,540.00
Bonuses 15,000.00
Rice subsidy 8,000.00 10,000.00
Productivity Incentive 8,000.00
Medical allowance. - employee 5,000.00 4,000.00
Medical allowance - dependent 3,000.00 2,000.00
Subtotal 353,460.00 6,540.00 34,250.00 105,750.00
Threshold of othe benefts -90,000.00
Taxable other benefits 21,000.00 15,750.00
Total 374,460.00 6,540.00 34,250.00
Supplementary Solutions
Gross Compensation 360000.00
SSS Contribution
Monthly contribution 545.00
Months in a year 12 -6540.00
Taxable Gross Compensation Income 353460.00
Rice Subsidy per quarter 4500.00

Rice Subsidy threshold -2000.00
Excess rice subsidy per quarter 2500.00
Quarters pe year 4
Excess Rice Subsidy 10000.00
Quarterly Medical Allowance - Dependents 1250.00

Quarters in a semester 2
Medical allowance in a semester 2500.00
Excess Medical Allowance per semester 1000.00
Semesters in a year 2
Excess Medical Allowance 2000.00
Total Meal Allowance given

De Minimis threshold (Min. Wage per day)
Minimum wage per day 500.00
Threshold rate 25%
Daily meal allowance threshold 125
Total meal allowance give 7500.00
Meal allowance per day 150.00
Number of days with meal allowance 50
Excess Meal allowance
Requirement 2
Total Taxable Income 369210.00
Threshold -250000.00
Taxabe Income Subject to 20% Tax Rate 119210.00
Tax Rate 20%
Income Tax 23842.00
Other Benefits
Other Benefits
11000.00
-6250.00
4750.00
ACCTAX1
Problem 64 – Multiple employer, married
Requirement No. 1
Palayan, Inc. Maisan Company
Gross compensation income 300,000.00 170,000.00
Less: 13th month pay (25,000.00) (30,000.00)
Taxable Gross Compensation 275,000.00 140,000.00
Fixed Allowance 6,000.00
* Taxable Other Benefits 16,500.00
Taxable compensation income 275,000.00 162,500.00
* 13th month pay from Palayan 25,000.00

13th month pay from Maisan 30,000.00
Performance bonus from Maisan 40,000.00
13th month pay from Manihan 11,500.00
Total 106,500.00
Threshold (90,000.00)
Excess 16,500.00
Requirement No. 2
PALAYAN, INC.
Taxable Compensation Income 275,000.00
Threshold of Tax Bracket (250,000.00)
Excess 25,000.00
Tax Rate 20%
Withheld Tax - Palayan, Inc. 5,000.00
MAISAN, INC. - Subsequent employer consolidated income tax

13th month pay from Palayan 25,000.00
13th month pay of Maisan 30,000.00
Other Benefits 40,000.00
Total 95,000.00
Threshold on Tax Bracket (90,000.00)
Consolidated Taxable Excess 5,000.00
Gross compensation income 170,000.00

Less: 13th month pay (30,000.00)
Taxable Gross Compensation 140,000.00
Fixed Allowance 6,000.00
Taxable Other Benefits 5,000.00
Taxable Compensation - Palayan 275,000.00

Taxable Compensation - Maisan 151,000.00
Consolidated Taxable Income 426,000.00
Excess 26,000.00
Tax Rate 0.25
Tax on Excess 6,500.00
Tax on Lower Brackets 30,000.00
Total Income Tax 36,500.00
Withheld Tax - Palayan, Inc. (5,000.00)
Withheld Tax - Masan Company 31,500.00
MANIHAN, INC.
Taxable Compensation Income 149,500.00
Withheld Tax -
SUMMARY OF WITHHELD TAXES BY EMPLOYEES

Withheld Tax - Palayan, Inc. 5,000.00
Withheld Tax - Maisan, Co. 31,500.00
Withheld Tax - Manihan, Inc. -
Total Withheld Tax by Employers 36,500.00
Requirement No. 3
Excess 187,000.00
Tax Rate 25%
Tax on Excess 46,750.00
Tax on Lower Brackets 30,000.00
Total Income Tax 76,750.00
Withheld by Employers (36,500.00)
Tax Still Due 40,250.00
Manihan, Inc. Total
161,000.00 631,000.00
(11,500.00) (66,500.00)
149,500.00 564,500.00
6,000.00
16,500.00
149,500.00 587,000.00
Gross compensation income

Less: 13th month pay
Taxable Gross Compensation

Total
1 Income from Palayan
Income from Maisan
Performance bonus
Transportation allowance
Income from Manihan
Threshold
Income
Basic exemptions
additional exemptions
Taxable income
2
176,000.00 Palayan - Gross compensation
(48,000.00) Maisan (6,000.00) Carry over income
140,000.00 Bonus 40,000.00 Transportation allowance

268,000.00 total 34,000.00 Performance bonus
Limit 82,000.00 Exemptions
Taxable (48,000.00) Taxable compensation
Tax liab
3 Total income tax
4 Tax due
82000 threshold Taxable Total
20,000.00 240,000.00 260,000.00
30,000.00 140,000.00 170,000.00
32,000.00 8,000.00 40,000.00
6,000.00 6,000.00
161,000.00 161,000.00
(82,000.00) (82,000.00)
0.00 555,000.00 555,000.00
(50,000.00)
(75,000.00)
430,000.00
Palayan Maisan Manihan

240,000.00 140,000.00 149,500.00
240,000.00
6,000.00
8,000.00 Excess de minimis
(125,000.00) (125,000.00) (125,000.00)
115,000.00 269,000.00 24,500.00
17,500.00 55,700.00 1,950.00
104,000.00
46,350.00
ACCTAX1
Problem 65 – Tax on business income; resident citizens, 8% income tax
Requirement No. 1
First Quarter
Sales 280,000.00
Less: Cost of Sales 72,000.00
Less: Business expenses 30,000.00
Taxable Income 178,000.00
Requirement No. 2
Quartery Cumulative
Excess of 250000
Excess of 400000
20% of excess (250000)

25% of excess (400000)
Fixed Tax
Income Tax
Requirement No. 3 First Quarter

Sales 280,000.00
OSD (40% of sales) 112,000.00
Taxable business income before exemptions 168,000.00
Requirement No. 4
Quartery Cumulative
Excess of 50000
Excess of 400000
20% of excess (250000)

25% of excess (400000)
Fixed Tax
Income Tax
Requirement No. 5 First Quarter

Cumulative Sales 280,000.00
Deductions (250,000.00)
Rate 0.08
Income Tax 2,400.00
Second Quarter Third Quarter Fourth Quarter Total
210,000.00 250,000.00 280,000.00 1,020,000.00
75,000.00 76,000.00 80,000.00 303,000.00
135,000.00 174,000.00 200,000.00 717,000.00
32,000.00 38,000.00 45,000.00 145,000.00
103,000.00 136,000.00 155,000.00 572,000.00
First Quarter Second Quarter Third Quarter Annual

178,000.00 281,000.00 417,000.00 572,000.00
- 31,000.00 - -
- - 17,000.00 172,000.00
- 6,200.00 -
- - 4,250.00 43,000.00
- - 30,000.00 30,000.00
- 6,200.00 34,250.00 73,000.00
Second Quarter Third Quarter Fourth Quarter Total

210,000.00 250,000.00 280,000.00 1,020,000.00
84,000.00 100,000.00 112,000.00 408,000.00
126,000.00 150,000.00 168,000.00 612,000.00
First Quarter Second Quarter Third Quarter Annual

168,000.00 294,000.00 444,000.00 612,000.00
- 44,000.00 - -
- - 44,000.00 212,000.00
- 8,800.00 -
- - 11,000.00 53,000.00
- - 30,000.00 30,000.00
- 8,800.00 41,000.00 83,000.00
Second Quarter Third Quarter Annual

490,000.00 740,000.00 1,020,000.00
(250,000.00) (250,000.00) (250,000.00)
240,000.00 490,000.00 770,000.00
0.08 0.08 0.08
19,200.00 39,200.00 61,600.00
1 Sales
COGS
BEX
Gross Income
Exemptions
Taxable income
2 Quarterly cumulative income

Exemptions
Fixed tax
Income tax
3 Sales
OSD
Income
Exemption
Taxable income
Schedule
Rate
Fixed tax
Q1 Q2 Q3 Q4
180.00 210.00 250.00 280.00
(72.00) (75.00) (76.00) (80.00)
(30.00) (32.00) (38.00) (45.00)
78,000.00 103,000.00 136,000.00 155,000.00
78,000.00 181,000.00 317,000.00 472,000.00

(150,000.00) (150,000.00) (150,000.00) (150,000.00)
0.00 2,500.00 22,500.00 50,000.00
0.00 #REF! #REF! #REF!
180,000.00 390,000.00 640,000.00 920,000.00

0.60 0.60 0.60 0.60
108,000.00 234,000.00 384,000.00 552,000.00
(150,000.00) (150,000.00) (150,000.00) (150,000.00)
(42,000.00) 84,000.00 234,000.00 402,000.00
0.00 (70,000.00) (140,000.00) (250,000.00)
0.00 0.20 0.25 0.30
0.00 8,500.00 22,500.00 50,000.00
Total
472,000.00
(150,000.00)
322,000.00
ACCTAX1
Problem 66 – Tax on business income; gross sales/receipts; 8% income tax option: VAT threshold breach
Requirement 1
1st Quarter 2nd Quarter
Gross Sales ₱ 700,000.00 ₱ 1,500,000.00
Prompt Payment Discount 80000.00 180000.00
Gross Sales ₱ 780,000.00 ₱ 1,680,000.00
Deduction -250000.00 -250000.00
Taxable Income ₱ 530,000.00 ₱ 1,430,000.00
Tax Percent 0.08 0.08
Income Tax ₱ 42,400.00 ₱ 114,400.00
3rd Quarter 4th Quarter

Gross Sales 2750000 4250000
Cost of Sales -1150000 -1800000
Gross Income 1600000 2450000
Business Expenses -750000 -1100000
Taxable Income 850000 1350000
Taxable Income Graduated Rate Income Tax

1st Quarter 200000 -
20% excess of 250000
2nd Quarter 400000 30000 + 25% excess of 30000

400000
3rd Quarter 800000 130000 + 30% excess of 130000

50000 8000000 15000
850000 145000
4th Quarter 800000 130000 + 30% excess of 130000

550000 8000000 165000
1350000 295000
8% Graduated Payable
1st Quarter 42400
2nd Quarter 114400
3rd Quarter 145000 30600
4th Quarter 295000 264400
Requirement 2
1st Quarter 2nd Quarter
Gross Sales ₱ 700,000.00 ₱ 1,500,000.00
Prompt Payment Discount -300000.00 -650000.00
Gross Sales ₱ 400,000.00 ₱ 850,000.00
Deduction -200000.00 -450000.00
Taxable Income ₱ 200,000.00 ₱ 400,000.00
Taxable Income Graduated Rate Income Tax

1st Quarter 200000 -
20% excess of 250000
2nd Quarter 400000 30000 + 25% excess of 30000

400000
3rd Quarter 800000 130000 + 30% excess of 130000

50000 8000000 15000
850000 145000
4th Quarter 800000 130000 + 30% excess of 130000

550000 8000000 165000
1350000 295000
shold breach

₱ 2,750,000.00 ₱ 4,250,000.00
300000.00 430000.00
₱ 3,050,000.00 ₱ 4,680,000.00

₱ 2,750,000.00 ₱ 4,250,000.00
-1150000.00 -1800000.00
₱ 1,600,000.00 ₱ 2,450,000.00
₱ (750,000.00) ₱ (1,100,000.00)
₱ 850,000.00 ₱ 1,350,000.00
ACCTAX1
Problem 67 - Tax on mixed income
Requirement 1
20A1 - 8% 20A2 - Graduated
Compensation Income 265000 330000
13th month -20000 -25000
Contributions -5000 -5000
Taxable Compensation Income 240000 300000
Income from business 300000 500000

Business expenses -100000 -200000
Taxable business income 200000 300000
Requirement 2
20A1
Gross receipts 350000 If income is solely from business, use
Rate 8% Total Income Tax Due = 0
Tax on business 28000 If mixed income, use this formula:
Total Incom Tax Due = (0
Gross Compesation 265000
Deductions -25000 The main difference, as you can see, is
earners. Now, before you start rallying
Taxable Income 240000 P250,000 has already been deducted
Excess - being applied anymore to the tax from
Tax on Compensation -
Tax on Business 28000

Tax on compensation -
Total tax due 28000
20A2
Taxable Compensation 300000
Taxable Business 300000
Total Taxable 600000
25% of excess 50000

Fixed Tax 30000
Tax due 80000
Requirement 3
20A1 20A2
Gross receipts 350000 580000
Rate 8% 8%
Tax on business 28000 46400
Gross Compesation 265000 330000
Deductions -25000 -30000
Taxable Income 240000 300000
Excess - 50000
Tax on Compensation - 10000
Tax on Business 28000 46400

Tax on compensation - 10000
Total tax due 28000 56400
lely from business, use this formula:
otal Income Tax Due = 0.08 * (Gross sales - 250000)
me, use this formula:
otal Incom Tax Due = (0.08 * Gross Sales) + Tax Due on Compensation
rence, as you can see, is that the P250,000 deduction is not applied for Mixed Income
before you start rallying out on the streets, the reason is pretty straightforward: the
already been deducted when you computed your tax due on compensation so it’s not
anymore to the tax from your business.
ACCTAX1
Problem 67 – Tax on mixed income; resident and non-resident citizen; resident and non-resident alien
Requirement 1

13th Month pay (40,000.00)
SSS, etc. (12,000.00)
Gross income from business 300,000.00
Business expenses (100,000.00)
Taxable income 668,000.00
Grad. Rate
Tax on 400,000.00 30000 + 25% excess. Of
268,000.00 400000
Total 668,000.00
Total income tax
Requirement 2
Gross Income from Business 300,000.00
Business Expense (100,000.00)
Taxable Income Grad. Rate Income Tax

200000 0% -
Requirement 3
13th Month pay (40,000.00)
SSS, etc. (12,000.00)
Taxable income before exemptions 468,000.00
Grad. Rate
Tax on 400,000.00 30000 + 25% excess. Of
68,000.00 400000
Total 468,000.00
Total income tax
Requirement 4
13th Month pay (40,000.00)
SSS, etc. (12,000.00)
Grad. Rate
Tax on 400,000.00 30000 + 25% excess. Of
68,000.00 400000
Total 468,000.00
Total income tax
Requirement 5
13th Month pay (40,000.00)
SSS, etc. (12,000.00)
Taxable Income Grad. Rate Income Tax

