MIDTERM MOCKBOARD

ACCOUNTING 601-Integrated Course in Taxation

INSTRUCTION: In your answer sheet, shade the letter d. That the prescriptive period for the tax has
that corresponds to the best answer. elapsed.

1. Which of the following statements is not correct? 7. Which of the following business taxes serve more
a. The power to tax is inherent to the existence the regulatory functions of taxation?
of the government which could be exercised a. Value Added tax
even without its provision in the Constitution. b. Percentage tax (OPT)
b. Taxation is the strongest among the inherent c. Excise tax on production or importation
powers of the State and considered as an d. Sales tax
absolute power.
c. Constitutional tax provisions limit the exercise 8. This type of tax escape will not result to loss in
of taxation power. government revenue.
d. Taxes appropriated for National Defense may a. Tax evasion
be regarded as for public purposes. b. Tax exemption
c. Tax shifting
2. Taxes are public money which should be used for d. Tax fraud
public purposes. Which of the following
appropriations is not regarded for public purpose? 9. This duty tax is imposed to offset foreign subsidy
a. Appropriation for public education granted to imported goods to the prejudice of our
b. Appropriation for Comprehensive Agrarian local industries.
Reform Program of the government. a. Countervailing duty
c. Appropriation for the church activities b. Discriminatory duty
d. Appropriation for governmental projects c. Dumping duty
d. Marking duty
3. What Constitutional provision is described when
tax bill is required to be presented for the 10. Which of the following is not subject to
approval of the executive branch of the withholding tax?
government? a. Maternity benefits under Social Security Act,
a. Legislative in nature advanced by employer.
b. Non-impairment clause b. 15 days monetized unused vacation leave paid
c. Due process of law during the year.
d. President’s power to veto c. 15 days paid sick leave availed during the
year.
4. Which of the following fees is considered as tax? d. Overtime pay.
a. License fee
b. Postage fee 11. X Company’s request for extension to file income
c. Surcharge fee tax return has been approved by the BIR
d. Automobile registration fee Commissioner. Which of the following statement
is correct with regards to this delay of filing and
5. Which of the following correctly describes the payment of tax? X Company
primary purpose of taxation? a. Will be subject only to interest imposed by
Fiscal Regulatory law and will not be subject to 25% surcharge.
purpose purpose b. Will be subject to interest and applicable
a. To raise revenue Yes No surcharge.
b. To check inflation Yes No c. Will be subject to interest and 25% surcharge.
c. To discourage d. Will be subject to interest and 50% surcharge.
consumption of harmful No No
products 12. When is the due date of paying tax by installment?
d. To limit influx of foreign First installment 2nd installment
products Yes Yes a. When the return is On or before July 15
filed
6. A taxpayer gives the following reasons in refusing b. April 15 of next year On or before June 30
to pay a tax. Which of his reasons is not c. January 1 of current On or before April 15
acceptable for legally refusing to pay the tax? year
a. That he has been deprived of due process of d April 15 of current July 15 next year
law. year
b. That there is lack of territorial jurisdiction.
c. That he derives no direct benefit from the
tax.
MIDTERM MOCKBOARD
ACCOUNTING 601-Integrated Course in Taxation
13. It refers to an assessment that is contested by the
taxpayer regarding its legality or validity and asked
the same to be cancelled or withdrawn.
a. Void assessment
b. Erroneous assessment
c. Jeopardy assessment
d. Disputed assessment
14. On August 1, 2010, Persistent Company received a
letter from the CTA denying its appeal for
reconsideration regarding the adverse decision of
the BIR. When is the last day to appeal to the
Supreme Court (SC)?
a. No need to appeal to the SC because the CTA
already denied the protest.
b. August 16, 2010
c. September 1, 2010
d. September 30, 2010
15. X is a delinquent taxpayer. One of his real
properties has been levied by the BIR for the
satisfaction of his tax delinquency:
Date the real property was January 5,
levied 2010
Date the real property levied March 1, 2010
was sold
When is the last day for X to redeem the real
property?
a. Redemption of the levied property is not
allowed because it was already sold.
b. March 30, 2010.
c. March 1, 2011.
d. March 1, 2012.
16. Which of the following is not an authority granted
by law to the commissioner of the BIR?
a. To define, fix tax rates and amend the same
b. To interpret tax laws and decide tax cases
c. To obtain information, summon, examine and
take testimony of persons
d. To make assessments and prescribes
additional requirements for tax administration
and enforcement
17. The BIR Commissioner is authorized to inquire into
the bank deposit of a taxpayer in the following
instances, except
a. To determine the gross estate of a decedent
person.
b. To determine the correct gross income of a
taxpayer who is believed not declaring his
true income.
c. When a taxpayer entered into a tax
compromise with the government.
d. When the taxpayer waives his right under the
Bank Secrecy Law.
18. The books of accounts shall be kept in
i. Native language
ii. English
iii. Spanish
Choices:
a. Any of the above.
b. Only ii.
c. Only i and ii.
d. Only ii and iii.
19. It refers to the basic principle to a sound tax
system which states that the collection of taxes
should be proportionate to the taxpayer’s ability
to pay.
a. Administrative feasibility
b. Theoretical justice
c. Fiscal adequacy
d. Tax policy
20. Which of the following could exercise the levying
aspect of taxation?
a. Barangay council
b. City mayor
c. Judiciary
d. The President of the Philippines.
21. The managerial employee was sent by the
employer to a conference in other country. Which
of the following is correct?
a. His inland travel expense outside the country
in the amount of $250 per day is subject to
fringe benefit tax.
b. The cost of his first class place ticket is subject
to fringe benefit tax.
c. 30% of his 1st class plane ticket is taxable
with fringe benefit tax.
d. 100% of the cost of the 1st class plane ticket is
the expense of the employee.
22. Mr. W, a watch dealer, sold second hand watches
by installment for P1,000 each. The initial
payment is 30% and the remaining balance is
payable within 2 consecutive years. He presented
his income tax return to the BIR paying the related
tax by installment. The BIR Assessor refused to
accept the installment payment because the
selling price does not exceed P1,000. Is the BIR
Assessor correct?
a. Yes, because the selling price does not exceed
P1,000 per watch.
b. Yes, because the initial payment exceeds 25%
of the selling price.
c. No, because the watches sold are part of Mr.
W’s inventory thereby the sale is a regular
sale of personal property. The rules on 25%
initial payments and P1,000 selling price
should not be applied.
d. No, because the selling price does not exceed
P1,000 per watch sold.
23. All of the following are income within, except
MIDTERM MOCKBOARD
ACCOUNTING 601-Integrated Course in Taxation

