Sample Problems

I. Gross Income
Kim Domingo, a Filipino residing in Zamboanga City, is engaged in the sale of leather goods,
during the year ended December 31, 2020, she had the following details:

Income from Royalties earned in Mexico, Pampanga W 222,300.00

Income from Business owned by John Lloyd Cruz, her 35,500.00
Boyfriend, located in Manila. NI
Dividend Income from Pepsi Corporation, a domestic 125,200.00
Corporation. W
Income from interest on bonds loaned out to Mariposa, a 204,500.00
Filipina, currently living in Spain, however on Vacation in the
Philippines. NI
Jewelry, that was given to her by her ex, and subsequently sold 586,100.00
in Hong Kong.NI
Return of premium Sunlife of Canada, a company registered 1,389,900.00
locally, amount of premium paid amounted to P1,250,000.00.
SSS Contribution W 15,500.00
Salary as a supervisor in a canning factory. The Factory is 821,200.00
located in Zamboanga City.W
Rental on House and Lot, offered by the canning factory. W 329,700.00
Income from her business in Zamboanga City.W 928,900.00

How Much is the gross income of Kim Henarez for the year ended? If she is a NRA?

II. Foreign Net Income

Miguel Ortiz, is a resident Citizen, who earns income from within and without the Philippines,
during the taxable year, he had the following information

Income – Philippines ₱938,495.00

Income – Japan (Exchange is ¥1 is ₱0.50) ¥883,284.00
Income Korea – (Exchange is ₩1,000 is ₱50.00) ₩105,183,500.00
Income – Saudi Arabia (Exchange is SAR1 is ₱12.80) SAR293,050.00
Philippine Taxes Paid ₱348,390.00
Japan Taxes Paid ¥92,092.00
Korea Taxes Paid ₱247,231.00
Saudi Arabia Taxes Paid SAR-

How much is his income tax payable?

III. Deductions

Melun Company had the following expenses during the taxable year

a. Gross Income (28% attributable to Seniors, 12% to PWD) P15,000,000

b. Bad Debts deemed uncollectible due to low sales by customer P293,000
c. Income Tax Paid during the taxable year P398,500
d. Real Property Taxes P89,390
e. Disney Cruise given to potential customer P155,000
f. Discount to Senior Citizen – 25% provided P-
g. Discount to PWD – 22% provided P-
h. Charitable Contribution
a. Philippine Government program that focuses on Seniors P293,000
b. Philippine Government program that focuses on Sports P103,000
c. IRRI P28,000
i. Employee Salaries (10% of salaries is paid out to Seniors) P1,920,000
Seniors Salaries Expense did not include any special benefits and is below poverty rate

j. Interest Expense 8% of GI
k. Interest Income 1.5% of Average Sales
l. Loss arising from changes in Inventory Value P938,000.00
m. Breastfeed Station
n. COGS P5,490,000
o. NOL prior year P837,482

How much is the allowable expense and Taxable net income of Melun Company?

IV. Self Learning

1. Salva, had the following information for 2019:

Gross Sales 4,850,000.00

Sales Returns and Allowance 350,000.00
Purchase Discounts 128,000.00
Beginning Inventory 2,852,000.00
Purchases 1,063,500.00
Purchase Returns 74,800.00
Freight In 146,300.00
Freight Out 101,000.00
Ending Inventory 1,897,000.00

How Much is the cost of goods sold to be declared?

2. JC Wu, a CPA, had an accounting office. For the year 2019, he had the following
information:
 Billing for services Rendered and out of pocket cost P 4,500,000
Salaries of Audit Staff 1,400,000
Salaries of Administrative staff 200,000
Transportation expense 12,000
Supplies used on various engagement 250,000
Supplies used for party thrown in clients office 120,000
Supplies and General utilities 180,000
Depreciation of office equipment 80,000
Depreciation of laptop 50,000
Insurance Expense on office properties 25,000
Rent Expense Allocable to workspace 450,000
Rent Expense Allocable to administrative work 123,000
Bad debts Expense 87,000

How much is the cost of service? How much is the net income to be declared for the year?

3. Daisy Syete, owned a manufacturing business, and reported the following results of
operations during the taxable year:

Sales, net of returns and discounts P 4,000,000

Cost of sales 1,800,000
Dividend income, net of final tax 36,000
Business Expenses 1,600,000
Gain on sale of old equipment 100,000
Sale of scrap metal 200,000
Interest income on employee advances 45,000
Gain on sale of domestic stocks 10,000

How much is the Net Income to be declared for the taxable year?

V. Comprehensive Problem

Preparation of Individual Income Tax Return for Mixed Income Earner

Pedro R Dela Cruz, married to Josefina A. Dela Cruz, had the following information for the year
ended December 31, 2018. He is from #12 Joyful St. Brgy. Tetuan Zamboanga City, 7000. He
was born on February 28, 1988. His email address is pdelacruz@gmail.com, and his contact
number is 0906.123.4567.

TIN 123-456-789-000
TIN of Spouse – 987-654-321-000
Cedula Number – ABC123EFG456XY issued in Brgy. Tetuan Zamboanga City, issued January
02, 2018. Paid 500 pesos.
Mr. Dela Cruz, is a single proprietor and owns Pedro’s Mango Float and Retail Store. He opts to
use the itemized Deduction of expenses for taxation purposes. He uses the accrual method of
accounting for his business. He is not exempt from any income taxes nor is he subject to special
or preferential tax rates. He is not employed in any business and therefore does not earn any
compensation income. He had excess prior year credits amounting to 100,000.00, and paid a total
of 386,525 in taxes for the first three quarters. He was withheld a total of 453,000 for the first
three quarters.

For the year ended 2018, Mr. Dela Cruz earned the following.

Total Sales for the Year 35,000,000.00

Sales not subjected to withholding tax 5,500,000.00
Sales returns and allowances 850,000.00
Sale of Oreo cheesecake(one time order) 322,000.00
Beg. Inventory 10,287,000.00
Purchases 5,023,000.00
Purchases discounts 345,000.00
Freight in 245,000.00
Ending inventory 9,850,000.00
Direct Materials Beg. 3,250,000.00
Materials Purchased 2,778,000.00
Materials Ending 1,232,000.00
Labor for the production of mango float 6,456,000.00
Manufacturing overhead 3,400,000.00
WIP Beg 899,000.00
WIP End 1,459,000.00
Finished Goods Beginning 2,005,000.00
Finished Goods Ending 2,562,000.00
Sale of scrap materials 202,000.00
Sale of mango seeds 100,000.00
Expenses:
Advertising and promotions 453,000.00
Amortization 234,000.00
Bad debts 150,000.00
Charitable contributions 100,000.00
Communications, light and water 1,200,000.00
Insurance 80,000.00
Interest 24,000.00
Miscellaneous 213,000.00
Professional fees 150,000.00
Rental 1,450,000.00
Office Supplies 102,000.00
SSS, GSIS, Philhealht 88,000.00
Salaries and Allowances 902,000.00