468000 25% 117000
d non-resident alien
30,000.00
67,000.00
97,000.00
30,000.00
17,000.00
47,000.00
30,000.00
17,000.00
47,000.00
ACCTAX1
Problem 69 – Tax on resident citizens; foreign tax credits
Requirement 1
Within Australia Total
Gross compensation 351,000.00 351,000.00
13th month pay (27,000.00) (27,000.00)
Sales 450,000.00 450,000.00
Cost of sales (120,000.00) (120,000.00)
Gross income 324,000.00 330,000.00 654,000.00
Business expenses (100,000.00) (100,000.00)
Taxable income before exemption 324,000.00 230,000.00 554,000.00
Requirement 2
Personal Income Tax (400000 to 800000) 30,000.00
25% of excess of 400000 [(554000-400000)*25%] 38,500.00
Personal Income Tax in the PH 68,500.00
Foreign Income 230,000.00

Divided by: Total Income 554,000.00
% of foreign 0.42
Multiply: Personal Income Tax in the PH 68,500.00
Tax Credit Limit 28,438.63
Actual Tax Paid 30,000.00
Personal Income Tax PH 68,500.00

Lower of Tax Credit and Actual Tax Paid (28,438.63)
Tax Payable 40,061.37
Requirement 3
Within Australia Total
Gross compensation 351,000.00 351,000.00
13th month pay (27,000.00) (27,000.00)
Sales 450,000.00 450,000.00
Cost of sales (120,000.00) (120,000.00)
Gross income 324,000.00 330,000.00 654,000.00
Business expenses (100,000.00) (100,000.00)
Foreign Inxome Tax (30,000.00) (30,000.00)
Taxable income before exemption 324,000.00 200,000.00 524,000.00
400000 bracket 30,000.00

Excess [(524000 - 400000) * 25%] 31,000.00
Tax Due 61,000.00
Requirement 4
Australia New Zealand
Foreign Income 138,000.00 92,000.00
Divided by: Total Income 554,000.00 554,000.00
% of foreign 0.25 0.17
Multiply: Personal Income Tax in the PH 68,500.00 68,500.00
Tax Credit Limit 17,063.18 11,375.45
Actual Tax Paid 20,000.00 10,000.00
Personal Income Tax PH 68,500.00

Lower of Tax Credit and Actual Tax Paid
Australia (17,063.18)
New Zealand (10,000.00)
Tax Payable 41,436.82
ACCTAX1
Problem 70 – Minimum wage earners
Requirement No. 1
Ylang Camia
Daily minimum wage 500.00 450.00
No. of days 365.00 313.00
Total 182,500.00 140,850.00
Divide by: No. of months 12.00 12.00
Monthly minimum wage 15,208.33 11,737.50
Requirement No. 2 and No. 3

SITUATION A (same sa situation B)
Taxable income -
Income tax -
Note: Minimum wage earner, de minimis benefits are provided, hazard pay is non-taxable
SITUATION B
Monthly salary 15,208.00
No. of months salary 16.00
Total 243,328.00
Excess rice subsidy 6,000.00 [(P2,500-2000) x 12]
Performance bonus 25,000.00
Commision 12,000.00
Total 286,328.00
Less: 13th month pay, etc.
13th, 14th, 15th, 16th 60,832.00
Excess rice subsidy 6,000.00
Total 91,832.00
Threshold (90,000.00)
Exclusion (90,000.00)
Taxable 196,328.00
Divide by: No. of months 12.00
Effective monthly compensation 16,360.67
Hence, taxable since exceeds the monthly statutory minimum wage

Tax on - -
- -
Total -
Tax -
Situation C
Monthly salary (July 1 to December) 15,208.00
Increase 110%
New salary 16,728.80
No. of months 6.00
Taxable compensation 100,372.80
Personal exemption
Additonal personal exemption
Tax on
Total
Tax -
Situation D
New salary 16,000.00
No. of months 6.00
Personal exemption -
Additonal personal exemption -
Tax on -
- -
Total -
Tax -
Train law mga sis

15208.33 11737.5
2000) x 12]
ACCTAX1
Problem 71 – Aliens and Filipinos employed by ROHQs
Situation A

No. of months 12.00
Gross compensation 1,800,000.00
13th month pay and other benefits 210,000.00
SSS, Philhealth and Pag-ibig (18,000.00)
Gross income 1,992,000.00 Requirement No. 1
Tax rate 15%
Tax due 298,800.00 Requirement No. 2
Aliens are automatically taxed at 15%.
Situation B
Monthly salary and allowances 75,000.00

No. of months 13.00
Gross compensation 975,000.00
Total Monthly Salary (75,000.00)
Taxable Income 900,000.00 Requirement No. 1
Managerial position and compensation requirements were met. May avail 15% rate.
OPTION 1: GRADUDATED RATES

Tax on 800,000.00 130,000.00
100,000.00 30% 30,000.00
Total 900,000.00
Requirement No. 2
Income Tax Liability 160,000.00
OPTION 2: 15% RATE

Income Tax Liability (900,000 x 15%) 135,000.00
Situation C
No. of months 13.00
Compensation Check/Gross Compensation 936,000.00
Technical position was met but not the compensation requirement. No 15% rate option.
Monthly Salary (72000 x 12) 864,000.00

13th month -
Rice subsidy -
Laundry allowance Within 90k -
Clothing allowance threshold -
Productivty incentive -
Christmas gift -
Taxable income 864,000.00 Requirement No. 1

Tax on 800,000.00 130,000.00
64,000.00 30% 19,200.00
Total 864,000.00
Income Tax Liability 149,200.00 Requirement No. 2
Situation D
No. of months 13.00
Gross compensation 780,000.00
Total Compensation 980,000.00
Above 975,000 threshold; Technical position and compensation reequirements were met. May avail 15% rate.
Gross compensation (60000 x 12) 720,000.00

13th month and others
13th month 60,000.00
Performance Bonus 200,000.00
Threshold (90,000.00) 170,000.00
Taxable compensation 890,000.00 Requirement No. 1

Tax on 800,000.00 130,000.00
90,000.00 30% 27,000.00
Total 890,000.00
Requirement No. 2
OPTION 2: 15% RATE

Income Tax Liability (890,000 x 15%) 133,500.00
Situation E
No. of months 13.00
Gross compensation 1,040,000.00
Managerial position and compesation requirements were met. May avail 15% rate.
De minimis are tax-exempt.
Gross compensation (January - June) 480,000.00

Gross compensation (July - December) 420,000.00
13th month and others within 90k threshold -
Rice subsidy within threshold -
Taxable compensation 900,000.00 Requirement No. 1

Tax on 800,000.00 130,000.00
100,000.00 30% 30,000.00
Total 900,000.00
OPTION 2: 15% RATE Requirement No. 2

Previous Employer:
Tax on 400,000.00 30,000.00
Requirement No. 2
500,000.00 25% 5,000.00

900,000.00
Curret Employer (480000*15%) 72,000.00
Situation F
Santan Araw
Monthly salary 80,000.00 100,000.00
No. of months 13.00 13.00
Gross compensation 1,040,000.00 1,300,000.00
Managerial position and compensation requirements were met. May avail of the 15% rate.
Santan Santan Araw

Monthly salary 80,000.00 100,000.00
No. of months 5.00 7.00
Total 400,000.00 700,000.00
13th month pay (5/12; 7/12) 33,333.33 58,333.33
Total compensation 433,333.33 758,333.33
Gross taxable compensation income 1,191,666.67

13th month pay threshold (90,000.00)
Taxable compensation 1,101,666.67 Requirement No. 1

Tax on 800,000.00 130,000.00
301,666.67 30% 90,500.00
Total 1,101,666.67
Requirement No. 2
OPTION 2: 15% RATE

Income Tax Liability (1,101,666.67 x 15%) 165,250.00
Situation G
Compensation Check (80000 x 13) 10,400,000.00
Managerial position and compensation requirements wer met. May avail 15% rate for ROHQ.
Taxable Income Not Taxable

Santan's Salary (80000 x 5) 400,000.00
Santan's 13th month [(80,000 x 5) / 12] 33,333.33
Araw's Salary (100,000 x 7) 700,000.00
13th Month (700,000 / 12) 58,333.00
Threshold (90,000 - 33,333.33) (56,666.67)
Taxable Income 1,101,666.33 Requirement No. 1

Tax on 800,000.00 130,000.00
301,666.33 30% 90,499.90
Total 1,101,666.33

Requirement No. 2
Tax on Araw
Tax on 400,000.00 30,000.00
301,667.00 25% 75,417.00
701,667.00
Tax on Santan (480000*15%) 60,000.00
Situation H
Compensation Check (100,000 x 13) 10,400,000.00
Technical position and compensation requirements were met. May avail 15% rate for ROHQ.
Taxable Income Not Taxable

Santan's Salary (80000 x 5) 400,000.00
Santan's 13th month [(80,000 x 5) / 12] 33,333.33
Araw's Salary (100,000 x 7) 700,000.00
13th Month (700,000 / 12) 58,333.00
Threshold (90,000 - 33,333.33) (56,666.67)
Taxable Income 1,101,666.33 Requirement No. 1

Tax on 800,000.00 130,000.00
301,666.33 30% 90,499.90
Total 1,101,666.33
Requirement No. 2
OPTION 2: 15% RATE

Tax on Santan (701,667 x 15%) 105,250.00
Tax on Araw (400000) 30,000.00
Situation I
Compensation Check; Jan - June (70,000 x 13) 910,000.00 Can't opt for 15% rate
Compensation Check; July - Dec (70,000 x 1.1 x 6 1,001,000.00 May opt for 15% rate
Salary; January - June (70,000 x 6) 420,000.00

Salary July - December (70,000 x 1.1 x 6) 462,000.00

Tax on 800,000.00 130,000.00
82,000.00 30% 24,600.00
Total 882,000.00

Tax on January - June
Tax on 400,000.00 30,000.00
20,000.00 25% 5,000.00
420,000.00
Tax on July - December (462000*15%) 69,300.00
Situation J
Managerial/Technical position reqruirements were not met; thus, no 15% option.
Salary; January - June (70,000 x 6) 420,000.00

Salary July - December (70,000 x 1.1 x 6) 462,000.00
Tax on 800,000 130,000.00

Tax on Excess [(882000-800000) x 30%] 24,600.00
Income Tax Liability 154,600.00 Requirement No. 2
[(150,000x2)-90000)
ement No. 1
ement No. 2
ement No. 1
ement No. 1
ement No. 2
s were met. May avail 15% rate.
ement No. 1
[455,000/(13 months/2)] x 6 months
ement No. 1
he 15% rate.
Total
1,100,000.00
91,666.67
1,191,666.67
ement No. 1
rate for ROHQ.
ment No. 1
rate for ROHQ.
ment No. 1
pt for 15% rate

t for 15% rate
ment No. 1
ment No. 1
ement No. 2
ACCTAX1
Problem 72 – Income subject to final taxes

Resident citizen Non-resident citizen
a. Prize 1,000,000.00 1,000,000.00

Tax rate 20% 20%
Final withholding tax 200,000.00 200,000.00
b. Lotto 2,000,000.00 2,000,000.00

Tax Rate 20% 20%
Final Tax 400,000.00 400,000.00
c. Prize 5,000.00 5,000.00

Tax rate Subj. to Grad % Subj. to Grad %
FWT - -
d. Interest income 6,000.00 6,000.00

Tax rate 20% 20%
e. Interest income 3,000.00 3,000.00

Tax rate 15.0% 15.0%
Final withholding tax 450.00 450.00
f. Interest income 40,000.00 40,000.00

Tax rate 20% 20%
g. Interest income 90,000.00 90,000.00

Tax rate 5% 5%
h. Interest income 100,000.00 100,000.00

Income tax exempt Exempt Exempt
Final withholding tax - -
i. Rental income 5,000.00 5,000.00

Tax rate 20% 20%
Dividend income 8,500.00 8,500.00

Tax rate 10% 10%
Final withholding tax 850.00 850.00
Gain on sale of shares 6,500.00 6,500.00

Income tax exempt Exempt Exempt
j. Dividend income - Domestic 10,000.00 10,000.00

Tax rate 10% 10%
k. Dividend income - Foreign 8,000.00 8,000.00

Tax rate Subj. to Grad % Tax-exempt
l. Gain on Sale OTC 125,000.00 125,000.00

CGT rate 15% 15%
CGT 18,750.00 18,750.00
m. FMV (higher) 6,000,000.00 6,000,000.00

CGT rate 6% 6%
CGT 360,000.00 360,000.00
n. Royalty income 15,000.00 15,000.00

Tax rate 10% 10%
o. Franchise fee 100,000.00 100,000.00

Tax rate 20% 20%
Resident alien NRAETB NRANETB
1,000,000.00 1,000,000.00 1,000,000.00

20% 20% 25%
200,000.00 200,000.00 250,000.00
2,000,000.00 2,000,000.00 2,000,000.00

20% 20% 25%
400,000.00 400,000.00 500,000.00
5,000.00 5,000.00 5,000.00

Subj. to Grad % Subj. to Grad % 25%
- - 1,250.00
6,000.00 6,000.00 6,000.00

20% 20% 25%
1,200.00 1,200.00 1,500.00
3,000.00 3,000.00 3,000.00

15.0% Exempt Exempt
450.00 Exempt Exempt
40,000.00 40,000.00 40,000.00

20% 20% 25%
8,000.00 8,000.00 10,000.00
90,000.00 90,000.00 90,000.00

5% 5% 25%
4,500.00 4,500.00 22,500.00
100,000.00 100,000.00 100,000.00

Exempt Exempt 25%
- - 25,000.00
5,000.00 5,000.00 5,000.00

20% 20% 25%
1,000.00 1,000.00 1,250.00
8,500.00 8,500.00 8,500.00

10% 20% 25%
850.00 1,700.00 2,125.00
6,500.00 6,500.00 6,500.00

Exempt Exempt Exempt
10,000.00 10,000.00 10,000.00

10% 20% 25%
1,000.00 2,000.00 2,500.00
8,000.00 8,000.00 8,000.00

Tax-exempt Tax-exempt Tax-exempt
- - -
125,000.00 125,000.00 125,000.00

0.15 0.15 0.15
18,750.00 18,750.00 18,750.00
6,000,000.00 6,000,000.00 6,000,000.00

6% 6% 6%
360,000.00 360,000.00 360,000.00
15,000.00 15,000.00 15,000.00

10% 10% 10%
1,500.00 1,500.00 1,500.00
100,000.00 100,000.00 100,000.00

20% 20% 25%
20,000.00 20,000.00 25,000.00
Taxable as income from trust fund.
Although income from trust fund, since subjected to FWT on

dividend, no longer subject to tax as income from trust fund
Although income from trust fund, since tax exempt, no longer

subject to FWT.
Income derived from sources outside
ACCTAX1
Problem 73 – Deposit substitutes
Requirement No. 1
a. Deposit substitute
b. Not deposit substitute
c. Deposit substitute
Requirement No. 2
a. Investment income 50,000.00
Tax rate 20%
Final tax 10,000.00
b. -
c. Investment income 25,000.00