a. dividends declared by domestic corporation. payable on January 15, 200B. The income tax on
b. salaries earned by Filipino overseas contract this income accrues on
workers. a. November 30, 200A.
c. interest on bonds issued by domestic b. December 15, 200A.
corporation. c. December 31, 200A.
d. income from business located in the d. January 15, 200B.
Philippines.
29. Which of the following is a taxable income?
24. Which of the following is incorrect? a. Income from a qualified pension plan
Taxable b. Compensation for personal injuries
income c. Stock dividend received
Year Year d. Sick leave with pay
1 2
a. Rent for year 2 collected in No Yes 30. William Galam was retired by his employer
year 1 corporation in 200A and paid P1,000,000 as a
b. Income from year 1 sales Yes No retirement gratuity. The corporation became
collected in yr 2 bankrupt in 200B. Can the BIR subject the
c. Services for year 1, collected No Yes P1,000,000 retirement gratuity to income tax?
in year 2 First answer: Yes, if the retirement gratuity was
d. Income from year 2 sales, paid based on a reasonable pension plan where
collected in William Galam was 50 years old and has served
advance in year 1 No Yes the corporation for 10 years.
Second answer: No, if William Galam was forced
25. Which of the following is correct? by the corporation to retire.
Reportable a. Only the first answer is correct.
subject to b. Only the second answer is correct.
Final tax Tax c. Both answers are correct.
Return d. Both answers are incorrect.
a. Compensation income No No
b. Business income Yes Yes 31. Which of the following is considered as taxable
c. Passive income earned Yes No compensation income?
within a. Cost of living allowance
d. Capital gain on real b. Social Security System Benefits
estate Yes Yes c. Retirement pay under a duly BIR approved
(capital asset) benefit plan
d. Retrenchment pay
26. Which of the following is subject to 10% final tax?
a. Interest income from savings account 32. Which of the following is considered as
b. Royalty income from franchise nontaxable compensation income?
c. Royalty income from patent a. Transportation allowance regularly received
d. Royalty income from literary works by a rank-and-file employee in the
performance of his duty
27. Which of the following dividends is subject to b. Excess amount of actual business expenses
income tax? not returned to the employer.
a. Dividend received by domestic corporation c. Salary
from another domestic corporation d. Sick leave pay
b. Dividend received by a resident foreign
corporation from a domestic corporation 33. Which of the following is income to the recipient?
c. Dividend received by nonresident foreign a. Stock option
corporation from a domestic corporation. b. Stock dividend
d. Received by nonresident foreign corporation c. Pre-emptive stock right
from another nonresident foreign corporation d. Stock warrant

