FATHER SATURNINO URIOS UNIVERSITY

BUSINESS LAW AND TAXATION WITH FOCUS ON LAWS AFFECTING MSMES

SEMI-FINAL EXAMINATION

NAME: SCORE:

DATE:

I. PROBLEM SOLVING (3 POINTS EACH). PROVIDE YOUR SOLUTIONS

1. A Company had a net sales of P2.5M. The actual entertainment, amusement and recreation
expense amounted to P75,000. The deductible Entertainment Amusement and Recreation
expense (EAR) is _____________.

2. C Company is engaged in the sale of goods and services with net sales and net revenue of P3M
and P1M respectively. The actual, amusement and recreation expense amounted to P30,000.
The deductible EAR expense is ________________.

3. Assume that the taxpayer engaged in business incurring an interest expense of 380,000. In the
same year, the business also earned 320,000 interest income from time deposit in the bank.
The deductible interest would be? ________________.

4. X Company paid in 200B the following taxes which were incurred in connection with the
business: Community Tax, Basic Amount of 1,800.00 and surcharge of 260 plus interest of 150.
Real property tax of 7,300 plus surcharge of 1,500 and interest of 600. Income tax 155,000, plus
surcharge of 28,000 and interest of 10,0000.
The amount deductible of taxes and interest from business gross income of the X Corporation
for 200B would be? ________________.

5. Cash Tight Company sold its 300,000 accounts receivable for 180,000 to Collecting Corp without
recourse. Assume that the latter cannot collect from the client of the former despite the efforts
made. How much is the allowed deductible bad debt expense of Collecting Corp?

II. PROBLEM SOLVING (5 POINTS). PROVIDE YOUR SOLUTIONS

6. Balingit Furnitures sold its sala set on installment for 100,000 with the following terms: 30%
Downpayment; the remaining balance is payable in five annual installment. The cash price of the
sala set sold is 80,000. Assuming that the remaining balance becomes uncollectible and was
written off, the amount of bad debts that can be deducted from gross income is ?

7. On December 1, 200A, M Company rents a store building for 20,000 a month. The lease contract
tipulates that an advance payment for 10 months must be made before the lesse can occupy the
store building. M paid the 200,000 as advance payment on on November 1, 200A. The related
creditable withholding tax has been withheld and remitted to the BIR.

EJM, CPA
 FATHER SATURNINO URIOS UNIVERSITY
BUSINESS LAW AND TAXATION WITH FOCUS ON LAWS AFFECTING MSMES
SEMI-FINAL EXAMINATION

How much is the total deductible rental expense for the year 200A, under accrual and cash
methods reporting? The deductible rental expense for the year 200A would be?

8. Ordana company has 65,000 collectibles from Mr. Teen who died with the following assets and
liabilities:

Total Assets 700,000 Liabilities 980,000

Assume that the liabilities are composed of the following:

Unpaid Income Tax 150,000

Various Creditors 875,000
Total liabilities 950,000

Deductible bad debt expense is?

9. Senior Company employs Senior Citizes at minimum wage showing the following reports during
the year:
Gross sales 6,500,000
Cost of Sales 3,000,000
Salaries paid to senior citizens 460,000
Salaries paid to other workers 300,000
Senior Citizen’s Discount 30,000

The specialized itemized deduction would be?

10. Ms. Terry operates a convenience store while she offers bookkeeping services to her clients. In
2018, her gross sales amounted to P900,000.00, in addition to her receipts from bookkeeping
services of P300,000.00. She already signified her intention to be taxed at 8% income tax rate in
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter her 1st
quarter
(8% Rate) (8% Rate) (8% Rate) return.
Total Sales P600,000.00 P600,000.00 P2,000,000.00 P3,500,000.00 Her
income tax
Less: Cost of Sales 300,000.00 300,000.00 1,200,000.00 1,200,000.00
liability for the
year will Gross Income P300,000.00 P300,000.00 P800,000.00 P2,300,000.00 be:

11. Less: Operating Expenses 120,000.00 120,000.00 480,000.00 720,000.00 Ms.

Terry
TAXABLE INCOME P80,000.00 P80,000.00 P320,000.00 P1,580,000.00

The income tax shall be:

EJM, CPA
 FATHER SATURNINO URIOS UNIVERSITY
BUSINESS LAW AND TAXATION WITH FOCUS ON LAWS AFFECTING MSMES
SEMI-FINAL EXAMINATION

above, failed to signify her intention to be taxed at 8% income tax rate on gross sales in her
initial Quarterly Income Tax Return, and she incurred cost of sales and operating expenses
amounting to P400,000.00 and P250,000.00, respectively, or a total of P800,000.00, the income
tax shall be

12. Mr. Yoso signified his intention to be taxed at 8% income tax rate on gross sales in his 1st
Quarter Income Tax Return. He has no other source of income, His total sales for the first three
(3) quarters amounted to P4,000,000.00 with 4th quarter sales of P3,500,000.00.

13. Ms. RSVP is a prominent independent contractor who offers architectural and engineering
services. Since her career flourished, her total gross receipts amounted to P4,250,000.00 for
taxable year 2018. Her recorded cost of service and operating expenses were P2,150,000.00 and
P1,000,000.00, respectively.

Her income tax liability will be:

EJM, CPA