Tax rate 20%
Final tax 5,000.00
ACCTAX1
Problem 74 – Regular corporate income tax (RCIT) and minimum corporate income tax (MCIT)
Note: Discuss MCIT, entities covered by MCIT, etc.
Gross sales
Sales discounts
Sales returns
Net sales
Cost of goods sold
Gross income before other income
Other income
Interest income on loans
Dividend income on investment in foreign shares
Gain on sale of transportation equipment
Gross income
MCIT rate
MCIT
Gross Income
Deductions
Salaries and bonuses
Interest expense 325,000.00
Non-deductible interest
Interest income subject to final tax 50,000.00
Multiply by: Non-deductible rate 33% 16,500.00
Loss on sale of equipment
Fire loss
Utilities expense
Bad-debts (actual write-off)
Pension expense
20A1 Contribution 300,000.00
20A1 Normal cost 200,000.00
20A1 Excess 100,000.00
No. of years 10.00
20A1 Excess amortization 10,000.00
20A0 Contribution 350,000.00
20A0 Excess 130,000.00
No. of years 10.00
20A0 Excess amortization 13,000.00
Taxable income before contributions
Charitable contributions - Full deduction
Charitable contributions - Subject to Limit 150,000.00
Limitation
Taxable income before donation 613,500.00
Limit 5% 30,675.00
Taxable income
RCIT rate
RCIT
Higher b/w MCIT and RCIT
CGT on shares
Gain on Sale of Domestic Shares
Rate
Tax on Interest
Interest Income
Tax Rate on Interest
Income Tax Liability
10,000,000.00
(300,000.00)
(500,000.00)
9,200,000.00
(4,000,000.00)
5,200,000.00
100,000.00
300,000.00
350,000.00 750,000.00
5,950,000.00 Requirement No. 1
2%
119,000.00 Requirement No. 2
5,950,000.00
2,500,000.00
308,500.00
900,000.00
175,000.00
650,000.00
380,000.00
200,000.00
223,000.00 5,336,500.00
613,500.00
270,000.00
30,675.00 300,675.00
30%
119,000.00
280,000.00
15% 42,000.00
50,000.00
20% 10,000.00
ACCTAX1
Problem 75 – Excess MCIT carryover; commencement of MCIT
Requirement Nos. 1, 2 and 3

20A3 20A4 20A5
Net sales 5,000,000.00 6,000,000.00 7,000,000.00
Cost of sales 1,800,000.00 2,500,000.00 3,200,000.00
Gross income 3,200,000.00 3,500,000.00 3,800,000.00
Deductions 3,000,000.00 3,400,000.00 3,750,000.00
Taxable income before NOLCO 200,000.00 100,000.00 50,000.00
NOLCO
20A1 (150,000.00)
20A2 (40,000.00)
20A6
Taxable income 10,000.00 100,000.00 50,000.00
RCIT rate 0.30 0.30 0.30
RCIT 3,000.00 30,000.00 15,000.00
MCIT (2%) Not applicable 70,000.00 76,000.00
Income tax , higher 3,000.00 70,000.00 76,000.00

Excess MCIT over RCIT 40,000.00 61,000.00
Utilization:
20A7 (21,000.00)
20A8 (61,000.00)
Balance 19,000.00 -
Expired
Income tax, higher 3,000.00 70,000.00 76,000.00

Excess MCIT credit
20A4 excess MCIT
20A5 excess MCIT
20A6 excess MCIT
Income tax due 3,000.00 70,000.00 76,000.00
Requirement No. 4
20A3 Current tax expense
Income tax payable
20A4 Income tax payable

Cash
Current tax expense

Income tax payable
Deferred tax asset

Income tax benefit

Cash
Current tax expense
Income tax payable
Deferred tax asset

Income tax benefit

Cash
Current tax expense

Income tax payable
Deferred tax asset

Income tax benefit

Cash
Current tax expense

Income tax payable
Income tax payable

Deferred tax asset
Deferred tax expense

Deferred tax asset

Income tax payable
Income tax payable

Deferred tax asset

Income tax payable
Deferred tax expense

Deferred tax asset
Requirement No. 5
20A3 20A4 20A5
Net sales 5,000,000.00 6,000,000.00 7,000,000.00
Cost of sales 1,800,000.00 2,500,000.00 3,200,000.00
Gross income 3,200,000.00 3,500,000.00 3,800,000.00
Deductions 1,280,000.00 1,400,000.00 1,520,000.00
Taxable income 1,920,000.00 2,100,000.00 2,280,000.00
RCIT rate 0.30 0.30 0.30
RCIT 576,000.00 630,000.00 684,000.00
MCIT (2%) Not applicable 70,000.00 76,000.00

Income tax (Higher b/w RCIT and MCIT) 576,000.00 630,000.00 684,000.00
20A6 20A7 20A8 20A9
8,000,000.00 9,000,000.00 10,000,000.00 12,000,000.00
3,800,000.00 8,000,000.00 7,000,000.00 8,000,000.00
4,200,000.00 1,000,000.00 3,000,000.00 4,000,000.00
4,230,000.00 900,000.00 2,750,000.00 3,800,000.00
(30,000.00) 100,000.00 250,000.00 200,000.00
(30,000.00)
(30,000.00) 70,000.00 250,000.00 200,000.00 Requirement No. 3
0.30 0.30 0.30 0.30
(9,000.00) 21,000.00 75,000.00 60,000.00 Requirement No. 2
84,000.00 20,000.00 60,000.00 80,000.00 Requirement No. 1
84,000.00 21,000.00 75,000.00 80,000.00

84,000.00 20,000.00
(14,000.00)
70,000.00 - - 20,000.00
Expired
84,000.00 21,000.00 75,000.00 80,000.00
(21,000.00)
(61,000.00)
(14,000.00)
84,000.00 - - 80,000.00
3,000.00
3,000.00
3,000.00
3,000.00
70,000.00
70,000.00
40,000.00 Excess MCIT over RCIT should be set-up as deferred tax asset
40,000.00 P&L account
70,000.00
70,000.00
76,000.00
76,000.00
61,000.00
61,000.00
76,000.00
76,000.00
84,000.00
84,000.00
84,000.00
84,000.00
84,000.00
84,000.00
21,000.00
21,000.00
21,000.00 Utilization of excess MCIT credits

21,000.00
19,000.00 Write-off of expired excess MCIT credits

19,000.00
75,000.00
75,000.00
75,000.00
75,000.00
80,000.00
80,000.00
70,000.00
70,000.00
20A6 20A7 20A8 20A9

8,000,000.00 9,000,000.00 10,000,000.00 12,000,000.00
3,800,000.00 8,000,000.00 7,000,000.00 8,000,000.00
4,200,000.00 1,000,000.00 3,000,000.00 4,000,000.00
1,680,000.00 400,000.00 1,200,000.00 1,600,000.00
2,520,000.00 600,000.00 1,800,000.00 2,400,000.00
0.30 0.30 0.30 0.30
756,000.00 180,000.00 540,000.00 720,000.00
84,000.00 20,000.00 60,000.00 80,000.00

756,000.00 180,000.00 540,000.00 720,000.00 Requirement No. 5
rred tax asset
ACCTAX1
Problem 76 – RCIT, MCIT, cost of services
Requirement Nos. 1, 2, and 3

Sales/Revenues
Sales discounts
Less: Senior citizen & PWD discount
Net sales/revenues
Cost of services
Cost of sales – food
Cost of sales – packaging
Salaries and bonuses – servers/waiters
Salaries and bonuses – store supervisors and
managers
Rental expense – stores
Utilities expense – stores
Repairs and maintenance – stores and store
facilities
Depreciation – stores and store facilities
Gross income before other income
Other income
Gross income
MCIT rate
MCIT
Gross Income
Deductions
Salaries and bonuses – sales and administration
Rental expense – administration
Utilities expense – administration
Repairs and maintenance – administration
Depreciation expense – administration
Interest expense
Less: Non-deductible interest
Interest subject to final tax 13,875.00
Factor (Tax rate = 15%) 85.00%
Gross interest 16,323.53
Non-deductible rate 33%
Taxes and licenses

Less: Donor's tax
Other administration expenses
Senior citizen and PWD discount
Taxable income
Tax rate
RCIT
Income Tax Liability (Higher b/w MCIT and RCIT)

Requirement No. 4
Gross income
OSD (40%)
Taxable income
Tax rate
RCIT
MCIT
Higher between RCIT and MCIT

10,000,000.00
300,000.00
50,000.00 (250,000.00)
9,750,000.00
1,200,000.00
500,000.00
1,500,000.00
700,000.00
850,000.00
325,000.00
300,000.00
600,000.00 5,975,000.00
3,775,000.00
750,000.00
2%
4,525,000.00
560,000.00
450,000.00
225,000.00
150,000.00
280,000.00
375,000.00
5,386.76 369,613.24
480,000.00
50,000.00 430,000.00
425,000.00
50,000.00 2,939,613.24

30%

4,525,000.00
1,810,000.00
2,715,000.00
30%
814,500.00
90,500.00

ACCTAX1
Problem 77 – Income tax reconciling items, RCIT, MCIT
Machinery and Equipment

Cost 400,000.00
Acc. Depreciation (194,000.00)
Acc. Impairment Loss (50,000.00)
Machinery and Equipment, net 156,000.00
Additional Info.
Cost 400,000.00
Acc. Depreciation, 12/31/A0 (150,000.00)
CV before Impairment, 12/31/A0 250,000.00
Impairment Loss, 20A0 (30,000.00)
CV after Impairment, 12/31/A0 220,000.00
Depreciation Expense, 20A1 (44,000.00)
CV before Impairment, 12/31/A1 176,000.00
Impairment Loss, 20A1 (20,000.00)
CV after Impairment, 12/31/A1 156,000.00
Construction in Progress 500,000.00
Additional Info.
Balance, 1/1/A1 -
Add: Capital Expenditures 420,000.00
InterestCapitalized under PAS 23 80,000.00 500,000.00
Balance, 12/31A1 500,000.00
Inventories
Inventories 450,000.00
Allowance for Inventory Write-down (50,000.00)
Net 400,000.00
Allowance for Inventory Write-down

Balance, 1/1/A1 35,000.00
Adjustment 15,000.00
Balance, 12/31/A1 50,000.00
Accunts Receivable
A/R 350,000.00
Allowance for Doubtful Accounts (ADA) (40,000.00)
Net 310,000.00
Allowance for Doubtful Accounts

Balance, 1/1/A1 35,000.00
Add: Provision for Doubtful Accounts 23,000.00
Subtotal 58,000.00
Less: Accounts written-off (18,000.00)
Balance, 12/31/A1 40,000.00
Accounts Payable 290,000.00

Additional Info.
Balance, 1/1/A1 530,000.00
Add: Purchses on Account 420,000.00
Subtotal 950,000.00
Less: Payments (635,000.00)
Subtotal 315,000.00
Less: Forex Adjustment (25,000.00)
Balance, 12/31/A1 290,000.00
Warranties Payable 135,000.00
Additional Info.
Balance, 1/1/A1 120,000.00
Add: Accrual of Liability 50,000.00
Subtotal 170,000.00
Less: Actual Payments (35,000.00)
Balance, 12/31/A1 135,000.00

Sales 3,000,000.00
Cost of sales 1,200,000.00
Gross income for financial accounting 1,800,000.00
Provision for inventory write-down 15,000.00
Taxable gross income 1,815,000.00 Requirement No. 1
MCIT rate 2%
MCIT 36,300.00 Requirement No. 2

Income before tax 1,350,000.00
Permanent differences
Dividend income (20,000.00)
Excess EAR 10,000.00
Temporary differences
Impairment loss 20,000.00
Excess of tax depreciation over accounting (6,000.00)
Interest expense (80,000.00)
Allowance for doubtful accounts 23,000.00
Accounts written-off (18,000.00)
Provision for inventory write-down 15,000.00
Unrealized foreign exchange gain (25,000.00)
Warranties accrual 50,000.00
Warranties payments (35,000.00)
Taxable income 1,284,000.00 Requirement No. 3
RCIT rate 30%
RCIT 385,200.00 Requirement No. 4
Requirement No. 5
Income tax liability 385,200.00 Requirement No. 5
Requirement No. 6
OSD 726,000.00
RCIT rate 30%
RCIT 326,700.00
Income tax liability 326,700.00 Requirement No. 6

Excess of tax over accounting
Cost 400,000.00
Life 8.00
Tax depreciation 50,000.00
Accounting dep 44,000.00
Difference 6,000.00
ACCTAX1
Problem 78 – Taxation of proprietary educational institutions
Requirement No. 1
Accounting
Revenues:
Tuition fees 15,000,000.00
Other education fees 3,800,000.00
Total 22,400,000.00
Costs:
Salaries and wages 6,000,000.00
Employee benefits 2,200,000.00
Laboratory and maintenance 800,000.00
Depreciation and amortization 1,500,000.00
Faculty retirement expense 1,200,000.00
Pension expense - normal cost
Pension expense - amortization of excess (20A1)
Pension expense - amortization of excess (prior years)
Utilities expense 950,000.00
School supplies 350,000.00
Honorariums 250,000.00
Rent expense 180,000.00
Faculty development 150,000.00
Total 13,580,000.00
Gross profit 8,820,000.00
Expenses:
Employee benefits 1,100,000.00
Depreciation and amortization 700,000.00
Retirement expense 650,000.00
Pension expense - normal cost
Pension expense - amortization of excess (20A1)
Pension expense - amortization of excess (prior years)
Utilities expense 450,000.00
Office supplies 170,000.00
Rent expense 100,000.00
Charitable contributions 350,000.00
Staff training and development 80,000.00
Other expenses 150,000.00
Total 7,080,000.00

Tax rate
Income tax
Final tax on interest
Total income
NOTES:
Note 1 Normal Cost 800,000.00
Multiply: Portion attributable to direct costs 30%
Pension - normal cost 240,000.00
Note 2 Actual Cotnribution 1,000,000.00

Normal Cost (800,000.00)
Excess 200,000.00
Multiply: Portion attributable to direct csts 30%
Amount amortized for 10 years 60,000.00
Divde: Amortization Period 10.00
Pension Expenses - Excess of Normal Cost 6,000.00
Note 3 Excess 700,000.00

Multiply: Portion attributable to direct costs 30%
Amount to be amortized for 7 years 210,000.00
Divide: Amortization period 7.00
Pension Expense - Excess of Normal Cost (Prior years) 30,000.00
Note 4 Donations to foundations accredited by PCNC 250,000.00

Donaions to the government for sports development 100,000.00
Charitable Contributions - Deductible in full 350,000.00
Note 5 Interes Expense