28. X, an individual is a holder of 10,000 shares of Y
Corporation. On December 15, 200A, he received
a notice from Y Corporation that it declared P5
cash dividend per share on November 30, 200A to
stockholder of records as of December 31, 200A,
34. If a property is received in lieu of cash
compensation, the basis of tax is the
a. supposed amount of cash to be received.
b. agreed value of the property received.
c. fair market value of the property received.
d. salvage value of the property received.
MIDTERM MOCKBOARD
ACCOUNTING 601-Integrated Course in Taxation

41. Which of the following is taxable?

35. A general principle recognizing as part of gross a. SSS and GSIS benefit
income the recovered expense previously b. Social security benefit received by a
deducted from gross income. balikbayan from employer abroad.
a. Tax exemption rule c. Separation pay received by a 50-year old
b. Tax deficiency rule employee due to the retrenchment program
c. Tax recovery rule of the employer.
d. Tax benefit rule d. Personnel Economic Relief Allowance

36. Which of the following tax refund is reportable as 42. If the beneficiary is the estate or the insured
taxable income? person and he outlived the life insurance policy,
a. Income tax refund thus, receiving the entire amount of policy, such
b. Real property tax refund for capital asset amount is
property a. taxable.
c. Documentary stamp tax for deed of sale of b. nontaxable.
capital asset c. taxable to the extent of excess over premium
d. Local taxes refund for taxes incidental to paid.
conduct of business d. nontaxable to the extent of the excess over
the premium paid.
37. When there are no beginning and ending
inventories of farm crops harvested, which of the 43. Eddie resigned from his employment and received
following is true? P25,000 separation pay. Glory received P30,000 as
Cash Accrual her terminal pay due to retrenchment legally
Method Method enforced by her employer. Joseph received
a. Income is Greater Lesser P35,000 termination pay when he was dismissed
b. Expense is Lesser Greater due to gross negligence.
c. Income is The same The same a. Only the separation pay of Eddie is taxable.
d. Expense is Greater Lesser b. Only the terminal pay of Glory is not taxable.
c. Only the termination pay of Joseph and Glory
38. Which of the following income earned/received in are not taxable.
the Philippines by a citizen is subject to income d. Only the separation pay of Eddie and Joseph
tax? are not taxable.
a. Winnings in Philippine Charity Sweepstake
lottery 44. Which of the following is taxable?
b. SSS or GSIS benefits a. SSS and GSIS benefit
c. Gains from sale of 3-year bond b. Social security benefit received by a
d. Value of property received as gift balikbayan from employer abroad.
c. Separation pay received by a 50-year old
39. The following are taxable compensation for employee due to the retrenchment program
injuries except of the employer.
a. interest from nontaxable damages. d. Personnel Economic Relief Allowance
b. compensatory liquidated damages.
c. damages for loss of goods and other 45. There shall be no recognition of gain or loss on
belongings. a. sale of treasury stock below cost.
d. damages for unrealized profit. b. original sale of shares of stocks above par
value.
40. Eddie resigned from his employment and received c. receipt of shares of stocks for a property.
P25,000 separation pay. Glory received P30,000 as d. exchange of shares of stocks for a bond
her terminal pay due to retrenchment legally investment.
enforced by her employer. Joseph received
P35,000 termination pay when he was dismissed 46. In 200B, the BIR discovered and ascertained that
due to gross negligence. Y, a domestic corporation engaged in business of
a. Only the separation pay of Eddie is taxable. leasing real properties, underdeclared its rental
b. Only the terminal pay of Glory is not taxable. income amounting to P1,000,000 in 200A. Y
c. Only the termination pay of Joseph and Glory denied having received or earned the amount as
are not taxable. unreported income for 200A explaining that part
d. Only the separation pay of Eddie and Joseph of the said amount totaling P600,000 was
are not taxable. collected by its president who did not turn the
same to the corporation in 200A and the
MIDTERM MOCKBOARD
ACCOUNTING 601-Integrated Course in Taxation

remaining P400,000 was advanced payments by a. compensation and business income.

tenants for 200C. b. sales or gross receipts of business.
a. The entire P1,000,000 should be reported as c. business income.
income in 200A. d. business income after deducting NOLCO.
b. Only P600,000 is to be reported as income in
200A and the remaining P400,000 is to be 52. Which of the following items is not a special
reported in 200C. deduction from gross income?
c. The P600,000 is to be reported only when the a. Net operating loss carry-over
president turn over it to the corporation. b. Incentives on contributions to TESDA, CHED
d. Only P400,000 is to be reported in 200A and DECS
because there is an actual cash collection c. Income distributed to beneficiaries of estates
made by the corporation. and trusts
d. Interest expense to finance petroleum
47. Which of the following expenses is deductible exploration
from gross income?
a. Personal, living and family expenses 53. Which of the following interest income shall be
b. Cost of improving fixed assets used to limit the deductibility of an interest
c. Premiums paid on life insurance of employee expense? Interest income earned from
(the employer is the beneficiary) a. trade notes receivable.
d. Premium payments for hospitalization b. banking institution.
insurance. c. personal lending.
d. payment of tenant to land-owner under a
48. Which of the following item is incorrect as to the tenant-purchaser agreement as part of CARP.
deductibility of expense from gross income?
Item Deductible Nondeductible 54. Which of the following taxes incurred in the
a. Advanced conduct of business is not allowed as deduction
payment No Yes from business income?
of rent a. Foreign income tax claimed as tax credit
expenses b. Documentary stamp tax
b. Fringe benefit No No c. Import duties
tax d. Local business taxes
c. Compromise No Yes
penalty 55. If the casual loss on business property is partial,
d. Accrued salary Yes No the deductible loss is the
expense a. Replacement cost to put back the business
property to its operating condition.
49. Which of the following item is correct as to the b. Actual cost of damaged on business property.
deductibility of expense from gross income? c. Replacement cost or depreciated value,
Item Deductible Nondeductible whichever is lower.
a. Distribution of Yes Yes d. Replacement cost or damaged book value,
profits whichever is lower.
b. Interest on Yes No
salaries 56. For purposes of implementing the provisions on
c. Tax withheld improperly accumulated earnings tax, the
from Yes No following constitute accumulation of earnings for
employee’s the reasonable needs of the business except:
salaries a. Allowance for the increase in the
d. Personal No No accumulation of earnings up to 100% of the
expenses paid-up capital of the corporation as of
Balance Sheet date, inclusive of accumulation
50. Which of the following corporate taxpayers is not taken from other years.
allowed to deduct OSD? b. Earnings reserved for definite
a. Domestic corporation corporate expansion projects or programs
b. Resident foreign corporation requiring considerable capital expenditure as
c. General co-partnership approved by the Board of Directors or
d. Nonresident foreign corporation equivalent body.
c. Earnings reserved for building, plants
51. To compute for optional standard deduction, an or equipment acquisition as approved by the
individual taxpayer should multiply 40% of gross Board of Directors or equivalent body.
MIDTERM MOCKBOARD
ACCOUNTING 601-Integrated Course in Taxation

d. None of the above. Tax per assessment P120,000

Less: Tax paid per reported 70,000
57. Which of the following is not correct regarding return
NOLCO? Basic deficiency tax P 50,000
a. NOLCO is allowed as deduction from business Add: Surcharge (P50,000 x P25,000
income for the next 3 succeeding years. 50%)
b. Domestic and resident foreign corporation Interest (P50,000 x 5,000 30,000
subject to normal income tax is allowed with 20% x 6/12)
NOLCO. Total amount due per
c. Offshore banking unit of a foreign assessment P 80,000
corporation is allowed with NOLCO. – May 15, 200A
d. Private education institution enjoying The total amount due per assessment is required
preferential tax rate is allowed with NOLCO. to be paid on May 15, 200A, but the actual
payment was made on June 30, 200A. The total
58. On April 1, 200A, the BIR sold the residential lot payment inclusive of surcharge and interest would
(under levy) of Mr. Mario Lucas through public be
auction. Mr. Lucas received P20,000 from the BIR a. P106,250.
corresponding to the excess amount after b. P102,000.
deducting the tax claim and cost of sale as follows: c. P 94,500.
Income tax liability P400,000 d. P 92,625.
Cost of sale 50,000
Mr. Lucas redeemed his residential lot on 61. Mr. Roach, a nonresident alien not engaged in
December 1, 200A. How much is the capital gains trade or business in the Philippines, made a time-
tax paid upon sale and the required total deposit amounting to $100,000 in the Philippines
redemption price? under an expanded foreign currency deposit
Capital gains Redemption system in which he earned $2,000 interest income
tax price during the year. In addition, he received
a. P30,000 P550,000 $1,000,000 as boxing trainer’s fee from MP whom
b P30,000 P500,000 he trained in Los Angeles, USA, for a boxing fight
. against JMM. How much is the taxable income of
c. P25,000 P470,000 Mr. Roach in the Philippines?
d P25,000 P500,000
a. $ - 0 -
.
b. $ 2,000
c. $1,000,000
59. F Co. declared bankruptcy with the following
d. $1,002,000
financial conditions:
Cash P
62. Miss Aglaclaco is a dealer of computer machines
100,000
on installment basis. In November 200A, she sold
Noncash assets 1,000,000
one unit with a cost of P80,000 for P120,000 on a
Bank loans payable 600,000
downpayment of P40,000 and the balance
Trade creditors 800,000
payable thereafter at the rate of P20,000 a month.
payable
How much would she report as income for taxable
Income tax payable 1,000,000
year 200A?
Accumulated losses 1,300,000
a. P60,000
b. P40,000
The noncash assets were liquidated for P600,000.
c. P30,000
F Co. was able to negotiate comprise due to
d. P20,000
financial incapability. Assuming that income tax
payable of F Co. has been due for 6 months, how
63. In 200A, X sold a real property lot (capital asset)
much is the minimum amount of compromise?
by installment for a selling price of P3,000,000.
a. P550,000
Information related to the sale:
b. P400,000
Down payment 20%
c. P270,000
Mortgage assumed by the P1,200,000
d. P200,000
buyer
Unpaid balance Equally in
60. An assessment notice demanding payment of
5 years
deficiency tax inclusive of surcharge and interest,
Cost to the seller P 700,000
due and payable on May 15, 200A was computed
How much is the amount of the capital gains tax in
as:
200A?
MIDTERM MOCKBOARD
ACCOUNTING 601-Integrated Course in Taxation