Nondeductible Interest
Multiply: Tax Arbitrage Rate 33%
Interest Expense
PREDOMINANCE TEST
Rental
Revenue 3,500,000.00
Direct costs
Depreciation and amortization (700,000.00)
Utilities expense (200,000.00)
Gross income from Rentals 2,600,000.00
Divided by: Gross Income 9,276,000.00
Other gross income percentage 28.03%
Requirement No. 2
Taxable income
Tax rate
Income tax
Final tax on interest
Total income
ONLY MIND THIS
COLUMN!!
Reconciliation Tax
15,000,000.00
3,800,000.00
(100,000.00) -
3,500,000.00
(100,000.00) 22,300,000.00
6,000,000.00
2,200,000.00
800,000.00
1,500,000.00
(1,200,000.00) -
560,000.00 560,000.00
14,000.00 14,000.00
70,000.00 70,000.00
950,000.00
350,000.00
250,000.00
180,000.00
150,000.00
(556,000.00) 13,024,000.00
456,000.00 9,276,000.00
3,000,000.00
1,100,000.00
700,000.00
(650,000.00) -
240,000.00 240,000.00 Note 1
6,000.00 6,000.00 Note 2
30,000.00 30,000.00 Note 3
450,000.00
170,000.00
100,000.00
350,000.00 Note 4
110,000.00
80,000.00
(33,000.00) 187,000.00 Note 5
150,000.00
(407,000.00) 6,673,000.00
863,000.00 2,603,000.00
10%
260,300.00
20,000.00
280,300.00
220,000.00
(33,000.00)
187,000.00
2,603,000.00
30%
780,900.00
20,000.00
800,900.00
ACCTAX1
Problem 79 – Taxation of local banks; foreign currency deposit unit
Note: Discuss also that taxation of OBUs is similar to FCDUs
Requirement Nos. 1, 2 & 3

Total FCDU
Interest income:
Loans and receivables 15,000,000.00 1,870,000.00
Trading and investments 1,000,000.00
Due from other banks and interbank loans 800,000.00 400,000.00
Total 16,800,000.00 2,270,000.00
Interest expense:
Deposit liabilities 2,200,000.00 330,000.00
Other borrowings 420,000.00 63,000.00
Total 2,620,000.00 393,000.00
Net interest income 14,180,000.00 1,877,000.00
Other income
Service charges, fees and commissions 3,200,000.00
Gain on sale of investment 740,000.00
Foreign exchange gain (current) 180,000.00
Foreign exchange gain (prior year)
Trust income 120,000.00
Total other income 4,240,000.00 -
Total income 18,420,000.00 1,877,000.00
Costs:
Salaries and employee benefits 2,150,000.00 473,000.00
Depreciation and amortization 1,500,000.00 330,000.00
Retirement expense 1,200,000.00 264,000.00
Utilities expense 950,000.00 209,000.00
Supplies 350,000.00 77,000.00
Rent expense 180,000.00 39,600.00
Total 6,330,000.00 1,392,600.00
Gross profit 12,090,000.00 484,400.00
Expenses:
Provision for impairment and credit losses 3,700,000.00 814,000.00
Write-off
Salaries and employee benefits 1,800,000.00 396,000.00
Taxes and licenses 1,100,000.00 242,000.00
Depreciation and amortization 700,000.00 154,000.00
Retirement expense 650,000.00 143,000.00
Other expense 250,000.00 55,000.00
Total 8,200,000.00 1,804,000.00
Income before tax 3,890,000.00 (1,319,600.00)

RCIT rate
RCIT
Gross income
MCIT rate
MCIT
Income tax
Requirement No. 4
Due from other banks (deposits) 800,000.00
Multiply: RBU Portion 50%
Interest income from deposits - RBU 400,000.00
Multiply: Final tax rate 20%
Final tax on deposits - RBU 80,000.00
Requirement No. 5
Interest from Matipid's FCDU to residents 1,350,000.00
Multiply: Final tax rate 15% 202,500.00
Due from other banks (deposits) 800,000.00
Multiply: CDU Portion 50% 400,000.00
Interest Income from Deposits - FCDU 400,000.00
Multipl: Final taxrate 15% 60,000.00
Final ax liability - Matipid's FCDU 662,500.00
Requirement No. 6
Deposit liabilities 2,200,000.00
Multiply: RBU Portion 85%
Interest Expense - Depositors, RBU 1,870,000.00
Multiply: final tax rate 20%
Final Tax- RBU 374,000.00
Deposit liabilities 2,200,000.00
Multiply: FCDU 15%
Interest expense - Depositors, FCBU 330,000.00
Multiply: Final Tax Rate 15% 49,500.00
Final Tax - Depositors 423,500.00
MIND THIS COLUMN LANG!!
RBU
Recon Item Taxable
13,130,000.00 13,130,000.00
1,000,000.00 1,000,000.00
400,000.00 (400,000.00) -
14,530,000.00 (400,000.00) 14,130,000.00
1,870,000.00 (132,000.00) 1,738,000.00

357,000.00 357,000.00
2,227,000.00 (132,000.00) 2,095,000.00
12,303,000.00 (268,000.00) 12,035,000.00
3,200,000.00 3,200,000.00
740,000.00 (740,000.00) -
180,000.00 (80,000.00) 100,000.00
120,000.00 120,000.00
120,000.00 120,000.00
4,240,000.00 (700,000.00) 3,540,000.00
16,543,000.00 (968,000.00) 15,575,000.00
1,677,000.00 1,677,000.00
1,170,000.00 1,170,000.00
936,000.00 (936,000.00) -
741,000.00 741,000.00
273,000.00 273,000.00
140,400.00 140,400.00 SUMMARY
4,937,400.00 (936,000.00) 4,001,400.00 Interest Income
11,605,600.00 (32,000.00) 11,573,600.00 Interest Expense
Net Interest Inc
Other Income
2,886,000.00 (2,886,000.00) - Total Income
2,800,000.00 2,800,000.00 Costs
1,404,000.00 1,404,000.00 Gross Profit
858,000.00 858,000.00 Expenses
546,000.00 546,000.00 Taxable Income
507,000.00 (507,000.00) -
195,000.00 195,000.00
6,396,000.00 (593,000.00) 5,803,000.00
5,209,600.00 561,000.00 5,770,600.00

30%
11,573,600.00
2%

FCDU expenses allocated based on gross revenues
14,130,000.00
2,095,000.00
12,035,000.00
3,540,000.00
15,575,000.00
4,001,400.00
11,573,600.00
5,803,000.00
5,770,600.00
ACCTAX1
Problem 80 – Taxation of resident foreign corporations; ROHQ; branch profit remittance
Requirement No. 1
Reconciling items:
Interest on bank deposits (100,000.00)
Dividend (80,000.00)
Nonded Loss from Capital Asset Transaction:
Gain on sale of bonds 120,000.00
Loss on sale of bonds 150,000.00 30,000.00
Gain on sale of shares (150,000.00)
Non-deductible interest (100000 x 33%) 33,000.00
RCIT rate 30%
RCIT 783,900.00
Requirement No. 2
Net Sales 7,000,000.00
Cost of Sales (2,400,000.00)
Gross Income 4,600,000.00
MCIT Rate 2%
MCIT 92,000.00
Requirement No. 3
Higher b/w RCIT and MCIT 783,900.00
Interest on bank deposit (FTR) 100,000.00 20% 20,000.00
CGT on shares (x by CGT rate) 150,000.00 15% 22,500.00
Total Tax Liability 826,400.00
Requirement No. 4
Taxable Income 2613000 10% 261,300.00
Interest on Bank Deposit (FTR) 100,000.00 20% 20,000.00
CGT on shares 150,000.00 15% 22,500.00
Requirement No. 5
Remittance 2,000,000.00
Tax 15%
Final tax 300,000.00
Amount of remittance 2,000,000.00

Non-deductible since capital loss exceeds capital gains
ROHQs and non-ROHQs are subject to BPRT
Final tax, not deducted from profit earmarked for remittance

ACCTAX1
Problem 81 – Taxation of international carriers
Requirement No. 1
Total Non-taxable
Passenger - Manila-London-Manila (Sold within) 5,000,000.00 2,000,000.00
Passenger - Manila-London-Manila (Sold without) 2,000,000.00 800,000.00
Passenger - Manila-Paris 3,000,000.00
Passenger - Paris-Manila 2,500,000.00 2,500,000.00
Passenger - Manila-London-Athens 4,000,000.00 850,000.00
Passenger - Athens-London-Manila 3,200,000.00 3,200,000.00
Excess baggage - Manila-London 1,000,000.00
Cargo - Manila-London 1,550,000.00
Excess baggage - London-Manila 1,200,000.00 1,200,000.00
Cargo - London-Manila 1,650,000.00 1,650,000.00
Excess baggage - Manila-Paris 1,300,000.00
Cargo - Manila-Paris 1,750,000.00
Excess baggage - Paris-Manila 1,400,000.00 1,400,000.00
Cargo - Paris-Manila 1,800,000.00 1,800,000.00
Excess baggage - Manila-London-Athens 1,500,000.00 500,000.00
Excess baggage - Athens-London-Manila 1,700,000.00 1,700,000.00
Total 34,550,000.00 17,600,000.00
Tax rate
Tax
Requirement No. 2
Only cargo will be taxable
Taxable amount
Tax rate
Tax
RULE:
1. Without Reciprociy
> 2.5% of Gross Ph Billings on Passeners, Excess Baggage, and cargoes from Ph to Abroad
2. With Reciprocity
> 2.5% of Gross Ph Billings on Cargoes only
Taxable
Pass & Ex Bag Cargo Total
3,000,000.00 3,000,000.00 Manila-London is taxable
1,200,000.00 1,200,000.00 Manila-London is taxable
3,000,000.00 3,000,000.00 Entirely taxable since the same airline
- -
3,150,000.00 3,150,000.00 Only Himpapawid leg is taxable
- -
1,000,000.00 1,000,000.00
1,550,000.00 1,550,000.00
- -
- -
1,300,000.00 1,300,000.00
1,750,000.00 1,750,000.00
- -
- -
1,000,000.00 1,000,000.00
- -
13,650,000.00 3,300,000.00 16,950,000.00
2.50%
423,750.00
3,300,000.00
2.50%
82,500.00
ACCTAX1
Problem 82 – Income subject to final taxes; domestic corporations; resident foreign corporations

If Domestic Corp If Resident For Corp
a. Interest income 60,000.00 60,000.00

Tax rate 20% 20%
b. Interest income 30,000.00 30,000.00

Tax rate 15.0% 15.0%
c. Interest income 400,000.00 400,000.00

Tax rate 20% 20%
d. Interest income 900,000.00 900,000.00

Tax rate 20% 20%
e. Interest income 1,000,000.00 1,000,000.00

Tax rate 20% 20%
f. Rental income 50,000.00 50,000.00

Tax rate 20% 20%
Dividend income 85,000.00 85,000.00

Tax rate
Gain on sale of shares 65,000.00 65,000.00

Income tax exempt
g. Dividend income 100,000.00 100,000.00

Tax rate
h. Dividend income 80,000.00 80,000.00

Tax rate 30% Exempt
RCIT/MCIT 24,000.00
i. Gain from sale of sales 1,250,000.00 1,250,000.00

Tax on 100,000.00 5,000.00 5,000.00
1,150,000.00 115,000.00 115,000.00
CGT 120,000.00 120,000.00
j. SP/FMV (higher) 6,000,000.00 6,000,000.00
CGT rate 6% 6%
CGT 360,000.00 360,000.00
k. Royalty income 1,500,000.00 1,500,000.00

Tax rate 20% 20%
l. Franchise fee 1,000,000.00 1,000,000.00

Tax rate 30% 30%
RCIT/MCIT 300,000.00 300,000.00
nt For Corp
Taxable as income from trust fund.
Tax exempt
Although income from trust fund,
since tax exempt, no longer
subject to FWT.
Tax-exempt
if RCIT but should be incorporated in RCIT computation

Considered active income, hence, not subject to 20% FWT but to RCIT/MCIT.
if RCIT but should be incorporated in RCIT computation

ACCTAX1
Problem 83 – Taxation of non-resident foreign corporations
Taxable FWT rate FWT

Income payment
a. Consultancy services 300,000.00 30% 90,000.00
b. Royalties 500,000.00 30% 150,000.00 Even if services are ren
c. Cinematographic films 500,000.00 25% 125,000.00
d. Lease of shipping vessel 500,000.00 4.50% 22,500.00
e. Lease of equipment 500,000.00 7.50% 37,500.00
f. Interest on loan 500,000.00 20% 100,000.00
g. Dividend 500,000.00 15% 75,000.00 With tax sparing. Effec
h. Dividend 500,000.00 30% 150,000.00 No tax sparing
i. Dividend 500,000.00 15% 75,000.00
j. Capital gain 100,000.00 5% 5,000.00

400,000.00 10% 40,000.00
500,000.00 45,000.00
Even if services are rendered outside, payments are taxable since these are considered royalties
With tax sparing. Effectively, since exempt in South Africa, there was 100% tax credit.
No tax sparing
ACCTAX1
Problem 84 – Improperly accumulated earnings tax
Requirements 1 & 2
20A0 20A1
Net sales 4,200,000.00 8,000,000.00

Cost of sales 1,200,000.00 3,200,000.00
Gross income 3,000,000.00 4,800,000.00
Business expenses 800,000.00 1,000,000.00
Taxable income 2,200,000.00 3,800,000.00
RCIT rate 30% 30%
RCIT 660,000.00 1,140,000.00
Taxable income 2,200,000.00 3,800,000.00

Dividend from domestic corporation 200,000.00 420,000.00
Income subjected to 20% final tax, gross 150,000.00 250,000.00
RCIT paid (660,000.00) (1,140,000.00)
Final tax (30,000.00) (50,000.00)
Dividends paid (500,000.00)
Amount for reasonable needs (capital and RE approp) (1,500,000.00)

Improperly accumulated taxable income 360,000.00 2,780,000.00
Tax 10% 10%
IAET 36,000.00 278,000.00
Dividends paid
20A0 earnings 100,000.00
20A1 earnings 500,000.00
20A2 earnings
Beg RE 1,860,000.00
Earnings 1,860,000.00 3,280,000.00
Ending RE 1,860,000.00 4,540,000.00
Requirement No. 3
20A0 20A1
Net sales 4,200,000.00 8,000,000.00

Cost of sales 1,200,000.00 3,200,000.00
Gross income 3,000,000.00 4,800,000.00
Taxable income 2,200,000.00 3,800,000.00
RCIT rate 30% 30%
RCIT 660,000.00 1,140,000.00
Taxable income 2,200,000.00 3,800,000.00

RCIT paid (660,000.00) (1,140,000.00)
Final tax (30,000.00) (50,000.00)
Amount for reasonable needs (capital and RE approp) (1,500,000.00) (340,000.00)

Improperly accumulated taxable income 360,000.00 2,440,000.00
Tax 10% 10%
IAET 36,000.00 244,000.00
Requirement No. 4
20A0 20A1
Net sales 4,200,000.00 8,000,000.00