a. P138,000. of the proceeds of life insurance will be

b. P180,000. received by Mr. Guardia’s heirs.
c. P238,000. What is the amount of the gross taxable
d. P252,000. compensation income of Mr. Guardia during the
taxable year?
64. The construction of the project was completed a. P376,000
only on its 3rd year. The fixed contract price of the b. P376,500
project amounted to P5,000,000. Actual cost c. P378,000
installed for year 3 alone was P600,000 and the d. P386,000
accumulated actual cost as of end of 2 nd year was
P1,400,000. Under percent of completion method 67. Goshen Co. signed a build-operate-transfer
of reporting income, how much should be contract with Mr. Tan, the lessee, for 15 years
reported as gross income for year 3? with an annual land rental of P60,000. Mr. Tan
a. P2,950,000 constructed a building with fair value of
b. P1,300,000 P2,000,000 with an estimated life of 20 years.
c. P 900,000 However, he failed to pay the monthly payment at
d. P 850,000 the beginning of the 11 year and thereafter, which
made Goshen Co. possessed and control the
65. Tatang Vicente gross income from his farm property before the end of the lease contract.
amounts to P245,000 using cash basis. Upon How much is the total amount of income to be
review of his records, the following data were reported by Goshen Co in the 11th year?
uncovered: a. P1,060,000
Gain from sale of products purchased P35,000 b. P1,000,000
and sold c. P 960,000
Rent income of carabao and hand 10,000 d. P 900,000
tractor
Inventory, beginning 20,000 68. Mario received the following prizes and winnings
Decrease in inventory beginning 5,000 during the taxable year:
How much is the gross farm income using accrual First prize in Talentadong P10,000
basis? Pinoy
a. P240,000 2nd place in bicycle race 6,000
rd
b. P250,000 3 place in chess 15,000
c. P260,000 tournament
d. P270,000. 4th place in a raffle draw 5,000
What is the total amount subject to normal tax?
66. The following transactions were reported by Mr. a. P10,000
Guardia related to his income during the taxable b. P16,000
year from January to December 200A: c. P31,000
 He received a notice of cancellation of his d. P36,000
indebtedness amounting to P10,000 from his
employer. Contained in the notice is to offset 69. Leslie Corpuz Corporation reported the following
such amount from his basic monthly for its first two-year operations:
compensation of P30,000. 200 200B
 100 shares of stock as compensation for A
service rendered on October 31, 200A. The Business income 500,000 P600,000
market value of the shares of stock at the time Operating expenses before 200,000 300,000
when service was rendered was P100 per bad debts
share, but P120 per share when the shares Allowance for bad debts 20,000 40,000
were received on November 30, 200A. Receivable written off 15,000
 A stock option of 100 shares was granted to Bad debts recovery 10,000
Mr. Guardia. The market price per share was How much is the reportable net taxable income
P120 but the option price was P80 per share for year 200B?
at the time of stock option exercise. He a. P320,000
subsequently sold the 50% of the shares at b. P310,000
P130 per share. c. P270,000
 His employer granted P4,000 annual insurance d. P260,000
premium to Mr. Guardia for an insurance
policy of P1,000,000. It is stipulated that 50% 70. An international carrier doing business in the
Philippines shall pay a tax of
MIDTERM MOCKBOARD
ACCOUNTING 601-Integrated Course in Taxation

a. Three percent of (3%) on its gross dividend

income. Cash surrender 20,000
b. Two and one-half percent (2 value
1/2%) on its Gross Philippine Billings. Interest earned 1,000
c. Two percent (2%) on its Gross How much is the amount excluded from the gross
Philippine Billings. income?
d. One and one-half percent (1 a. P26,000
1/2%) on its Gross Receipts. b. P25,000
c. P20,000
71. The gross compensation income of a minimum d. P 5,000
wage earner employee for the entire year
amounted to P240,000 which includes P15,000 75. On March 31, 200A, Gerry, who is 60 years old,
13th month pay; P20,000 availed vacation leave, retired from Alaska Corporation as a Comptroller.
P30,000 overtime pay, P5,000 holiday pay and His final basic monthly salary received was
P5,000 Christmas bonus (de-minimis) . How much P60,000. On June 1, 200A, he began to receive
is his taxable gross compensation income if he P10,000 SSS monthly pension. On October 31,
received P400 interest income, net of final tax, 200A, he was reemployed as a professor at the
from his saving bank deposit? University of the East with a monthly salary of
a. P185,000 P30,000.
b. P182,000
How much amount shall be excluded from gross
c. P180,000
income?
d. P - 0 -
a. P10,000
72. Jean, single, is an OFW with a monthly income as a b. P40,000
domestic helper in Hong Kong amounting to c. P50,000
P30,000. She sends second hand clothes to the d. P60,000
Philippines for her Wag-Wag business from which
she earns a monthly income of P5,000. She has a 76. Mr. X, a foreign Ambassador to the Philippines,
sari-sari store in the Philippines with an average received the following items of income during his
monthly income of P20,000. If Jean returned in stay in the Philippines:
the Philippines from March 1 of the taxable year Salary for consular services P800,000
and stayed to manage his sari-sari store, how Honoraria received in various
much of her income is subject to tax in the speaking engagement
Philippines during the taxable year? in the Philippines 200,000
a. P200,000 Capital gains on investments
b. P240,000 made in the Philippines 300,000
c. P250,000 If there is no tax-exempt treaty, how much is the
d. P300,000 total reportable income for Philippine income tax?
a. P - 0 -
73. Max received a total basic salary of P300,000 b. P 300,000
during the taxable year 200A. In addition, he c. P 500,000
received the following compensation income from d. P1,300,000
his employer:
Overtime pay P10,000 77. In 200A, Gain Corporation lends P500,000 to Mr.
Unused vacation leave (5 5,000 Rias, the company’s Vice President for Operations.
days) It is stipulated in their agreement that the amount
Holiday pay 1,700 should be paid in one year with an annual interest
Cost of living allowance 300 of 3%. The fringe benefit tax would be
How much is the amount of 13th month pay? a. P42,353.
a. P25,000 b. P38,400.
b. P25,833 c. P28,800.
c. P26,417 d. P – 0 - .
d. P30,000
78. Mr. Soria, the president of Soy Corporation, took a
74. Boyet insured himself for P1,000,000 at an annual holiday-vacation leave in Hong Kong together with
premium of P10,000 in which he religiously paid. his family incurring P680,000 vacation expenses of
In the 5th year, he received the following amount which 60% were paid by the Corporation. In
from the insurance company: addition, they bought personal belongings
Participating P 5,000 amounting to P136,000 which the corporation
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ACCOUNTING 601-Integrated Course in Taxation