Cost of sales 1,200,000.00 3,200,000.00
Gross income 3,000,000.00 4,800,000.00
Taxable income 2,200,000.00 3,800,000.00
RCIT rate 30% 30%
RCIT 660,000.00 1,140,000.00
Taxable income 2,200,000.00 3,800,000.00

RCIT paid (660,000.00) (1,140,000.00)
Final tax (30,000.00) (50,000.00)
Amount for reasonable needs (capital and RE approp) (1,500,000.00) (2,740,000.00)

Improperly accumulated taxable income 360,000.00 40,000.00
Tax 10% 10%
IAET 36,000.00 4,000.00
Dividends paid
20A0 earnings 100,000.00
20A1 earnings 500,000.00
20A2 earnings
Beg RE 1,860,000.00
Earnings 1,860,000.00 3,280,000.00
Ending RE 1,860,000.00 4,540,000.00
Appropriated retained earnings 3,000,000.00

Absorbed by prior year accumulation (260,000.00)
Balance appropriated 2,740,000.00
Accumulated earnings for 20A1 1,860,000.00

Capital stock (1,500,000.00)
Excess earnings 360,000.00
Dividend declared and paid (100,000.00)
Excess earnings 260,000.00 to partly absorb appropriation
20A2
12,000,000.00
4,500,000.00
7,500,000.00 NO MCIT!!!!
1,500,000.00
6,000,000.00
30%
1,800,000.00
6,000,000.00
500,000.00
300,000.00
(1,800,000.00)
(60,000.00)
(1,500,000.00)

10%
1,500,000.00
4,540,000.00
4,940,000.00
(1,500,000.00)
7,980,000.00
20A2
12,000,000.00
4,500,000.00
7,500,000.00
1,500,000.00
6,000,000.00
30%
1,800,000.00
6,000,000.00
500,000.00
300,000.00
(1,800,000.00)
(60,000.00)
(1,500,000.00)
<--- idk how that's solved :/

3,440,000.00
10%
344,000.00
20A2
12,000,000.00
4,500,000.00
7,500,000.00
1,500,000.00
6,000,000.00
30%
1,800,000.00
6,000,000.00
500,000.00
300,000.00
(1,800,000.00)
(60,000.00)
(1,500,000.00)
3,440,000.00
10%
344,000.00
1,500,000.00
4,540,000.00
4,940,000.00
(1,500,000.00)
7,980,000.00
3,000,000.00
3,000,000.00
y absorb appropriation
ACCTAX1
Problem 85 – Taxation of partnership and individual partners; itemized deduction and OSD
Requirement No. 1
None, since GPP (0% rate)

Partnership Mr. Sumakwel
Gross revenues 6,000,000.00
Cost of services (1,200,000.00)
Share in partnership income 2,000,000.00
Gross revenues 800,000.00
Cost of services (200,000.00)
Taxable income before exemption - personal 500,000.00
Tax on 490,000.00
1,600,000.00
Total tax Liability 2,090,000.00

Business expenses (1,920,000.00)
Cost of services
Tax on 130,000.00
336,000.00
Total tax 466,000.00

RCIT rate 30%
RCIT 1,200,000.00
Income after tax 2,800,000.00

Final tax rate on dividend 10%
Final tax on dividend 140,000.00

Cost of services (200,000.00)
Base 30,000.00
Excess 25,000.00
Taxes on dividends 140,000.00
Mr. Makatunaw
2,000,000.00
900,000.00
(120,000.00)
780,000.00
(80,000.00)
700,000.00
2,700,000.00
490,000.00
224,000.00
714,000.00
Mr. Makatunaw
Partnership, OSD
1,440,000.00
900,000.00
(120,000.00)
780,000.00
(80,000.00) Sumakwel, OSD; Makatunaw, itemized
700,000.00
2,140,000.00
490,000.00
44,800.00
534,800.00
Mr. Makatunaw
1,400,000.00
10%
140,000.00
900,000.00
(120,000.00)
780,000.00
(80,000.00)
700,000.00
30,000.00
75,000.00
105,000.00
140,000.00
245,000.00
ACCTAX1
Problem 86 – Taxation of estate and beneficiaries
Requirement No. 1

Expenses (500,000.00)
Income distribution (600,000.00)
Taxable Income 1,900,000.00
Excess Over (800,000.00)
Excess 1,100,000.00
Rate 30%
Subtotal 330,000.00
Tax On 130,000.00 <-- Above 800,000 to P2,000,000 bracket
Income tax liability 460,000.00
Requirement No. 2
Gross income
Income distribution 600,000.00
Personal income 500,000.00
Personal expense (100,000.00)
Excess Over (800,000.00)
Excess Over 200,000.00
Rate 30%
Subtotal 60,000.00
Tax on 130,000.00 <-- Above 800,000 to P2,000,000 bracket
00,000 bracket
00,000 bracket
ACCTAX1
Problem 87 – Taxation of trusts

Trust A Trust B
Gross income 780,000.00 890,000.00
Expenses (250,000.00) (350,000.00)
Income distribution (100,000.00) (80,000.00)
Taxable income before exemption 430,000.00 460,000.00
Tax on 400,000.00 30,000.00 30,000.00

Excess 7,500.00 15,000.00
Total 37,500.00 45,000.00
Tax on 800,000.00
Excess
Total
Allocated tax based on taxable income before exemption 75,853.93 81,146.07
Tax paid 37,500.00 45,000.00
Tax still due 38,353.93 36,146.07
Requirement No. 3
Income received
Trust A 100,000.00
Trust B 80,000.00
Total 180,000.00
OSD 72,000.00
Taxable income before exemption 108,000.00
Tax on - -
Excess -
Total -
Consolidate
1,670,000.00
(600,000.00)
(180,000.00)
890,000.00
130,000.00
27,000.00
157,000.00
157,000.00
82,500.00
74,500.00
ACCTAX1
Problem 88 – Cash basis

Cash sales during the year 400,000.00
Collections of 20A1 sales on account 175,000.00
Total sales
Cash purchases 100,000.00
Payments for 20A1 purchases on account 70,000.00
Payments for 20A0 purchases on account 50,000.00
Cost of sales
Gross income
Cash expenses 130,000.00
Payments for 20A1 expenses on account 80,000.00
Payments for 20A0 expenses on account 60,000.00
Total expenses
Taxable Income
Tax on 250,000.00
Excess
Total

Cash sales during the year 400,000.00
Total sales
OSD
Taxable income
Tax on 400,000.00
Excess
Total
825,000.00
220,000.00
605,000.00
270,000.00
335,000.00
-
17,000.00
17,000.00
825,000.00
(330,000.00)
495,000.00
30,000.00
23,750.00
53,750.00
ACCTAX1
Problem 89 – Hybrid method
Requirement Nos. 1 & 2 Cash Accrual

Trading Manufacturing
Sales on account 370,000.00
Cash sales during the year 400,000.00 350,000.00
Purchases on account (120,000.00)

Cash purchases (90,000.00) (100,000.00)
Payments for 20A1 purchases on account (80,000.00)
Payments for 20A0 purchases on account (75,000.00)
Expenses on account (220,000.00)
Cash expenses (170,000.00) (175,000.00)
Payments for 20A1 expenses on account (150,000.00)
Payments for 20A0 expenses on account (120,000.00)
Taxable income before exemptions 115,000.00 105,000.00
Tax on -
Excess 0%
Tax
Requirement Nos. 3 & 4 Cash Accrual

Trading Manufacturing
Sales on account 370,000.00
Cash sales during the year 400,000.00 350,000.00
Total sales 800,000.00 720,000.00
OSD (320,000.00) (288,000.00)
Taxable income before exemptions 480,000.00 432,000.00
Tax on 800,000.00
112,000.00 30%
Tax
Total
370,000.00
750,000.00
180,000.00
220,000.00
-
(120,000.00)
(190,000.00)
(80,000.00)
(75,000.00)
(220,000.00)
(345,000.00)
(150,000.00)
(120,000.00)
220,000.00
-
-
-
Total
370,000.00
750,000.00
180,000.00
220,000.00
1,520,000.00
(608,000.00)
912,000.00
130,000.00
33,600.00
163,600.00
ACCTAX1
Problem 90 – Farming: cash or accrual method
Sales of livestock and farm products raised
Sales of livestock and farm products purchased 600,000.00

Cost of livestock and farm products purchased and sold (400,000.00)
Gain on sale of farm equipment

Proceeds from crop insurance
Gross income
Deductions
Cost of raising livestock and farm products 900,000.00
Cash expenses in 20A1 paid in 20A1 300,000.00
Cash expenses in 20A0 paid in 20A1 250,000.00
Taxable income
Tax on 400,000.00
200,000.00
Total

Sales of livestock and farm products raised
Cost of raising livestock and farm products paid in 20A1
Gross Income
Sales of livestocj and farm products purchased
Inventory of livestock and farm products, January 1 100,000.00
Cost of livestock and farm products purchased and sold 400,000.00
Inventory of livestock and farm products, December 31 (130,000.00)
Cost of goods sold
Gross income
Gain on sale of farm equipment
Procees from crop insurance
Cash expenses paid in 20A1 for current year rxpenses
Exoenses icurred in 20A1 but not yet paid
Taxable income
Tax on 400,000.00
280,000.00
Total
1,700,000.00
200,000.00
50,000.00
100,000.00
2,050,000.00
1,450,000.00
600,000.00
30,000.00
50,000.00
80,000.00
1,700,000.00
(900,000.00)
800,000.00
600,000.00
(370,000.00)
230,000.00
50,000.00
100,000.00
(300,000.00)
(200,000.00)
680,000.00
30,000.00
70,000.00
100,000.00
ACCTAX1
Problem 91 – Real property: Deferred payment basis, installment method
March 1, 20A1 July 1, 20A1 Sep 1, 20A1

Unit A Unit B Unit C
Initial payments
Downpayment 100,000.00 200,000.00 250,000.00
Mortgage assumed
Cost basis
Excess - - -
Monthly installment 100,000.00 125,000.00 150,000.00
No. of months 9.00 5.00 3.00
Total installments 900,000.00 625,000.00 450,000.00
Initial payments (B8+B14) 1,000,000.00 825,000.00 700,000.00
Selling price 2,500,000.00 3,200,000.00 4,000,000.00
Cost 1,000,000.00 1,200,000.00 1,800,000.00
Gross income 1,500,000.00 2,000,000.00 2,200,000.00
Initial payments percentage (B15/B18) 40.00% 25.78% 17.50%
Deferred Deferred Deferred or Inst
Selling price
Less: Mortgage assumed
Balance
Add: Excess mortgage over cost
Contract price

Gross Profit 1,500,000.00 2,000,000.00 2,200,000.00
Divided by: contract price 2,500,000.00 3,200,000.00 4,000,000.00
Gross Profit Ratio 0.60 0.63 0.55
Multiply: Installment Payments Receiv 1,000,000.00 825,000.00 700,000.00
Total - - 385000.00
March 1, 20A1 July 1, 20A1 Sept. 1, 20A1

Gross Income 1,500,000.00 2,000,000.00 385,000.00
Less: Deductions
Taxable Income
RCIT rate
RCIT
Gross income
MCIT rate
MCIT
Income tax iability

Gross Profit 2,500,000.00 3,200,000.00 4,000,000.00
Cost (1,000,000.00) (1,200,000.00) (1,800,000.00)
Gross Profit 1,500,000.00 2,000,000.00 2,200,000.00
Less: Deductions
Taxable Income
RCIT rate
RCIT
Gross income
MCIT rate
MCIT

Nov 1, 20A1 Dec 1, 20A1
Land A Land B
130,000.00 250,000.00
600,000.00 400,000.00
500,000.00 480,000.00
100,000.00
20,000.00 10,000.00
1.00 1.00
20,000.00 10,000.00
250,000.00 260,000.00
1,250,000.00 1,000,000.00
500,000.00 480,000.00
750,000.00 520,000.00
20.00% 26.00% Sale of real property - persons who sell or otherwise dispose of
Deferred or Inst Deferred real property on installment plan are also allowed to use the installment
1,250,000.00 1,000,000.00 method to report the gain on the sale subject to one condition:
600,000.00 400,000.00 THAT THE INITIAL PAYMENT MUST NOT EXCEED 25% OF THE SELLING
650,000.00 600,000.00 PRICE
100,000.00 -
750,000.00 600,000.00
Land A Land B
750,000.00 520,000.00
750,000.00 600,000.00
1.00 0.87
250,000.00 260,000.00
250000.00 -
Nov. 1, 20A1 Dec. 1, 20A1

250,000.00 520,000.00 4,655,000.00
(1,200,000.00)
3,455,000.00
30%
1,036,500.00
4,655,000.00
2%
93,100.00
1,036,500.00
Land A Land B
1,250,000.00 1,000,000.00
(500,000.00) (480,000.00)
750,000.00 520,000.00 6,970,000.00
(1,200,000.00)
5,770,000.00
30%
1,731,000.00
6,970,000.00
2%
139,400.00
1,731,000.00
ho sell or otherwise dispose of
also allowed to use the installment
sale subject to one condition:
OT EXCEED 25% OF THE SELLING
CE
ACCTAX1
Problem 92 – Dealer of personal property: Deferred payment; installment method

Car A Car B Car C
Date of sale 1-Feb 1-Apr 1-Jun
Selling price 1,200,000.00 1,500,000.00 1,700,000.00
Cost 400,000.00 600,000.00 750,000.00
Gross income 800,000.00 900,000.00 950,000.00
Downpayment 200,000.00 300,000.00 500,000.00
No. of months 10.00 8.00 6.00
Initial payments 400,000.00 460,000.00 620,000.00
Initial payment percentage (C14/C17) 33.33% 30.67% 36.47%
Installment method gross income 266,666.67 276,000.00 346,470.59

Deductions
Taxable income
RCIT

Car A Car B Car C
Date of sale 1-Feb 1-Apr 1-Jun
Selling price 1,200,000.00 1,500,000.00 1,700,000.00
Cost 400,000.00 600,000.00 750,000.00
Gross income 800,000.00 900,000.00 950,000.00
Gross income
Deductions
Taxable income
RCIT
1 Cars
Selling price
Cost
GP
Car D Car E Total
1-Sep 1-Dec Downpayment
1,800,000.00 2,000,000.00 Installment
800,000.00 1,100,000.00 Initial payment
1,000,000.00 900,000.00 4,550,000.00
300,000.00 500,000.00 Precentage test
30,000.00 30,000.00
3.00 - Taxable income
90,000.00 -
390,000.00 500,000.00
21.67% 25.00%
216,666.67 225,000.00 1,330,803.92

500,000.00
830,803.92
249,241.18
Car D Car E
1-Sep 1-Dec
1,800,000.00 2,000,000.00
800,000.00 1,100,000.00
1,000,000.00 900,000.00
4,550,000.00
500,000.00
4,050,000.00
1,215,000.00
A B C D E
1,200.00 1,500.00 1,700.00 1,800.00 2,000.00
(400.00) (600.00) (750.00) (800.00) (1,100.00)
800.00 900.00 950.00 1,000.00 900.00
200.00 300.00 500.00 300.00 500.00