reimbursed in the full amount. How much is the In addition, Mr. Smith presented P200,000
amount of monetary value subject to FBT? operating expenses which cannot properly be
identified whether or not incurred in the
a. P408,000
Philippines. How much is the amount of operating
b. P544,000
expenses for Philippine income tax purposes?
c. P680,000
a. P600,000
d. P816,000
b. P450,000
c. P440,000
79. Mr. Flo sold his personal car for P700,000 which
d. P400,000
he previously acquired two years ago for
P1,000,000 with an estimated useful life of 5
83. Miss Dianne Torres showed the following income
years. How much is the reportable capital gain
and expenses during the year:
(loss) on the sale of the car?
Compensation income as a P250,000
a. (P300,000)
teacher
b. P 50,000
Sales of wagwag business 300,000
c. P 100,000
Cost of sales 80,000
d. P 200,000
Operating expenses
(without documentations) 50,000
80. R Corporation has 100,000 authorized common
How much is the deductible cost of sale and
shares with a par value of P100 per share. The
operating expense if Dianne opted to deduct OSD?
incorporators subscribed twenty-five percent of
Cost of Operating
the shares at a premium of five percent (5%) of
sale expense
which sixty percent (60%) were issued due to full
a. P - 0 - P -0-
payment. During the initial public offering, other
b P 80,000 P120,000
investors subscribed 30,000 shares at P150 per
.
share of which 100% were issued due to full
c. P 80,000 P 88,000
payment. How much is the taxable gain?
d P130,000 P 50,000
a. P - 0 -
.
b. P20,000
c. P21,250
84. If the actual interest incurred in the conduct of
d. P 2,500
business is P10,000, and if part of a domestic
corporate taxpayer’s income is interest amounting
81. Loakan Corporation sold the residential building
to P16,000, net of final tax, what is the amount
used in business as a housing privilege of its
allowed as deductible interest expense from
employees. The residential building was sold for
business income?
P10,000,000. It was previously constructed at
a. P10,000
P8,000,000 with recorded accumulated
b. P 6,600
depreciation of P7,500,000. The corporation
c. P 3,400
wrote the BIR to avail of the tax exemption
d. P 2,500
privilege because it plans to use the entire sales
proceeds to construct a new residential building
85. Mr. Tee, a taxpayer reporting in cash basis, shows
amounting to P10,000,000. If Loakan used all the
the following interest expense related to his
P10,000,000 to construct a new residential
business during the year:
building for its employees, how much is the
Interest paid in advance P20,000
amount subject to tax exemption?
Interest paid to a brother 12,000
a. P - 0 -
Interest paid on delinquency 8,000
b. P 2,000,000
taxes
c. P 2,500,000
Interest on borrowings to
d. P10,000,000
finance his family home 30,000
Interest paid to finance his 100,000
82. Mr. Smith, a nonresident alien, who is engaged in
house
business in the Philippines, presented the
If Mr. Tee has an interest income of P10,000
following incomes and expenses during the
earned from the bank, how much is the deductible
taxable year:
and nondeductible interest expense during the
Philippines Australia
year?
Gross income P1,000,000 P4,000,000
Deductible Nondeductible
Operating 400,000 2,200,000
a. P28,000 P142,000
expenses
b P 8,000 P162,000
.
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c. P 4,200 P165,800 premium of his family amounting to P1,500

d. P - 0 - P170,000 starting July 1, 200x. He has no other source of
income. How much is his allowable special
86. In 201x, Ace, a domestic corporation, made a deduction from the gross income for the entire
P30,000 charitable contribution as death year 200x?
assistance to the sister of its employee. Its net a. P 900
financial income for 200x is P500,000. The related b. P1,200
business expenses inclusive of the P30,000 actual c. P1,500
contribution is P100,000. The deductible d. P2,400
charitable contribution allowed would be
a. P30,000. 90. X Corporation maintains a BIR-registered benefit
b. P26,000. retirement plan. The company’s normal cost per
c. P25,000. actuarial valuation for funding is P1,000,000 and
d. P - 0 - . P1,200,000 for years 200A and 200B, respectively.
Information related to the retirement plan is as
87. The following tax expenses related to business follows:
were paid by X Trading during the taxable year: 200A 200B
Business taxes P20,000 Retirement benefit
Documentary stamp taxes 1,000 expense
Automobile registration 3,000 (Recognized for P1,100,000 P1,200,000
fees accounting
Import duty taxes 50,000 purposes)
Postage stamp 500 Actual contribution 1,250,000 900,000
Percentage tax on sale of X Co.’s financial net income for year 200A and 200B
shares of stock 2,500 are P50,000,000 and P60,000,000, respectively.
Income tax 600,000 How much is the deductible retirement expense for
Value-added tax 240,000 years 200A and 200B?
Donor’s tax 5,000 Deductible Retirement
How much is the amount of taxes deductible from Expense
gross income? 200A 200B
a. P73,000 a. P1,025,000 P 925,000
b. P73,500 b. P1,100,000 P1,200,000
c. P76,000 c. P1,250,000 P 900,000
d. P81,000 d. P1,000,000 P 925,000