200.00 160.00 120.00 90.00 0.00
400.00 460.00 620.00 390.00 500.00
33.33% 30.67% 36.47% 21.67% 25.00%
266.67 276.00 346.47 216.67 225.00 1,330.80

-500
830.80
249.2412
4,550.00
-500
4,050.00
1215
ACCTAX1
Problem 93 – Construction, percentage of completion

20A1 20A2 20A3
Contract Price 6,000,000.00 6,000,000.00 6,000,000.00
% of completion 10% 60% 100%
Cumulative gross revenues 600,000.00 3,600,000.00 6,000,000.00
Revenues declared PY - 600,000.00 3,600,000.00
Gross revenues for the year 600,000.00 3,000,000.00 2,400,000.00
Costs incurred to date 350,000.00 2,500,000.00 4,250,000.00

Costs declared PY - (350,000.00) (2,500,000.00)
Costs incurred for the year 350,000.00 2,150,000.00 1,750,000.00
Gross income 250,000.00 850,000.00 650,000.00

Deductions 350,000.00 (400,000.00) 450,000.00
NOLCO (100,000.00)
Taxable income (100,000.00) 350,000.00 200,000.00
RCIT 105,000.00 60,000.00

MCIT 5,000.00 17,000.00 13,000.00
Income tax liability 5,000.00 105,000.00 60,000.00

Less: Excess MCIT (5,000.00)
Tax still due 5,000.00 100,000.00 60,000.00
1
Selling price
percentage completed
Percentage earned
Cost incurred to date
Earned to date
Past records
Income
Opex
Income
NOLCO
Taxable income
RCIT
MCIT
Tax
Requirement No. 1
Requirement No. 2
20A1 20A2 20A3
6,000.00 6,000.00 6,000.00
10% 60% 100%
600.00 3,600.00 6,000.00
(350.00) (2,500.00) (4,250.00)
250.00 1,100.00 1,750.00
0.00 (250.00) (1,100.00)
250.00 850.00 650.00
(350.00) (400.00) (450.00)
(100.00) 450.00 200.00
0.00 (100.00) 0.00
0.00 350.00 200.00
0.00 105.00 60.00
5.00 17.00 13.00
5.00 100.00 60.00

ACCTAX1
Problem 94 – Inventory method, change in accounting method

Unit price/cost Units Total
Sales
Feb 1, 20A1 400.00 120.00 48,000.00
July 1, 20A1 800.00 130.00 104,000.00
December 1, 20A1 500.00 135.00 67,500.00
Total 1,700.00
Cost of sales
January 1, 20A1 600.00 80.00 48,000.00
March 15, 20A1 1,000.00 95.00 95,000.00
June 1, 20A1 100.00 100.00 10,000.00
Total 1,700.00
Gross income
OSD
Taxable income
RCIT
Ending inventory
June 1, 20A1 700.00 100.00 70,000.00
December 31, 20A1 200.00 105.00 21,000.00
900.00 91,000.00

Moving average
December 31, 20A2 900.00 101.11 91,000.00
Sales - March 1, 20A2 700.00 101.11 70,777.78
200.00 101.11 20,222.22
March 31, 20A2 900.00 110.00 99,000.00
1,100.00 108.38 119,222.22
May 31, 20A2 800.00 115.00 92,000.00
1,900.00 111.17 211,222.22
Sales - June 30, 20A2 1,000.00 111.17 111,169.59
900.00 111.17 100,052.63
October 31, 20A2 700.00 120.00 84,000.00
1,600.00 115.03 184,052.63
Sales - December 31, 20A2 500.00 115.03 57,516.45
1,100.00 115.03 126,536.18
Unit price/cost Units Total

Sales
March 1, 20A2 700.00 140.00 98,000.00
June 30, 20A2 1,000.00 145.00 145,000.00
December 31, 20A2 500.00 150.00 75,000.00
Total 2,200.00
Cost of sales
March 1, 20A2 700.00 101.11 70,777.78
June 30, 20A2 1,000.00 111.17 111,169.59
December 31, 20A2 500.00 115.03 57,516.45
Total 2,200.00
Gross income
OSD
Taxable income
RCIT
219,500.00
153,000.00
66,500.00
26,600.00
20,222.22
318,000.00
239,463.82
78,536.18
31,414.47
14,136.51 Requriement No. 4

ACCTAX1
Problem 95 – Accounting periods: Calendar or fiscal year, excess MCIT over RCIT, NOLCO
Requirement No. 1 December March March

20A3 20A4 20A5
Net sales 5,000,000.00 1,000,000.00 7,000,000.00
Cost of sales (1,800,000.00) (300,000.00) (2,500,000.00)
Gross income 3,200,000.00 700,000.00 4,500,000.00
Deductions (3,000,000.00) (400,000.00) (1,000,000.00)
Taxable income before NOLCO 200,000.00 300,000.00 3,500,000.00
NOLCO* (200,000.00) (300,000.00)
Taxable income - - 3,500,000.00
RCIT - - 1,050,000.00
NOLCO* aging Dec. 20A3 Mar. 20A4 Mar. 20A5

20A0 (250,000) (200,000.00)
20A1 (350,000) (300,000.00)
20A2
Requriement No. 2 December March March

20A3 20A4 20A5
Net sales 5,000,000.00 1,000,000.00 7,000,000.00
Cost of sales (1,800,000.00) (300,000.00) (2,500,000.00)
Gross income 3,200,000.00 700,000.00 4,500,000.00
Multiply: 2% 2% 2% 2%
MCIT 64,000.00 14,000.00 90,000.00
MCIT Credits Dec. 20A3 Mar. 20A4 Mar. 20A5

20A0 (30,000)
20A1 (20,000)
20A2 (10,000) (10,000.00)
20A3 (64,000) (64,000.00)
20A4 (14,000) (14,000.00)
Requirement No. 3
Income Tax (Higher bw RCIT & MCIT) 64,000.00 14,000.00 1,050,000.00
MCIT Credits
20A0
20A1
20A2 (10,000.00)
20A3 (64,000.00)
20A4 (14,000.00)
Tax Due 64,000.00 14,000.00 962,000.00
MCIT aging
20A0 30,000.00
20A1 20,000.00 (15,000.00)
20A2 10,000.00
20A3 -
Balance
50,000.00 Expired
50,000.00 Expired
Balance
20,000.00 Expired
20,000.00 Expired
-
-
-
(10,000.00)
-
ACCTAX1
Problem 96 – Individual compensation income earners; withholding tax; substituted filing
Situation A
Salary 13th/14th mo pay Non-taxable Total
January 15,000.00 15,000.00
15,000.00 15,000.00
February 15,000.00 15,000.00
15,000.00 15,000.00
March 15,000.00 15,000.00
15,000.00 15,000.00
April 15,000.00 15,000.00
15,000.00 15,000.00
May 15,000.00 15,000.00
15,000.00 15,000.00
June 15,000.00 15,000.00
15,000.00 15,000.00
July 15,000.00 15,000.00
15,000.00 15,000.00
August 15,000.00 15,000.00
15,000.00 15,000.00
September 15,000.00 15,000.00
15,000.00 15,000.00
October 15,000.00 15,000.00
15,000.00 60,000.00 (60,000.00) 15,000.00
November 15,000.00 30,000.00 (22,000.00) 23,000.00
15,000.00 15,000.00
December 15,000.00 30,000.00 45,000.00
15,000.00 15,000.00
Annualization Total 360,000.00 120,000.00 (82,000.00) 398,000.00
Less: Personal exemption (50,000.00)
Additional personal exemption (25,000.00)
Tax on 250,000.00 50,000.00

73,000.00 30% 21,900.00
323,000.00 71,900.00
Tax withheld - Jan to Dec 15 (76,266.15)
Tax refund (4,366.15)
Requirement No. 4 Not required to file. Qualifies for substituted filing.
Situation B
Salary 13th/14th mo pay Total
January 15,000.00 15,000.00
15,000.00 15,000.00
February 15,000.00 15,000.00
15,000.00 15,000.00
March 15,000.00 15,000.00
15,000.00 15,000.00
April 15,000.00 15,000.00
15,000.00 15,000.00
May 15,000.00 15,000.00
15,000.00 15,000.00
150,000.00 150,000.00
Annualization 13th month pay 12,500.00
Exclusion (12,500.00)
Total 150,000.00
Tax on 70,000.00 8,500.00

5,000.00 20% 1,000.00
75,000.00 9,500.00
Tax withheld - Jan to May 15 (22,686.57)
Tax refund (13,186.57)
June 20,000.00 20,000.00

20,000.00 20,000.00
July 20,000.00 20,000.00
20,000.00 20,000.00
August 20,000.00 20,000.00
20,000.00 20,000.00
September 20,000.00 20,000.00
20,000.00 20,000.00
October 20,000.00 20,000.00
20,000.00 20,000.00
November 20,000.00 23,333.33 (23,333.33) 20,000.00
20,000.00 20,000.00
December 20,000.00 20,000.00
20,000.00 50,000.00 70,000.00
Annualization Total 280,000.00 73,333.33 (23,333.33) 330,000.00
Previous employer - basic 150,000.00
Previous employer - 13th month pay 12,500.00
Total 515,833.33
Exclusion 13th month (35,833.33)
Other benefits - bonus (46,166.67) (82,000.00)
Taxable compensation income before exemptions 433,833.33
Less: Personal exemption (50,000.00)
Tax on 250,000.00 50,000.00

108,833.33 30% 32,650.00
358,833.33 82,650.00
Tax withheld - Previous employer (9,500.00)
Tax withheld - June to Dec 15 (52,269.49)
Withholding - Dec 31 20,880.51
Summary of withholding tax
Current employer 73,150.00
Previous employer 9,500.00
Total 82,650.00
Requirement No. 4 Required to file but no tax payment since last employer computed the
S1- Base Excess Tax on Base Tax on Excess Total
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 5,208.33 466.56 5,674.89
13,542.00 9,458.00 5,208.33 3,026.56 8,234.89
13,542.00 1,458.00 2,083.33 437.40 2,520.73
23,958.00 21,042.00 5,208.33 6,733.44 11,941.77
57,291.59 18,974.56 76,266.15
Requirement No. 3
S1- Base Excess Tax on Base Tax on Excess Total

13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00 2,083.33 437.40 2,520.73
13,542.00 1,458.00
18,749.97 3,936.60 22,686.57
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73

13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
13,542.00 6,458.00 2,083.33 1,937.40 4,020.73
27,083.29 25,186.20 52,269.49
Requirement No. 3
employer computed the taxes correctly.
Requirement No. 1 Requirement No.2
Deadline
Monthly WTW Filing Remittance
5,041.46 Feb 11-15 15-Feb
5,041.46 Mar 11-15 15-Mar
5,041.46 Apr 11-15 15-Apr
5,041.46 May 11-15 15-May
5,041.46 Jun 11-15 15-Jun
5,041.46 Jul 11-15 15-Jul
5,041.46 Aug 11-15 15-Aug
5,041.46 Sep 11-15 15-Sep
5,041.46 Oct 11-15 15-Oct
8,195.62 Nov 11-15 15-Nov
10,755.62 Dec 11-15 15-Dec
7,575.62 Jan 11-15 20-Jan
71,900.00
Requirement No. 1 Requirement No.2

Deadline
Monthly WTW Filing Remittance
5,041.46 Feb 11-15 15-Feb
5,041.46 Mar 11-15 15-Mar
5,041.46 Apr 11-15 15-Apr

5,041.46 May 11-15 15-May
(10,665.84) Jun 11-15 15-Jun
9,500.00
8,041.46 10-Jul 10-Jul
8,041.46 15-Aug 15-Aug
8,041.46 15-Sep 15-Sep
8,041.46 15-Oct 15-Oct
8,041.46 15-Nov 15-Nov
8,041.46 15-Dec 15-Dec
24,901.24 15-Jan 15-Jan
73,150.00
ACCTAX1
Problem 97 – Individual business income earners, mixed income; quarterly and annual; installment payment
Requirement No. 1
Mr. Dalandan
Salaries and allowances 300,000.00
13th month and others 40,000.00
Total 340,000.00
Exclusion
SSS, etc 9,800.00 49,800.00
Tax on 250,000.00
40,200.00 20% 8,040.00
290,200.00 8,040.00
Requirement No. 2
Mrs. Dalandan
Salaries and allowances 360,000.00
Total 410,000.00
Exclusion
SSS, etc 11,200.00 61,200.00
Tax on 250,000.00
98,800.00 20% 19,760.00
348,800.00 19,760.00
Requirement No. 3
First Second As of Second
Sales 50,000.00 90,000.00 140,000.00
Cost 25,000.00 50,000.00 75,000.00
Gross income 25,000.00 40,000.00 65,000.00
Deductions 10,000.00 15,000.00 25,000.00
Net income 15,000.00 25,000.00 40,000.00
Tax - -
Deadline May 15, 20A1 August 15, 20A1
Requirement No. 4
Consolidated
Employment 348,800.00
Business 76,000.00
Total 424,800.00
Tax on 400,000.00 30,000.00

24,800.00 25% 6,200.00
424,800.00 36,200.00
Tax withheld (19,760.00)
Tax paid -
Tax still due 16,440.00
Requirement No. 5
Total tax 36,200.00
50% 18,100.00
Tax paid/withheld 19,760.00 more than 50%, hence, 18,700 can be paid July 15, 20A1
View 1 View 2
April 15, 20A1 - 8,220.00
July 15, 20A1 16,440.00 8,220.00
Requirement No. 6
Hassle sis di kasali basta ITR 11 pages yan
Requirement No. 7
Nasa book girl go
Requirement No. 8
Consolidated
Employment 348,800.00
Business 290,000.00 8% 23,200.00
Total 638,800.00
Tax on 250,000.00
98,800.00 20% 19,760.00
348,800.00 42,960.00
Tax withheld (19,760.00)
Tax paid -
Tax still due 23,200.00
annual; installment payment
Third As of Third Fourth As of End of Yr

70,000.00 210,000.00 80,000.00 290,000.00
40,000.00 115,000.00 42,000.00 157,000.00
30,000.00 95,000.00 38,000.00 133,000.00
14,000.00 39,000.00 18,000.00 57,000.00
16,000.00 56,000.00 20,000.00 76,000.00
- -
October 15, 20A1 (Annual Return) April 15, 20A2

,700 can be paid July 15, 20A1
ACCTAX1
Problem 98 – Individuals: capital gains tax on sale of real property, shares

March 1, 20A1
Selling price 10,000.00 15.00
Cost 10,000.00 10.00
Gain
CGT rate
CGT
Deadline for filing
May 20, 20A1

Fair market value/Selling price (GAIN)
CGT rate
CGT
Deadline for filing
June 25, 20A1