88. A Filipino taxpayer supports the following 91. Mr. Q, a minimum wage earner, reveals the
dependents for their chief financial needs: following income and expenses during the taxable
 Mentally retarded legitimate son (40 years year:
old); Gross compensation P78,000
 Legitimate son (25 years old); income
 Legitimate daughter (20 years old) and her 13th month pay 6,500
husband (21 years old) Overtime pay 10,000
 Illegitimate daughter (10 years old); SSS contribution 3,000
 Adopted child (6 years old); Philhealth contribution 2,500
 Wife without income; Cellphone repair 200,000
 Senior citizen mother; and revenue
 A brother (20 years old) Operating expenses 80,000
How much is the amount of his total personal How much is Mr. Q’s net taxable income before
exemptions allowed from his P300,000 gross personal exemption?
compensation income? a. None, because Mr. Q is a minimum wage
a. P175,000 earner.
b. P150,000 b. P 82,500.
c. P125,000 c. P120,000.
d. P100,000 d. P202,500.

89. A citizen taxpayer has P240,000 gross salary 92. On its 5th year of operation, a domestic
income for year 200x. Among the personal corporation reported an operating loss of
expenses he incurred during the year are P200,000 after operating expenses of P1,000,000.
payments for six months health insurance Its income tax payable for the period is
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a. P64,000. Gross income P10,000,000 P12,000,000

b. P20,000. Operating (10,500,000) (11,000,000)
c. P16,000. expenses
d. P - 0 -. Net income (loss) (P 500,000) P 1,000,000
The income tax due and payable of X Corporation
93. W Corporation, a 5-year domestic corporation, in year 3 would be
revealed the following net income for years 200A a. P150,000.
and 200B in the Philippines: b. P240,000.
200A 200B c. P300,000.
Gross income P10,000,000 P10,000,000 d. P450,000.
Operating 10,200,000 3,900,000
expenses 97. Texas Instruments, Phils., remitted to its main
Net income (loss) (P 200,000) P 6,100,000 office located in Texas, USA, the following
If W Corporation opted to deduct OSD in 200B, earnings:
how much is the income tax still due and payable in Operating:
200B? Income – registered with PEZA P50,000,000
a. P1,800,000 Non-operating:
b. P1,600,000 Dividend income 6,000,000
c. P1,570,000 Interest income, net of final tax 4,000,000
d. P1,540,000 How much is the amount of branch remittances
tax?
94. University of Baguio (Philippines), a proprietary a. P7,500,000
educational institution, reported the following b. P9,000,000
income and expenses during the taxable year: c. P1,500,000
Tuition fees P20,000,000 d. P - 0 -
Miscellaneous fees 10,000,000
Rent income, net of 5% CWT 19,000,000 98. Flash Donaire, a resident Filipino, signed an
Interest income, net of 20% 800,000 endorsement contract as a professional endorser
final tax amounting to P4,480,000, including VAT. how
Dividend income 200,000 much is the net cash to be received by Flash
Operating expenses 15,000,000 Donaire after creditable tax and VAT?
The university hired you as a tax consultant to a. P4,480,000
minimize her tax liability. How much is the b. P3,808,000
acceptable income tax due? c. P3,400,000
a. P1,500,000 d. P3,000,000
b. P3,000,000
c. P3,500,000 99. Mario is a partner of MAMA General Professional
d. P10,500,000 Partnership engaged in construction of buildings,
sharing a 60% profit and loss. During the year, his
95. A & B Auditing Firm, a CPAs general professional actual share received from the income of the
partnership, shows the following results of partnership amounted P660,000, net of creditable
operation during the year: withholding tax. A portion of the total
Audit revenues P2,000,000 partnership’s net income during the year
Consultancy fees 900,000 amounting to P600,000 was kept by the
Tuition fees from CPA review center 570,000 partnership for acquiring equipments. How much
Interest income from Metrobank 60,000 is the total income of Mario from the partnership?
Interest income from lending 30,000 a. P1,320,000
activities b. P1,200,000
Dividend income 20,000 c. P1,080,000
Operating expenses 1,500,000 d. P1,000,000
The income tax due of the partnership would be
a. None, because a general professional 100. Don Pepot created a revocable trust in favor
partnership is tax-exempt. of his son. His own net income amounted to
b. P200,000. P1,000,000. The net income of the trust amounted
c. P300,000. to P500,000 of which P150,000 is to be given to
d. P600,000. his son. How much is the net income of the trust
subject to normal tax?
96. X Corporation’s results of operations are: a. P - 0 -
Year 2 Year 3 b. P330,000
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c. P350,000
d. P500,000

END OF DEPARTMENTAL EXAM!