Cost 15,000.00 12.00
Gain
CGT rate
CGT rate
Deadline for filing
Set. 8, 20A1
Cost 12,000.00 17.00
Gain
CGT rate
CGT
Deadline for filing
Nov. 18, 20A1

Fair market value/Selling price (GAIN)
CGT rate
CGT
Dealine for filing
CONDOLIDATED December 18, 20A1

CGT on shares only
March 1, 20A1
June 25, 20A1
Set. 8, 20A1
Total CGT
Deadline for filing
Requirement No. 3
ITR ulit sis haba
150,000.00
100,000.00
50,000.00
15%
7,500.00
March 31, 20A1
3,800,000.00
6%
228,000.00
April 19, 20A1
300,000.00
180,000.00
120,000.00
15%
18,000.00
July 25, 20A1
300,000.00
204,000.00
96,000.00
15%
14,400.00
October 8, 20A1
1,000,000.00
6%
60,000.00
December 18, 20A1
December 18, 20A1
7,500.00
18,000.00
14,400.00
39,900.00
April 15, 20A2
ACCTAX1
Problem 99 - Corporate income tax returns; excess MCIT, NOLCO; creditable withholding taxes
First Second Third

Quarter Quarter Quarter
Sales 500,000 765,000 920,000
Cost of sales (100,000) (175,000) (240,000)
Gross income from sales 400,000 590,000 680,000
Rent income 120,000
Gain on sale of fixed assets 45,000 45,000 180,000
Total gross income 445,000 635,000 980,000
Deductions
Taxes 14,675 29,350 44,025
Interest expense - - -
Salaries and bonuses 50,000 120,000 180,000
Depreciation 40,000 80,000 120,000
Bad debts 200,000
Casualty loss 100,000 100,000
Contributions 3,000 5,000 80,000
Other business expenses 30,456 65,700 110,893
Loss on sale of fixed assets 30,000 80,000 105,000
NOLCO 276,869 154,950 40,082
Total deductions 445,000 635,000 980,000
Taxable income - - -
Taxable income - - -
RCIT rate 30% 30% 30%
RCIT - - -
Gross income 445,000 635,000 980,000

MCIT rate 2% 2% 2%
MCIT 8,900 12,700 19,600
Income tax liability 8,900 12,700 19,600

Less: Income tax paid - - -
Creditable taxes carried ove 10,000 10,000 10,000
Taxes withheld 5,000 7,650 15,200
Excess MCIT over RCIT - - -
Total credits/payments 15,000 17,650 25,200
Income tax due (6,100) (4,950) (5,600)
Requirement No.3
Nothing can be claimed for refund since there is already income tax due (see annual column
All those that are creditable, were already credited.
Refundable until 2 years after payment.
Requirement No. 4
No excess tax credits to be creditable in the future (same with #3).
Although, if there is excess tax credits, there is no prescription/expiry.
It can be credited until fully utilized.
REFUND VS. TAX CREDIT

Every year that there is excess paid, you may choose to refund or to have it as tax credit.
E.g. for excess of 20A0 - refund; excess of 20A1 - tax credit; excess of 20A2 - refund.
However, in the example, if 20A1 is used as tax credit, and it was not fully utilized in 20A2, it
Requirement No. 5
ITR uli sis bye
ble withholding taxes
REMARKS
Annual Cumulative / as of
1,180,000
(325,000)
855,000
120,000 Actual collection of advance rental income
500,000
1,475,000
58,700 Local business tax paid quarterly

- No tax expense deductible
300,000
200,000
200,000 Write-off of accounts
100,000 Book value of casualty loss during May
150,000 Contributions are deductible in full
156,649
200,000 Incurred losses
109,651 Only to the extent of taxable income before NOLCO
1,475,000
- Requirement No. 1
-
30%
-
1,475,000
2%
29,500
29,500 Requirement No. 2

-
10,000 20A0 excess creditable taxes
17,800 Cumulative taxes withheld, current year
- If MCIT higher for the quarter, excess MCIT cannot be deducted
27,800
1,700 Requirement No. 2
tax due (see annual column).
or to have it as tax credit.

cess of 20A2 - refund.
s not fully utilized in 20A2, it continues to be tax credit -- it cannot be subsequently refunded.
ACCTAX1
Problem 100 – Timing of withholding, Top 20,000 corporations, expanded withholding tax
Nature Payment date Due date Quarter end

Purchase of goods March 15, 20A1 February 14, 20A1 March 31, 20A1
Repairs April 15, 20A1 April 30, 20A1 June 30, 20A1
Advance rentals April 1, 20A1 NA June 30, 20A1
Monthly rentals
April April 15, 20A1 April 30, 20A1 June 30, 20A1
May June 15, 20A1 May 30, 20A1 June 30, 20A1
June July 15, 20A1 June 30, 20A1 June 30, 20A1
July July 30, 20A1 July 30, 20A1 September 30, 20A1
August August 30, 20A1 August 30, 20A1 September 30, 20A1
September September 30, 20A1 September 30, 20A1 September 30, 20A1
October October 15, 20A1 October 30, 20A1 December 31, 20A1
Security services
January January 30, 20A1 January 30, 20A1 March 31, 20A1
February February 28, 20A1 February 28, 20A1 March 31, 20A1
March March 31, 20A1 March 31, 20A1 March 31, 20A1
May May 31, 20A1 May 31, 20A1 June 30, 20A1
June June 30, 20A1 June 30, 20A1 June 30, 20A1
November November 30, 20A1 November 30, 20A1 December 31, 20A1
December December 31, 20A1 December 31, 20A1 December 31, 20A1
Janitorial services
January January 30, 20A1 January 30, 20A1 March 31, 20A1
February February 28, 20A1 February 28, 20A1 March 31, 20A1
March March 31, 20A1 March 31, 20A1 March 31, 20A1
May May 31, 20A1 May 31, 20A1 June 30, 20A1
June June 30, 20A1 June 30, 20A1 June 30, 20A1
November November 30, 20A1 November 30, 20A1 December 31, 20A1
December January 5, 20A2 December 31, 20A1 December 31, 20A1

Amount EWT rate EWT
Purchase of goods 500,000.00 1% 5,000.00
Repairs 400,000.00 2% 8,000.00
Advance rentals 500,000.00 5% 25,000.00
Monthly rentals
April 100,000.00 5% 5,000.00
May 100,000.00 5% 5,000.00
June 100,000.00 5% 5,000.00
July 100,000.00 5% 5,000.00
August 100,000.00 5% 5,000.00
September 100,000.00 5% 5,000.00
October 100,000.00 5% 5,000.00
Security services
January 5,000.00 2% 100.00
February 5,000.00 2% 100.00
March 5,000.00 2% 100.00
April 5,000.00 2% 100.00
May 5,000.00 2% 100.00
June 5,000.00 2% 100.00
July 5,000.00 2% 100.00
August 5,000.00 2% 100.00
September 5,000.00 2% 100.00
October 5,000.00 2% 100.00
November 5,000.00 2% 100.00
December 5,000.00 2% 100.00
Janitorial services
January 22,000.00 2% 440.00
February 22,000.00 2% 440.00
March 22,000.00 2% 440.00
April 22,000.00 2% 440.00
May 22,000.00 2% 440.00
June 22,000.00 2% 440.00
July 22,000.00 2% 440.00
August 22,000.00 2% 440.00
September 22,000.00 2% 440.00
October 22,000.00 2% 440.00
November 22,000.00 2% 440.00
December 22,000.00 2% 440.00
Monthly EWT Purchase of goods Repairs Rentals

January
February 5,000.00
March
April 8,000.00 30,000.00
May 5,000.00
June 5,000.00
July 5,000.00
August 5,000.00
September 5,000.00
October 5,000.00
November
December
Requirement No. 1
Timing 1% Purchase of goods
February 14, 20A1 2% Purchase of services
April 15, 20A1
April 1, 20A1
April 15, 20A1

May 30, 20A1
June 30, 20A1
July 30, 20A1
August 30, 20A1
September 30, 20A1
October 15, 20A1
January 30, 20A1

February 28, 20A1
March 31, 20A1
April 30, 20A1
May 31, 20A1
June 30, 20A1
July 31, 20A1
August 31, 20A1
September 30, 20A1
October 30, 20A1
November 30, 20A1
December 31, 20A1
January 30, 20A1

February 28, 20A1
March 31, 20A1
April 30, 20A1
May 31, 20A1
June 30, 20A1
July 31, 20A1
August 31, 20A1
September 30, 20A1
October 30, 20A1
November 30, 20A1
December 31, 20A1
EFPS
Security services Janitorial Total EWT Filing deadline Payment deadline
100.00 440.00 540.00 30-Apr Feb 11 to 15
100.00 440.00 5,540.00 30-Apr Mar 11 to 15
100.00 440.00 540.00 30-Apr 30-Apr
100.00 440.00 38,540.00 31-Jul 31-Jul
100.00 440.00 5,540.00 31-Jul 31-Jul
100.00 440.00 5,540.00 31-Jul 31-Jul
100.00 440.00 5,540.00 31-Oct 31-Oct
100.00 440.00 5,540.00 31-Oct 31-Oct
100.00 440.00 5,540.00 31-Oct 31-Oct
100.00 440.00 5,540.00 31-Jan 31-Jan
100.00 440.00 540.00 31-Jan 31-Jan
100.00 440.00 540.00 31-Jan 31-Jan
Depends on industry
Requirement No. 4
EFPS
Total EWT Filing deadline Payment deadline
540.00 Feb 11 to 15 15-Feb
5,540.00 Mar 11 to 15 15-Mar
540.00 Apr 11 to 15 15-Ar
38,540.00 May 11 to 15 15-May
5,540.00 June 11 to 15 15-Jun
5,540.00 Jul 11 to 15 15-Jul
5,540.00 Aug 11 to 15 15-Aug
5,540.00 Sept 11 to 15 15-Sep
5,540.00 Oct 11 to 15 15-Oct
5,540.00 Nov 11 to 15 15-Nov
540.00 Dec 11 to 15 15-Dec
540.00 Jan 11 to 15 20-Jan
Manual
10-Feb 10-Feb
10-Mar 10-Mar
30-Apr 30-Apr
31-Jul 31-Jul
31-Jul 31-Jul
31-Jul 31-Jul
31-Oct 31-Oct
31-Oct 31-Oct
31-Oct 31-Oct
31-Jan 31-Jan
31-Jan 31-Jan
31-Jan 31-Jan
Manual
10-Feb 10-Feb
10-Mar 10-Mar
10-Apr 10-Apr
10-May 10-May
10-Jun 10-Jun
10-Jul 10-Jul
10-Aug 10-Aug
10-Sep 10-Sep
10-Oct 10-Oct
10-Nov 10-Nov
10-Dec 10-Dec
15-Jan 15-Jan
ACCTAX1
Problem 101 – EWT on reimbursements
Note: Discuss the rules on reimbursements.
Requirement No. 1
Kagandahan Brokerage Fee Warehouse RentalsTotal
Amount 5,000.00 3,500.00 8,500.00
EWT rate 15% 15% 15%
EWT 750.00 525.00 1,275.00
Requirement No. 2
Liwanag
Warehouse Rentals 3,500.00
EWT rate 5%
EWT 175.00
Requirement No. 3
Kagandahan Brokerage Fee Warehouse RentalsTotal
Amount 5,000.00 3,500.00 8,500.00
EWT rate 10% 10% 10%
EWT 500.00 350.00 850.00
Trucking and delivery cost 4,000.00

EWT rate 2%
EWT 80.00
Kagandahan Principal
Liwanag Agent/forwarder
revenue regulation 6-2001

income payments to certain brokers and agents
*Paid to Liwanag
Customs processing fee and Duties and taxes are for the benefit of the forwarder, thus,
are for the benefit of the forwarder, thus, not reimbursible
ACCTAX1
Problem 102 – EWT on real estate sales
Note: FWT covered under income payments to non-residents and local payments subject to final taxes.
WTW covered by Problem 95. However, discuss the payment deadlines for FWT.
Corporation Individual Corporation

March 1, 20A1 July 1, 20A1 Sep 1, 20A1
Initial payments
Downpayment 100,000.00 200,000.00 250,000.00
No. of months 9.00 5.00 3.00
Initial payments 1,000,000.00 825,000.00 700,000.00
Selling price 2,500,000.00 3,200,000.00 4,000,000.00
Cost 1,000,000.00 1,200,000.00 1,800,000.00
Gross income 1,500,000.00 2,000,000.00 2,200,000.00
Initial payments percentage 40.00% 25.78% 17.50%
Deferred Deferred Deferred or Inst
Date of sale Selling price Downpayment
Corp March 1, 20A1 2,500,000.00 100,000.00

Ind July 1, 20A1 3,200,000.00 200,000.00
Corp September 1, 20A1 4,000,000.00 250,000.00
Ind November 2, 20A1 1,250,000.00 250,000.00
Total
to final taxes.
Individual
Nov 1, 20A1
SP is 500k to 2M
250,000.00 above 2M
20,000.00
1.00 Revenue Regulation 6-2001
20,000.00
270,000.00 a Indiv, not engaged in T or B individual, more than 25%, withhold on the f
1,250,000.00 individual, not more than 25% withhold ONL
500,000.00
750,000.00 b Engaged in T or B, corp or corporation, more than 25%, withhold on the
21.60% otherwise corporation not more than 25%, withhold on
Deferred or Inst
Installment No. of months Total installment Initial payments % of IP

(DP + Total installment) (Initial pmnts/SP)
100,000.00 9.00 900,000.00 1,000,000.00 40.00%
125,000.00 5.00 625,000.00 825,000.00 25.78%
150,000.00 3.00 450,000.00 700,000.00 17.50%
20,000.00 1.00 20,000.00 270,000.00 21.60%
3%
5%
e Regulation 6-2001
al, more than 25%, withhold on the first installment

al, not more than 25% withhold ONLY on the LAST installment
tion, more than 25%, withhold on the first installment

tion not more than 25%, withhold on EVERY installment
Tax Base EWT rate EWT
2,500,000.00 5% 125,000.00 Corp, presumed to be engaged in T or B

3,200,000.00 5% 160,000.00 presumed NOT engaged in T or B
700,000.00 5% 35,000.00
- 3% -
320,000.00
ACCTAX1
Problem 103 – Income tax holiday; commencement
Requirement No. 1 Jan 1 to April 30 May 1 to Dec 31

ITH
Sales 100,000.00 8,000,000.00
Scrap sales 0.00 200,000.00
Gain on sale of fixed asset 0.00 0.00
Foreign exchange gain 60,000.00 294,000.00
Cost of goods sold (20,000.00) (3,200,000.00)
Gross income 140,000.00 5,294,000.00
Interest expense 393,400.00 567,000.00

Salaries and bonuses 300,000.00 2,500,000.00
Depreciation 400,000.00 1,600,000.00
Other business expenses 30,000.00 65,000.00
Foreign exchange loss 50,000.00 264,000.00
Deductions (1,173,400.00) (4,996,000.00)
Taxable income (1,033,400.00) 298,000.00
Taxable Income (Jan 1 - Apr 30)

Taxable Income (May 1 -Dec 31; Non-ITH)
Total Taxable Income Subject to Income Tax
Requirement No. 2
Taxable income covered by ITH
Requirement No. 3
Total Taxable Income Subject to Income Tax
Rate
Interest Income (Jan 1 - Apr 30)
Interest Income (May 1 - Dec 31)
Total Interest Income
FWT rat
OR
Income tax
FWT on interest income
Income tax liability
Requirement No. 4
Income tax savings
May 1 to Dec 31 Total
Non-ITH
0.00 8,100,000.00
100,000.00 300,000.00
1,250,000.00 1,250,000.00
0.00 354,000.00
0.00 (3,220,000.00)
1,350,000.00 6,784,000.00
0.00 960,400.00
0.00 2,800,000.00
0.00 2,000,000.00
0.00 95,000.00
0.00 314,000.00
0.00 (6,169,400.00)
1,350,000.00 614,600.00
(1,033,400.00)
1,350,000.00
316,600.00
298,000.00
316,600.00
0.30 94,980.00
20,000.00
100,000.00
120,000.00
0.20 24,000.00
118,980.00
94,980.00
24,000.00
118,980.00
89,400.00
ACCTAX1
Problem 104 – Expiration of income tax holiday
Requirement No. 1
Sales 5,000,000.00
Cost of Sales (1,500,000.00)
Gross Profit 3,500,000.00
Interest Income
Dividend Income
Scrap
January to September 100,000.00
October to December 200,000.00 300,000.00
Gain on Sale of Fixed Assets
January to September 350,000.00
October to December 250,000.00 600,000.00
FOREX Gain (320000*65%) 208,000.00
Deductible Interest Expense
Interest Expense 300,000.00
Non-deductible Interest Expense (28,875.00) (271,125.00)
Salaries and Bonuses (1,800,000.00)
Depreciation (600,000.00)
Pension Expense (300,000.00)
Other Business Expenses (85,000.00)
Requirement No. 2
Sales 12,000,000.00
Cost of Sales (4,000,000.00)
Gross Profit 8,000,000.00
Interest Income
Dividend Income
Scrap 300,000.00
Gain on sale of fixed assets
FOREX Gain 292,500.00
Deductible Interest Expense
Interest Expense 700,000.00
Non-deductible Interest Expense {[100,000/(1-.2)]x (41,250.00) (658,750.00)
Salaries and Bonuses (3,900,000.00)
Depreciation (1,800,000.00)
Accounts written-off (500,000.00)
Pension Expense (1,200,000 x 9/12) (900,000.00)
Other Business Expenses (230,000.00)
Requirement No. 3
MCIT rate 0.02
MCIT 92,160.00

RCIT Rate 0.30
TRCIT 465,562.50
Regular Income tax 465,562.50

Final tax on Interest Income
Gross interest income 202,500.00
Tax rate 0.20 40,500.00
Requirement No. 4
MCIT rate 0.02
MCIT 171,850.00

RCIT Rate 0.30
RCIT 181,125.00
ACCTAX1
Problem 105 - Multiple registrations; expansion
Requirement No. 1
Base 5,000.00
Produced 20,000.00
Ratio for expansion 0.25
New product Old Product

ITH ITH - 25%
Sales 12,000,000.00 5,000,000.00
Cost of sales (4,000,000.00) (750,000.00)
Deductions (2,000,000.00) (4,000,000.00)
Taxable income 6,000,000.00 250,000.00
Requirement No. 2
New Product
Old Product
Taxable income covered by ITH
Requirement No. 3
RCIT (750,000 x 30%)
MCIT (12,570,000 x 2%)
The higher
Requirement No. 4
RCIT (7,000,000 x 30%)
MCIT (25,000,000 x 2%)
The higher
Tax paid
Tax savings
Old Product Total
Non-ITH - 75%
15,000,000.00 32,000,000.00
(2,250,000.00) (7,000,000.00)
(12,000,000.00) (18,000,000.00)
750,000.00 7,000,000.00
6,000,000.00
250,000.00
6,250,000.00
225,000.00
255,000.00
255,000.00
2,100,000.00
500,000.00
2,100,000.00
(255,000.00)
1,845,000.00
ACCTAX1
Problem 106 - 5% gross income
Requirement Nos.1 & 2
Sales 15,000,000.00
Cost of sales
Raw materials 1,200,000.00
Indirect materials 500,000.00
Pension expense 400,000.00
Depreciation 1,000,000.00
Repairs and maintenance 300,000.00
Royalty fees 450,000.00
Subcontractor's fee 800,000.00
Rentals 650,000.00
Training 225,000.00 (7,605,000.00)
Scarp sales 562,500.00
Foreign exchange gain 175,000.00
GIT rate 5%
Gross income tax 406,625.00
Requirement No. 3
Interest income on loans 100,000.00
Scrap sales 187,500.00
Gain on sale of fixed assets 1,000,000.00
Foreign exchange gain 325,000.00
Requirement No. 4
RCIT (1,612,500 x 30%) 483,750.00
MCIT (1,612,500 x 2%) 32,250.00

BIR (3%) LGU (2%) Total
GIT 243,975.00 162,650.00 406,625.00
RCIT 483,750.00 0.00 483,750.00
Total 727,725.00 162,650.00 890,375.00
Tax Credit (112,500.00) 0.00 (112,500.00)
Tax Due 615,225.00 162,650.00 777,875.00
Requirement No. 7
Operating expenses
Supplies 300,000.00
Salaries and wages 420,000.00
Pension expense 100,000.00
Depreciation 375,000.00
Repairs and maintenance 125,000.00
Utilities 220,000.00
Rentals 180,000.00
Janitorial 160,000.00
Security 210,000.00
Non-deductible interest (16,500.00) (2,073,500.00)
Tax rate 30%
RCIT 1,817,700.00
MCIT 162,650.00
The higher 1,817,700.00
5% GIT (406,625.00)
Tax savings 1,411,075.00
Requirement No. 1
Requirement No. 2
ACCTAX1
Problem 107 - Multiple registrations
Product Line A Product Line B
Sales 10,000,000.00 12,000,000.00
Cost of sales (6,000,000.00) (6,800,000.00)
Operating expenses 0.00 (3,000,000.00)
Taxable income 4,000,000.00 2,200,000.00
Revenues subject to RCIT in previous year
Non-deductible inventory provisions 200,000.00 280,000.00
Non-deductible financial depreciation 800,000.00 1,000,000.00
Deductible tax depreciation (900,000.00) (1,200,000.00)
Non-deductible doubtful accounts 0.00 250,000.00
Non-deductible litigation loss 0.00 350,000.00
Advanced revenue collections 0.00 0.00
Requirement No. 1 Taxable net income 4,100,000.00 2,880,000.00
Rate of tax 5% 0%
Requirement No. 2 Income tax 205,000.00 0.00
Requirement No. 3 Taxable income subject to RCIT
Requirement No. 4 RCIT (2,020,000 x 30%)

MCIT [(1,920,000 - 300,000 + 400,000 + 280,000)*2%]
Requirement No. 5 RCIT

TaxableLiability Payable to BIR (205,000 x 3/5)
Total
Requirement No. 6 Tax liability payable to LGU
Requirement No. 7 Product line A

Inventory Provisions
Income before tax
Non-dedctible Depreciation
Deductible Depreciation
Doubtful Accounts
Taxable Income
Product Line B
Warehousing
Total Taxable Income
RCIT rate
RCIT
MCIT {[(2m+200k+800k-900k)+(2.2m+280k+1m-1.2m)+3m]*2%}
Higher bw RCIT and MCIT
Tax paid for 5% GIT
Tax Savings
Warehousing
3,000,000.00
(800,000.00)
(280,000.00)
1,920,000.00
(300,000.00)
0.00
0.00
0.00
0.00
0.00
400,000.00
2,020,000.00
30%
606,000.00
2,020,000.00
606,000.00
46,000.00
606,000.00
123,000.00
729,000.00
82,000.00
2,000,000.00
200,000.00
800,000.00
(900,000.00)
225,000.00
2,325,000.00
2,880,000.00
2,020,000.00
7,225,000.00
0.30
2,167,500.00
147,600.00
2,167,500.00
(205,000.00)
1,962,500.00
ACCTAX1
Problem 108 - Permanent establishment, subcontractor, business profits
Requirement No. 1 Rate FWT

Accounting Services 500,000.00 0.00 0.00
Management Services 700,000.00 0.30 210,000.00
Engingeering Services 400,000.00 0.00 0.00
Total FWT 210,000.00
Requirement No. 2 FWT Net Pay

Accounting Services 500,000.00 0.00 500,000.00
Management Services 700,000.00 210,000.00 910,000.00
Engineering Services 400,000.00 120,000.00 520,000.00
Total 1,600,000.00 330,000.00 1,930,000.00
ACCTAX1
Problem 109 - Permanent Establishment, royalties and service fees, grossing-up
Singapura Company
Requirement No. 1
License Fees paid 350,000.00
1 minus tax rate 0.75
Gross Amount 466,666.67
Withholding Tax Rate, non-resident corporation 0.25
Final withholding tax 116,666.67
Requirement No. 2
Withholding Tax (116,666.67)
Net Payment 350,000.00
Hapon Company
Requirement No. 1
Requirement No. 2
Franciscano Corporation
Requirement No. 1
Royalty Fees paid 420,000.00
Tax rate 0.10
Requirement No. 2
Royalty fees paid 420,000.00
Withholding Tax Paid (42,000.00)
Britana Corporation
Requirement No. 1
Withholding Tax Rate, non-resident corporation 0.30
Requirement No. 2
TOTAL
Requirement No. 1 - Total Wiholding Tax Liability
Singapura 116,666.67
Hapon 75,000.00
Franciscano 42,000.00
Britana 162,857.14
Requirement No. 2 - Total Net Payments

Singapura 350,000.00
Hapon 175,000.00
Franciscano 378,000.00
Britana 380,000.00
Final withholding tax 1,283,000.00
ACCTAX1
Problem 110 - Permanent establishment, interest and penalties, trade transactions
Country Loan FCE Local Currency Inerest/penalty Rate

United States 500,000.00 50.00 25,000,000.00 Interest 0.05
France 350,000.00 53.00 18,550,000.00 Interest 0.03
Hong Kong 5,000,000.00 6.00 30,000,000.00 Interest 0.04
Australia 300,000.00 40.00 12,000,000.00 Penalty 0.01
Czech Repulic 250,000.00 53.00 13,250,000.00 Penalty 0.02
Singapore 200,000.00 33.00 6,600,000.00 Interest 0.01
Requirement No. 1Requirement No. 2

Gross Payment FWT Net Payment
United States 1,250,000.00 187,500.00 1,062,500.00
France 556,500.00 83,475.00 473,025.00
Hong Kong 1,200,000.00 240,000.00 960,000.00
Australia 120,000.00 18,000.00 102,000.00
Czech Repulic 198,750.00 0.00 198,750.00
Singapore 66,000.00 9,900.00 56,100.00
TOTAL 3,391,250.00 538,875.00 2,852,375.00
Gross payment Tax Rate FWT
1,250,000.00 0.15 187,500.00
556,500.00 0.15 83,475.00
1,200,000.00 0.20 240,000.00
120,000.00 0.15 18,000.00
198,750.00 None 0.00
66,000.00 0.15 9,900.00
ACCTAX1
Problem 111 - Permanent establishment, dividend and branch profit, remittance
Requirement No. 1
Busilak Noruega
a. Dividend - 100% ownership 0.00 150,000.00
b. Dividend - 5% ownership 0.00 250,000.00
c. Branch remittance 0.00 150,000.00
d. Dividend - 100% ownership 0.00 0.00
e. Branch remittance 0.00 0.00
f. Dividend - subsidiary 150,000.00 0.00
Requirement No. 2
Busilak Noruega
a. Dividend - 100% ownership 850,000.00 0.00
b. Dividend - 5% ownership 750,000.00 0.00
c. Branch remittance 0.00 850,000.00
d. Dividend - 100% ownership 0.00 0.00
e. Branch remittance 0.00 0.00
f. Dividend - subsidiary 850,000.00 0.00
Nederland
0.00
0.00
0.00
100,000.00
100,000.00
0.00
Nederland
0.00
0.00
0.00
900,000.00
900,000.00
0.00
ACCTAX1
Problem 112 - Sale of shares, real property interest
Problem 113

ACCTAX1

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ACCTAX1

Problem 1 - Concept of income and when taxable

a. Requirement No. 1 (20A1)

Requirement No. 2 (20A1)

Properties received by Mabuhay Corporation

b. Requirement No. 1 (20A1)

Requirement No. 2 (20A1)

Note: Discuss the following:

Note: Discuss the following:

Masaya Banking Corporation

Net asset before condonation 300,000.00

Liabilities after condonation

Amount of loan 1,200,000.00

Net asset before condonation (1,410,000.00)

Liabilities after condonation

Amount of loan 1,200,000.00

Net asset before condonation (1,050,000.00)

Liabilities after condonation

Amount of loan 1,200,000.00

me is realized from condonation.

expense since properly liquidated.

e considered income (relatively small value) based on BIR DA-331-2000.

b. Repair services 48,000.00

c. Repair services 45,000.00

d. Annual salary 3,000,000.00

e. Annual salary 1,000,000.00

f. Annual salary 1,000,000.00 1,000,000.00

g. Face value of the note 50,000.00

h. Cancellation of debt as consideration for repair services 60,000.00

i. Condonation of debt is not an income since there is no consideration -

Fair market value of goods received

Cash compensation received

Cash compensation received

Living quarters and meals received

Cash compensation received

Not compensation since provided for the convenience of the employer.

Method 1 - FMV reported at the time of completion

20A2 until end of lease term

Method 2 - Spread over the lease term

20A2 until end of lease term

Method 1 - FMV reported at the time of completion

20A2 until 20A7

20A8 Rental income

Method 2 - Spread over the lease term

20A2 until 20A7

20A8 Rental income

Method 1 - FMV reported at the time of completion

20A2 until end of lease term

Method 2 - Spread over the lease term

Method 1 - FMV reported at the time of completion

20A2 until 20A7

20A8 Rental income

Method 2 - Spread over the lease term

20A8 Rental income

20A2 until 20A7

20A8 Rental income

d. Premium payments 15,000.00

Premiums returned 600,000.00 After 10th policy year

Policy dividend 30,000.00 20A1

Cash surrender value 150,000.00 20A1

Nature of payment Requirement No. 1 Requirement No. 2

a. Retirement pay 3,000,000.00

b. Retirement pay 3,000,000.00

c. Retirement pay 3,000,000.00